Demand falters amidst coronavirus, industry seeks timeline extension for commercial coal auctions

Amid low demand of coal in the current economic environment, potential investors have requested the Union government to delay the commercial coal auctions by three months.

In letters sent to the Union coal ministry regarding the upcoming auction, industry players have pointed that more time is needed for “identifying reliable coal customer to purchase coal” and “assess the grade of coal” for the companies to take informed decision.

The government on June 18 had launched the maiden auction for coal blocks without any end-use restrictions, and the bidding is scheduled to take place on August 18.

The development comes at a time with all India coal production inching up 0.05% in FY20, the lowest growth rate in at least 20 years, to 729.1 MT as electricity demand grew 1.3% in the fiscal. The share of renewable energy is gradually increasing in power generation raising questions about the future of coal, although the latter currently contributes more than 70% of electricity production. Due to muted power demand, state-run Coal India produced 602.2 MT in FY20, down 0.8% y-o-y.

Responding to the industry’s query on whether the government will provide railway connectivity to mines, the coal ministry clarified that “the evacuation infrastructure shall be the responsibility of the successful bidder”.

financial express
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