The rates were derived from a weighted combination of monthly coal prices in different transaction channels, including imports, for the month of March.
On Friday, the Government released the indicative coal prices for the maiden tranche of commercial auctions under the revenue sharing model. ‘Representative prices’ will be used to calculate the government’s share of revenue from auctioned mines.
The rates were derived from a weighted combination of monthly coal prices in different transaction channels, including imports, for the month of March. Companies will use these prices to evaluate their bids for coal blocks at auctions, which are expected to take place next week.
The representative prices of non-coking coal between grades G7 and G14 are within the range of Rs 1,098 / tonne to Rs 2,619 / tonne. While prices are higher than the estimated price of the fuel sold by Coal India, industry sources have argued that the rates are reasonable. “It remains to be seen if the government, to reflect market conditions, modulates the weightage of each factor going forward while determining these prices for the next tranches,” an industry veteran told FE on conditions of anonymity.
The Ministry of Coal has also rolled out the ‘national coal index,’ which is the weighted average change in the rate of coal based on the FY18 price level. This index, sources said, will be used to calculate the amount of performance that security companies need to pay after winning coal blocks, and will also have a bearing on the prices of coal to be sold from those mines.
The Cabinet recently approved a new bidding technique for commercial coal blocks according to which the auction price of the floor will be 4 per cent of the revenue share, rising by 0.5 per cent in multiples. If bidders increase the government’s revenue share to more than 10% at auctions, bids will be approved in multiples of 0.25% of the revenue share afterwards.
According to the Atmanirbhar Bharat package, not only fully explored coal blocks but also partially explored ones will now be auctioned for commercial mining, and 50 assets will soon be hammered.
