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India's CIL starts auctioning of coal linkages for sponge iron sector

New Delhi — State-owned Coal India Limited will be auctioning coal linkages for the sponge iron sector initially as part of a government directive to hold an auction for unregulated sectors such as cement, steel, aluminum and power, CIL said Wednesday.

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The auction will be conducted for the sponge iron sector initially, to be followed by other sectors, CIL said in a statement.

Around 24 million mt of coal is supposed to auctioned for the unregulated sector in fiscal 2016-2017, ministry sources said.

The government had directed CIL to hold auctions of coal linkages for the unregulated sector in February this year.

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The framework attempts to make coal available "in a fair manner" to end-users. Along with CIL, state-owned Singareni Collieries Co. Ltd. will also auction linkages to the unregulated sector.

In the current system, coal linkages are allocated on the recommendation of a government committee. Since 2007, however, no new linkages have been allocated to the non-regulated sector.

An end-user source from a sponge iron unit said that he was currently buying imported coal and called the auction of linkages as good news.

But there were issues with the quality of the domestic coal, he said, as Indian low cv coal has high ash content.

"Price is the main factor, and it has to be economical on a per unit carbon basis," he said.

Transportation costs also could be an issue if mines were far from end-user plants, he added.

--Sapna Dogra, newsdesk@platts.com
--Edited by E Shailaja Nair, shailaja.nair@spglobal.com