Even as the process of coal blocks’ auction is on pause mode since successful bidders are yet to get possession of reserves, the Government is getting ready to give away coal linkages through the competitive bidding route by next month.
According to sources privy to the development, an inter-ministerial committee (IMC) has finalised the methodology for the coal linkages auction process, which is likely to begin before June 30.
Earlier coal linkages were sanctioned through a committee of the Coal Ministry. However, official sources told The Pioneer as auction of coal blocks was done to ensure transparency, it was decided to give away coal linkages also through the auction route. Another reason behind bidding out coal linkages was to counter allegations of favouritism while giving away through the committee route.
Coal linkages are given by Coal India ltd (CIl) to end-users, which are mainly involved in the power sector, apart from players in the steel and cement industry. Under this arrangement, the supply of coal for the end-user is earmarked for a particular period of time and the price is determined by CIl.
The IMC has finalised the “bucket filling” and the “ascending market clearing systems”, as the proposed methodology for auction of coal linkages.
SBI Caps, the consultant appointed by the Coal Ministry for auction of linkages, has been asked to work out the fine details before finalising the procedure.
“Bucket filling” and “ascending market clearing systems” are meant to align demand and supply at any particular time so that the availability of coal linkages can be synchronised as per the demand arises.
The Pioneer had first reported on April 20, 2015 that the Government is preparing a draft methodology to give away coal linkages for the power sector. End-users which don’t have captive blocks are normally given linkages by the Government on a short term basis.
During a meeting conducted by the IMC on April 27, which is headed by Additional Secretary in the Coal Ministry AK Dubey, and which is mandated with the purpose of finalising the methodology for coal linkages auction, a consensus was arrived at by all the stakeholders on adopting the aforementioned procedures.
The Government is keen to finalise the methodology for coal linkages auction before June 30, 2015 and the IMC has held a series of meetings in the past four months to arrive at a consensus on it.
According to the minutes of the IMC’s April 27 meeting, the decision to opt for “bucket filling” and “ascending market clearing systems” was finalised after some members of IMC pointed towards the cyclical demand trend of some sectors. “The point was raised that the different user groups may be going through different stages of business cycle and hence, there could not be uniform interest among categories to bid in the auction,” the minutes mentioned.
The IMC considered various auction methodologies and after members of the IMC were confident that bucket filling approach and ascending market clearing approach (followed in telecom radio spectrum auction) were better suited for this purpose, it was decided to adopt it.