Cabinet Committee on Economic Affairs in its meeting headed by Prime Minister Narendra Modi has approved allocation of coal linkages for non-regulated sector only through auction, ending the past practice of selective allocation and potentially raising costs for users.
Power and Coal Minister Piyush Goyal said that allocation of coal linkages for the non-regulated sector, which includes steel and cement, will be only through the auction route to ensure transparency.
The Minister further said that proposed auction methodology leads to price through a market mechanism; it does not seek to maximise revenue, he said that “it ensures that all market participants of non-regulated sector have a fair chance to coal linkage, irrespective of size.”
Following the decision, state-controlled Coal India will put up a quarter of its production for auction to non-power companies. But companies that had long-term fuel contracts with Coal India will continue to get supplies until their term expires.
Coal Secretary Anil Swarup said that coal linkages for 24 million tonnes would go under the hammer in the first year. Letter of Assurance is issued on furnishing Commitment Guarantee followed by execution of fuel supply agreement (FSA) on the fulfillment of LOA conditions in the stipulated period of time. Till now, Standing Linkage Committee has been deciding on allocation of long-term and short-term linkages for the sectors, including power and steel.
