INDIA BUSINESS WORLD - FEBRUARY 2007
The Month that was ...

PANEL SET UP TO EVOLVE COAL ALLOCATION POLICY

The government has set up a committee under the chairmanship of coal secretary to deliberate and evolve a policy for the allocation of coal. The move comes in wake of recent Supreme Court (SC) order discontinuing e-auction of coal by Coal India (CIL) and its subsidiaries.

CIL has already replaced its e-auction system with a new e-booking mechanism under which the bidder is supposed to bid for the quantity instead of price.

In the e-auction system coal was sold to the highest bidder. This helped CIL to increase realisation by up to 40% over the notified prices of coal. However, under the e-booking mechanism coal is priced at 30% premium over its notified prices.

The committee would now study other measures that would not only help better realisations for coal but would also ensure adequate supplies to consuming sectors. Apart from officials of the coal ministry, the committee would comprise representatives from ministries of power, steel, commerce, finance, law and small scale industries. Officials of Department of Industrial Policy and Promotion would also form part of the committee.

A government source said that the committee would also evolve a mechanism to improve coal supplies to small and tiny consumers, who do not get linked supplies and are not able buy coal at market prices. Under the present system, while the government keeps aside a portion of coal for these sectors, the quantity has often been found to be inadequate.

The committee would also look into the issues relating to classification of consumers into core and non-core sectors. A government had earlier suggested that only power sector should get 100% coal linkages while others should get linked supplies only for a certain portion of their requirements and source the remaining at market price.

It is understood that this committee would also look into staring bidding system for allocation of coal blocks for captive consumers in the cement, steel and power sectors. At present captive block allocation is done by a screening committee headed by the coal secretary.

The committee has already held its first meeting in January, where it was decided that the administrative ministries would liaise with respective trade consumer associations and obtain their comments on such issues. Further, the committee has also decided that the views of major associations associated with the industries would be invited in forming a future policy for the distribution of coal.