Draft Guidelines Released for CIL's New 'CoalSETU' Auction Window
Executive Summary:
On February 16, 2026, Coal India
Limited (CIL) released the draft operative modalities for a new auction window
named 'CoalSETU' (Seamless, Efficient & Transparent Utilisation). This
window will be under the Non-Regulated Sector (NRS) Linkage Auction Policy. The
draft document outlines the proposed rules for domestic buyers except traders,
seeking long-term coal supply agreements. CIL is currently inviting feedback
from prospective bidders on these proposed modalities.
Deep Dive: Analysis
1. Who Can Participate?
The draft indicates that any
domestic buyer requiring coal can participate in this auction. This includes
existing specified end-users, such as cement and sponge iron plants, as well as
independent coal washery operators. However, the document explicitly restricts
participation to actual users and washeries; traders are not permitted to
participate in this window.
2. Usage and Export Rules:
The proposed modalities
introduce specific parameters for how the allocated coal can be utilized.
Buyers may use the coal for their own industrial consumption, coal washing, or
for export. The draft specifies that linkage holders are eligible to export up
to 50% of their total coal linkage quantity.
3. Long-Term Contracts:
For those who successfully
secure allocations, the proposed tenure for the Fuel Supply Agreements (FSAs)
under the CoalSETU window is 10 years.
Key Insights: Restrictions and Pricing Mechanism
1. Resale and Rejects Guidelines:
While the draft
permits the export of raw coal up to the 50% limit, it prohibits the resale of
raw coal within the domestic Indian market. Businesses are, however, permitted
to sell processed products, such as washed coal and washery by-products, domestically.
Additionally, the disposal of coal washery rejects with a
Gross Calorific Value (GCV) of less than 2200 kcal/kg must follow the specific
Ministry of Coal policy dated May 27, 2021. The draft also requires a
declaration confirming that no coking coal is processed or utilized under this
specific linkage window.
2. The Proposed Auction Format
The document outlines
a 'First-Price Sealed Bid' auction methodology. In this format, eligible
bidders submit a single sealed bid specifying the quantity requested and the
price per tonne. The winning premium percentage established during the auction
will remain constant throughout the 10-year tenure of the FSA. The final
delivered price will be calculated using the modulated notified price, the
winning premium, and an "Escalable Component" based on previous
auction premiums.
Actionable Advice (What businesses should consider)
- Submit Feedback: CIL has opened a 20-day window from the date of the notification (February 16, 2026) for interested parties to submit opinions or suggestions regarding these draft modalities. Businesses may want to review the pricing formulas and usage restrictions to determine if feedback is necessary.
- Review
Bidding Strategies: Because the proposed mechanism is a sealed bid
rather than a forward auction, companies might need to evaluate their
internal bidding strategies. In this proposed format, the submitted bid
price is final and will be ranked in descending order to determine
allocations.
- Analyse
Washery Capabilities: Independent washery operators should ensure
their Environmental Clearances (EC) and Consents to Operate (CTO)
explicitly specify "coal washing / beneficiation" to meet the
proposed qualification criteria.