Also, a second Coal India official opined that private companies will be more interested in short-term supply agreements which will allow them greater flexibility to react as per global trends and earn higher margins. On the other hand, Coal India will continue to focus on long-term supply agreements which warrant higher and steady offtake thereby ensuring a stable topline in the long term.
Although a section of coal consumers perceive that it will make the landscape more competitive and will lead to better price discovery, Coal India officials are confident that given their current market dominance where it controls 80 per cent of the country's energy needs, it will continue to dictate prices.
"No other company can match our production volume and it is a well known fact that market prices depend to a large extent on the market leader's reaction to any market dynamics", the company official said.
Sector analysts said that for any new entrant in commercial coal mining, it will take atleast 5-6 years to operationalise in the first place and then another three years will be needed to run the mine under full capacity and attain economies of scale.
"Given such a timeframe, Coal India is expected to continue its dominance during these years and such a huge timeframe will also allow this company to adjust itself fast to any market dynamics. At least for the first 3-4 years after the private companies start selling coal, Coal India prices will be the benchmark", an analyst with Motilal Oswal said.
Typically, it is estimated that the auction process will take a year to conclude, land acquisition process for the mine will take another three years and setting up the infrastructure for mining will take another year.
"Coal India caters to nearly 80 per cent of the country's energy needs and hence enjoys a near-monopolistic status. It will be extremely hard for the new entrants to substantially challenge that monopolistic status with pricing", a sector expert said.
Nevertheless, Coal Consumers Association (CCA) is expecting sourcing of coal to become much easier as new mines would be made operational and foresee big players including international firms entering the coal mining field.
The success, however, will depend on the size of the mine and the reserve price in the forthcoming auctions.
"The mine will go to the bidder who offers the highest amount as royalty income to the state government where the mine is located. The reserve price needs to be justified as per the mine which will go under the hammer for any meaningful outcome", a CCA official said.
Coal secretary Susheel Kumar said that the private companies, as well as Coal India, can also explore exports as "there is no restriction and no changes to the policy is needed to promote coal exports".
"Exports to neighbouring countries can be explored as well if they (miners) find good prices", he said.
Analysts, however, are sceptical how Indian coal can fare against the black diamond from Australia, Indonesia, South Africa and others owing to its lesser gross calorific value and presence of impurities.