India: Coal India contracts not discontinued in June 2016

The fuel supply contracts of cement companies with Coal India will not be discontinued for auction, in contrast to earlier government announcements that all coal supply agreements between Coal India and non-power firms would end in June 2016.

The government will wait for the contracts to end and then auction them. Most contracts are expected to laps in 2017. Around 28Mt of coal is due for auctioning to unregulated sectors (e.g. cement and steel) next year.

The companies will have to indicated their coal requirement and end-use projects to the coal ministry before bidding for supply from Coal India. The ministry has also committed to reserve coal for auction for these sectors out of Coal India’s rising production annually to avoid desperate bidding by private firms in the next bidding round.

As per the proposed mechanism, Coal India will invite bids from companies for supplying a fixed quantity of coal at a floor price. Once bids are received, the state-run miner will increase the floor price till the demand and supply reach the same level.