India has decided to open up the coal sector to external market forces, as the nation prepares itself for commercial coal mining options. The country has taken the decision to set up a coal trading platform to increase the number of coal sellers. Seemingly, all the discussions have already commenced in the ministry and it is certain that a coal-related exchange will be established once the government addresses all the concerns.
As per sources familiar with the knowledge of the matter, the proposal indicates that the entire coal manufactured in the country will be traded on an online platform, in which the pricing is determined via demand and supply. The exchange will be inclusive of power bourses, proposed gas exchanges, or commodity exchanges. It is likely for this to lead to the end of Coal India’s new Fuel Supply Agreements (FSA) regime. Nevertheless, Coal India Ltd is anticipated to be a dominant player in the coal sector, especially in view of the fact that it has set a production target of one billion tons by 2024 and is likely to see incremental capacity at market prices.
A government official was quoted stating that the nation will go ahead with the commercial coal mining procedure and have more coal sellers in the market apart from Singareni Collieries and Coal India. Also, coal blocks have been allocated to the state-level PSUs for coal sales.
While most consumers and traders of coal have welcomed the move, the general consensus is that the exchange must commence only with numerous buyers and sellers. It has been speculated that the coal ministry may start the auctions of around 50 coal blocks for commercial coal mining, on Thursday.
Kapil Mantri, Head, Corporate Strategy, Jindal Steel & Power Ltd, has been quoted to state that setting up a coal trading platform may be very profitable for the nation and will bring about huge efficiencies, especially with respect to logistics cost, though a lot of it is dependent on the finer details of such platforms.