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No need to allocate CIL coal for PSUs in unregulated sector

The coal ministry has decided to auction Coal India Limited’s (CIL) linkages, which the state-run miner signs with its buyers in the form of fuel supply pacts.

Written by Priyadarshi Siddhanta | New Delhi | Published: June 27, 2015 12:41:48 am
CIL, coal allocation, CIL linkage, coal ministry, coal auction, RINL, SAIL, PSU, business news, nation news, india news, national news, latest news, Indian Express SBI Caps suggestion is contrary to the steel ministry’s proposal which seeks that the government should earmark certain amount of CIL’s output for the state-run plants.

The coal ministry is considering a proposal that state-run companies in the unregulated sectors comprising of steel, cement and fertliser industries should bid for Coal India’s linkages or fuel supply pacts like their private sector counterparts.

The coal ministry has decided to auction Coal India Limited’s (CIL) linkages, which the state-run miner signs with its buyers in the form of fuel supply pacts. Under this system an assured quantity of coal is supplied by CIL to the companies to run their operations. SBI Capital Limited (SBI Caps), which has been appointed as the consultant to the coal ministry for suggesting a methodology to electronically auction CIL’s linkages has proposed earlier this month that PSUs in the unregulated sectors should not be allocated coal. Rather they should bid for them as the private sector will do, it has suggested.

SBI Caps suggestion is contrary to the steel ministry’s proposal which seeks that the government should earmark certain amount of CIL’s output for the state-run plants. In a meeting convened on June 4 by the coal ministry to discuss its Approach Paper on e-auctioning of linkages, steel ministry officials insisted that certain quantity of fuel must be separated for state-run steel firms like SAIL and Rashtriya Ispat Nigam Limited (RINL), which pay heavily to import coal and this in turn impact their bottom line. To justify their contention, the officials argued that state-run firms were spared from bidding in the recently concluded electronic auction of coal blocks and 38 mines were allocated to central and state PSUs during February-March this year.

“But the representatives of SBI Caps opposed the suggestion while arguing that allocating coal to PSUs can distort the competition. This is because while the private sector would have to bid for linkages, the government companies would be allotted linkages without any competition,” an official who attended the meet told The Indian Express. To bolster their contention, the SBI Caps officials cited companies like RINL and iron ore miner NMDC Limited which have been competing for iron ore at the same price as the private sector and so there is no need for a separate dispensation for them.

Countering the SBI Caps suggestion, a senior steel ministry official said that there cannot be two dispensation for allocation of coal blocks and auctioning of fuel linkages for PSUs. “If they can reserve blocks for government-run companies, where is the harm in doing so for allocating linkages? We are not asking for something which is impossible. It is well within the realm of possibility,” he reasoned.

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