- 30 Aug 2024
- ICICI Securities
Government proposes a new window in NRS auction
News: As per media sources, the government has suggested establishing a new window within the Non-Regulated Sector (NRS) Linkage Auction Policy 2016, which would allow any domestic buyer to participate in auctions to secure the commodity for up to 15 years, without any restrictions on its end use. This new window will be referred to as coal linkage for own consumption, sale, or any other purpose. The base or floor price of any source for the auction is to be fixed at reserve price (RP) not below the notified price. The RP for linkage auctions will be indexed by Coal India (CIL) and Singareni Collieries Company (SCCL) for subsequent years. However, the bid premium shall remain constant over the contract period.
Views: This is a favourable development, especially since Coal India has been aiming to boost its revenue share from the NRS, which is also a high-margin segment for the company. In FY24, coal dispatches to the NRS sector have risen by 22% year-on-year, reaching 163 MT. We remain optimistic about Coal India’s prospects, supported by the company’s ambitious target of achieving 1000 MT of coal production by FY26, strong demand from the power sector, diversification into areas such as critical minerals and the power segment, investments in new technology like coal gasification, attractive valuation, and a strong dividend yield.
Impact: Positive