India’s coal buyers pay over 300% premiums to ensure fuel supplies

Coal buyers paid Coal India Ltd (CIL) a premium of over 340% more than baseline prices in two sales this month to ensure fuel supplies.

In the auctions held by the state-run miner of the country, Indian coal prices have increased highly, with domestic buyers hurrying to ensure supplies due to disruptions worldwide increasing the prices of imported fuels.

Coal India, the top producer of fuel globally, sells around 15% to 20% of its production via an online auction system.

The buyers make offers above a minimum fixed price and rates paid are generally far more than the long-term contracts that account for the majority of sales.

The coal produced locally is way cheaper compared to the fuel imported from Indonesia or Australia, including the high premiums.

On March 11 auctions of Coal India, 6,000 kilocalories per kilogram was sold for approximately Rs 11,700, which is less than half the cost of a similar kind of coal at Newcastle on the same day.

Coal India is also seeking to make the first huge price rise since 2018 to long-term contracts, asserting that an increase is crucial to handle surging costs.

India is dependent on coal to produce nearly 70% of its electricity.

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