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SUMMER PROJECT REPORT

ON

Evaluation Of The e-Auction System Of

Coal India Limited

In Partial Fulfillment of Award of

Post Graduate Diploma in Business Management

By

(RUPAK GHOSH)

UNDER THE GUIDANCE OF:

FACULTY GUIDE: Dr. Girish Kathuria

COMPANY GUIDE: Mr. Vineet Singh

PGDM(BM)

Entrepreneurship and Management Processes International

New Delhi-74

June 2011



SUMMER PROJECT REPORT

ON

Evaluation Of The e-Auction System Of

Coal India Limited

Submitted to

In Partial Fulfillment of Award of

Post Graduate Diploma in Business Management

By

(RUPAK GHOSH)

UNDER THE GUIDANCE OF:

FACULTY GUIDE: Dr. Girish Kathuria

COMPANY GUIDE: Mr. Vineet Singh

PGDM(BM)

Entrepreneurship and Management Processes International

New Delhi-74

June 2011

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CONTENTS

SERIAL

NUMBER

PARTICULARS PAGE NUMBER

1 ACKNOWLEDGEMENT 7

2 SYNOPSIS 8

1 COMPANY PROFILE 10-32

2 INTRODUCTION OF THE STUDY 33-51

3 RESEARCH OBJECTIVE OF THE STUDY 52

4 NEED OR SIGNIFICANCE OF THE

STUDY

53

5 BENEFITS AND LIMITATION OF THE

STUDY

54

6 EXECUTIVE SUMMARY 56

9 RESEARCH METHODOLOGY & DESIGN

OF THE STUDY

58-59

10 FINDINGS AND ANALYSIS 61-76

11 LIMITATION OF THE PROJECT 77

12 MAIN FINDINGS 79

13 RECOMMENDATION 80-81

14 BIBLIOGRAPHY 82

15 APENDIX (SAMPLE QUESTIONNAIRE) 83-89

LIST OF FIGURES AND CHARTS

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SERIAL NO. PARTICULARS PAGE NO.

1 Fig: Subsidiaries and CIL 19

2 Fig: Organisational structure of CIL 18

3 Fig: Major development of marketing policy 33

4 Fig: Schematic diagram of logistic system 36

5 Fig: Schematic diagram of supply chain

management

37

6 Fig: Representation of the NCDP policy 40

7 Fig: A strategic internet marketing policy 42

8 Fig: Flow chart of the e-Auction process 48

9 Chart:5 largest coal producing countries 12

10 Chart: India primary energy consumption 12

11 Chart: World v/s CIL production 25

12 Chart: CIL market share in India 25

13 Chart: Yearwise coal production of CIL 26

14 Chart: Yearwise coal production of CIL

subsidiaries

26

15 Chart: Production of raw coal by CIL 27

16 Chart: Production cost of CIL 27

17 Chart: Avg. realization/tonne of CIL 28

18 Chart: Man productivity of CIL 28

19 Chart: Net profit of CIL 29

20 Chart: Net profit to net worth of CIL 29

21 Chart: Consuming sector profile of coal in India 39

22 Charts of Service provider and customers of e-

Auction’s response

64-72

ACKNOWLEDGEMENT

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I would like to take this opportunity to express my sincere gratitude to COAL INDIA LTD

for providing me with an invaluable opportunity to work with them. I express my heartfelt

thanks to my project guide Mr. Vineet Singh, (Assisstant Manager, Sales & Marketing).

I would also like to thank Mr. R.D.Roy ( Chief Sales Manager ) for providing me with

required information needed for this project.

I am also grateful to my faculty guide, Mr. Girish Kathuria of EMPI Business School, New

Delhi.

I would also like to thank the customers and the service providers of e-auction who spared

their valuable time and gave me interview and responded to my questionnaire for the project.

Thanks and Regards

RUPAK GHOSH

PGDM-(BM)

Batch: 2010-12

Roll No:47

SYNOPSIS

Coal is the most important & abundant fossil fuel in India and accounts for 55%

of India's energy need. It is becoming increasingly evident that coal will continue to

occupy centre-stage of India's energy scenario. Indian coal offers a fuel source to

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domestic energy market for the next century & beyond.

Prior to nationalization entire amount of coal was sold through middle- men or

agents on behalf of producers and consumers and their commission was fixed under

the colliery control order. After nationalization of coal sector, demand from non-core

consumers slowly built up to unrealistic level leading to rationalization of coal

demand versus availability. It necessitate introduction of the system of linkage for

non-core sector consumers like core sector. But this system for supply of coal to

consumers of non- core sector suffered from disadvantages like because of

inadequacy in availability of coal new linkage could not be granted after 2001,

consumers purchasing from black market etc.

After complete decontrol of coal distribution from 1.1.2004 many

traders/consumers challenged the system of linkage/sponsorship in non-core sector in

Courts. CIL submitted a special leave petition to evolve a new system based on

modern technology. CIL wanted to evolve a transparent and equitable policy of coal

marketing to all non-core sector consumers making use of modern technology through

electronic auction route. During the year 2005-06, E-marketing was conducted in all

the coal producing subsidiaries of CIL. The government in 2007 announced its new

policy for distribution of coal (NCDP), which re-introduced e-auction and for the first

time made it binding on the producers to deliver assured supplies of coal at the pre-

determined price. In 2008 Coal India Ltd introduced forward e-auction of coal. The

new instrument was launched on the existing spot e-auction platform to help the users

especially the small and medium enterprises (SME) plan their procurement on a long-

term basis. Presently CIL is conducting e-Auction through the following service providers MSTC India and Metal Junction.

All the topics have been covered in a very systematic way.The first chapter contains the company profile,introduction of the study as well as the documentationof the objectives, significance, benefits and limitation of the study. In the third chapter I have described the research methodology and design of the study.In the fourthchapter I have dealt with the findings from the customer and the service provider’sresponse and tried to analyze those. In the fifth chapter I concluded the findings andrecommended some solutions to improve the e-Auction process.I have also includedthe sample questionnaire used for my research. The language has been kept simple sothat even a layman could understand.

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CHAPTER-I

INTRODUCTION

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Coal Industry in India-A Retrospect

Coal is the most important & abundant fossil fuel in India and accounts for 55% of

India's energy need. India's industrial heritage was built upon indigenous coal, largely

mined in the eastern and the central regions of the country. In India, 80% of mining isin coal and the balance 20% is in various metals and other raw materials such as gold,

copper, iron, lead, bauxite, zinc and uranium. Coal has been a major contributor in

providing energy security during the past century. But it is not a renewable resource,

one day it will exhaust. It is possible that this pattern may change and there could be

emphasis on uranium and thorium based power plants during the later part of the 21st

century in addition to the emphasis on renewable energy sources.

Historical records in India indicates that mining and the use of metals and their

alloys,including iron,took place in the ancient days of civilization.Ruins of old smithy

furnaces and slag heaps close to the coal deposit region in Eastern India indicate thatcoal was used in metallurgical processing even as early as two thousand years ago.In

the absence of proper documentation and records,however,the profile of the coal

industry remained vague until the middle of the eighteenth century.In their memoir of

1774,Sumner and Healthy of the East India Company recorded the receipt of the

proposal by the council of revenue “for working coal mines and selling coal in

Bengal”.Sumner and Healthy were granted permission to mine coal in six mines and

actually started operations at one of them.Following that,industrial coal mining

operations in India continued in a low key,principally as a result of indifference and

neglect.This state of affairs persisted until1813 when the government deputed and

experienced mining engineer to make an appraisal of the prospects of coal mining in

India.By the mid-nineteenth century,coal mining was well established and prodution

was about 90,000 tonnes by 1850.The level of coal production in Indiareached 6.12

million Tonnes by1900 and 18 Million Tonnes by 1920.A number of committees and

commissions at that time recommended conservation and scientific exploitation of

coal,improvement in the working conditionsin mines and safety of the miners.Coal

production during this period was mostly by manual means.Only a fewcoal cutting

machines employed in some of the mines were electri-driven.By 1946,the year before

India gained its independence coal production reached about 30 Millon Tonnes.

With the advent of independence,the country embarked upon Five-Year national

development plans to improve the economic status of the people.Coal being the most

important and proven energy form available,the need was felt in the First Five Year

plan for greater and more efficient production of coal.A production of 39 Million

Tonnes by the terminal year (1960-61).During this period,it was considered that the

private sector alone would not be able to achieve the target of coal production.As a

result,the National Coal Development Corporation Ltd.(NCDC),a Government of

India undertaking,was established in 1956 with the collieries owned by the Railway as

its nucleus.Along with the Singreni Collieries Co. Ltd.(SCCL),already in operation in

Southern India from 1945,the country had two state-owned coal companies.With the

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Government’s national energy policy,the near total national control of the coal mines

in India took place in two stages.

Nationalisation of Coal Mines

Coal mines in India were nationalized way back in 1972-73 with the aim of re-organizing and restructuring of coal mines in the backdrop of the then existing

unsatisfactory mining conditions,violation of mine safety laws,industrial unrest,lack

of investments in mine development,mechanization etc.and aiming to meet the long

range coal requirements of the country.The Coking Coal Mines (Emergency

Provisions) Act,1971 was promulgated by the Central Government on 16.10.1971

under which except the captive mines of IISCO,TISCO and DVC,the management of

all 226 coking coal mines were taken over by the government and Bharat Coking

Coal Ltd.(BCCL) was formed to look after these mines.The mines were nationalized

w.e.f 1.5.1972

Further by promulgation of the Coal Mines(Taking over of Management)

Ordinance,1973 on 31.1.1973,the Central Government took over the management of

711 non-coking coal mines.In the next phase of nationalization,these mines were

nationalized w.e.f 1.5.73 and a public sector company namely Coal Mines Authority

Ltd.(CMAL),was formed to mange these non-coking coal mines.

In November 1975,the holding company Coal India Limited(CIL) was formed

.Singareni Collieries Co. Ltd.(SCCL) continued to maintain its separate identity,while

a few captive mines belonging steel plants such as Tata Iron and Steel Co. Ltd.

(TISCO) and the Steel Authority of India Ltd.(SAIL) and a power agency,the

Damodar Valley Corporation(DVC),were kept out of the purview of coal

nationalization.Bituminous coal in India,therefore,is produced by Coal India

Ltd.Singareni Collieries Co. Ltd. and the balance by the captive mines of

TISCO,SAIL-IISCO,DVC and others.Lignite is largely produced in India by a state

sector organization,the Neyvile Lignite Corporation(NLC).

It is becoming increasingly evident that coal will continue to occupy centre-stage of

India's energy scenario. Indian coal offers a fuel source to domestic energy market for

the next century & beyond. Based on estimates, the consumption of coal is projectedto rise by nearly 40 percent over the next five years and almost to double by 2020.

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Coal Industry highlights:

• India is the third largest producer of coal in the world.

5 Largest Global Coal ProducingCountries

1455

993

358220 103

3050

973

558

250 253

0

500

1000

1500

2000

2500

3000

3500

C h i n

a

U S A

I n d i a

S o u t h

A f r i c

a

I n d o n e s i a

CY2002

CY2009

• Coal is one of the primary sources of energy, accounting for about 52% of thetotal energy consumption in the country.

I ndia primary energy consumption

Nuclear

energy

1%

Natural Gas

10%

Oil

32%

Hydro

Electric

5%

Coal

52%

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• India has the fourth largest reserves of coal in the world (approx. 197 billiontonnes.).

• Coal deposits in India occur mostly in thick seams and at shallow depths. Non-coking coal reserves aggregate 172.1 billion tonnes (85 per cent) whilecoking coal reserves are 29.8 billion tonnes (the remaining 15 per cent).

• Indian coal has high ash content (15-45%) and low calorific value.• With the present rate of around 0.8 million tons average daily coal extraction

in the country, the reserves are likely to last over a 100 years.• The energy derived from coal in India is about twice that of energy derived

from oil, as against the world, where energy derived from coal is about 30%lower than energy derived from oil.

• As of 2003, India has 19 coal washeries (total capacity:27.2 million tonnes per annum) of which 15 are owned by CIL.And they are planning to construct 20new washeries in recent future.

• The use of beneficiated coal has gained acceptance in steel plants and power plants located at a distance from the pithead.

Company Profile

Date of Incorporation Formed as holding company with 5 subsidiaries on

21.10.1975

Corporate status The company is incorporated under the Companies Act,

1956 and is wholly owned by the Government of India(GOI).Business Engaged in the mining of coal, coal based products and

mining consultancy.Wholly owned

subsidiaries

Eastern Coalfields Ltd.Bharat Coking Coal Ltd.Central Coalfields Ltd.

Northern Coalfields Ltd. Western Coalfields Ltd.South Eastern Coalfields Ltd.Mahanadi Coalfields Ltd.

Central Mine Planning & Design Institute Ltd. North Eastern Coalfields is directly under Coal India Ltd.

Registered office Coal Bhavan,10 Netaji Subhas Road,Kolkata – 700001

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http://www.easterncoal.co.in/

http://www.bccl.cmpdi.co.in/

http://www.ccl.cmpdi.co.in/

http://www.ncl.nic.in/

http://www.westerncoal.nic.in/

http://www.secl.nic.in/

http://www.mahanadicoal.nic.in/

http://www.cmpdi.nic.in/

http://coalindia.nic.in/neccons.htm

http://www.bccl.cmpdi.co.in/

http://www.ccl.cmpdi.co.in/

http://www.ncl.nic.in/

http://www.westerncoal.nic.in/

http://www.secl.nic.in/

http://www.mahanadicoal.nic.in/

http://www.cmpdi.nic.in/

http://coalindia.nic.in/neccons.htm

http://www.easterncoal.co.in/



COAL INDIA LIMITED

MISSION

“The mission of Coal India Limited is to produce

the planned quantity of coal efficiently &

economically with due regard to safety,

conservation & quality”.

VISION

“Be the leading energy supplier in the country,

through best practices from mine to market”.

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The objectives of the company are as follows –

1. To promote the development and utilization of the coal reserves in the country

for meeting the present and likely future requirement of the nation with dueregard to need for conservation of non-renewable resources and safety of mineworkers.

2. . To raise the productivity of coal mining and related activities throughintroduction of improved technology, streamlining of organization,management and improving the skills, motivation of the work –forces.

3. Efficiency of operations and adopting appropriate cost reduction and costcontrol methods.

4. To make efficient arrangements for marketing and supply of coal so that coal,coke and other similar derivatives are available to consumers throughout thecountry conveniently and at reasonable prices.

5. To promote research and development activities on an continuing basis in theareas of coal mining, beneficiation development of new coal based products or

by- products, fuel technology or any other area having a bearing onconservation, development for utilization of the coal reserves of the country

• Background history at a glance

1774 Warren Hastings initiates commercial coal mining at Raniganj (WestBengal)

1815-1820 First Shaft Mine opened at Raniganj

1835 Carr, Tagore & Company takes over the Raniganj Coal Mines

1843 Bengal Coal Company takes over Raniganj Coal Mines and others; isfirst Joint Stock Coal Company in India.

Upto 1900 Minimal development; River transportation used to transport coal toCalcutta; railway lines at Calcutta leads to expansion of CoalProduction

Early1900s

Capacity at 6 million tonnes per annum

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1955-56 Focus on Coal Industry; capacity up to 38.4 Million tonnes.

1956 National Coal Development Corporation (NCDC) formed to exploreand expand coal mining in Public Sector

1972 Coking Coal Industry nationalised, Bharat Coking Coal Limited formedto manage operations of all Coking Coal mines in Jharia Coalfield.

1973 Non-coking coal nationalised; Coal Mine Authority Limited set up tomanage these mines; NCDC operations bought under the ambit of CMAL.

1975 Coal India Limited formed as holding Company with 5 subsidiaries viz.Bharat Coking Coal Limited (BCCL), Central Coalfields Limited(CCL), Western Coalfields Limited (WCL), Eastern Coalfields Limited

(ECL) and Central Mine Planning and Design Institute Limited(CMPDIL).

1985 Northern Coalfields Limited (NCL) and South Eastern CoalfieldsLimited (SECL) carved out of CCL and WCL

1992 Mahanadi Coalfields Limited (MCL) formed out of SECL to managethe Talcher and IB Valley Coalfields in Orissa.

2000 De-regulation of Coal pricing and distribution of coal.

2007 Coal India & four of its Subsidiaries, viz, NCL,SECL,MCL,WCL wasaccorded coveted "Mini Ratna" Status

2008 Coal India was awarded the Navaratna status.

2010 Introduction of Coal India IPO

2011 Coal India was awarded the Maharatna status.

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Functions of Coal India Ltd.

Broad functions:

• Laying down policies• Formulating long and short-term strategies.• Monitoring the functions of the subsidiary companies.• Laying down system and procedures.• Assisting the subsidiary companies to achieve their objectives.• Coordinating with ministry of coal, ministry of railways, planning commission

and other ministries.

Specific functions:

• Pricing and distribution of coal.• Coal supply agreements.• Consumer services through regional offices.• Negotiations of wages.• Executive cadre control – recruitment, promotion/postings, pay/perks etc.•

Manpower planning – HRD.• Foreign collaboration.• Introduction of new technology.• R&D activities.• Mobilization of resources – long term and short term.• Accounting policies.

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Organisational Structure of Coal India Limited:

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BOARD OF DIRECTORS

CHAIRMAN

TECHNICAL SECRETARY TO CHAIRMAN

ADMINISTRATION

VIGILANCE

PARLIAMENTARY AFFAIRS

CORPORATE COMMUNICATION & PR

COMPANY SECRETARY,CORPORATE GOVERNANCE

DIRECTOR(FIN) DIRECTOR(TECH) DIRECTOR(P & IR) DIRECTOR CMD



COAL INDIA LTD.

467 MINES

(403.73 MT)

ECL 1975 #

113 MINES

28.13 MT

BCCL

1973#

84 MINES

25.51 MT

WCL 1975

#

84 MINES

44.70 MT

CCL 1975#

62 MINES

43.23 MT

NNN

NCL 1986 #

10 MINES

63.65 MT

SECL

1986#

88 MINES

102.15 MT

CMPDIL

1975#

MCL 1986#

26 MINES

96.33 MT

Fig:Subsidiaries and Coal India

Eastern coalfields limited. (ECL) Asansol, W.B.

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Bharat coking coal limited. (BCCL) Dhanbad, Jharkhand

Central coalfields limited. (CCL) Ranchi, Jharkhand

Northern coalfields limited. (NCL) Singruali,M.P.

Western coalfields limited. (Nagpur,Maharashtra)

Southeastern coalfields limited (SECL) Bilaspur,Chattisgarh

Mahanadi coalfields limited. (MCL) Sambalpur, Orissa

Central mine planning & design institute limited (CMPDIL)Ranchi,Jharkhand. (For mine planning, design & engineering consultancy services

and exploration activity).

The mines of North Eastern coalfields (Assam & Meghalaya) operate directly under

COAL INDIA. Registered office of the Company is Coal Bhawan, 10 Netaji Subhas

Road , Kolkata-700 0011, West Bengal, India.

COAL INDIA currently operates 467 mines and 17 washeries (11 coking and 6

non-coking) spread over eight states to produce and beneficiate coal for meeting the

demand of the consumers all over the country.

75 % of CIL total production contributes towards electricity generation. COAL

INDIA, for over three decades, has been fuelling economic growth of INDIA keepingits wide array of consumers like Thermal power plants, steel plants , cement plants,

fertilizer units and innumerable industrial units satisfied with supply of coal.

COAL INDIA has played a significant role in securing India’s energy future. The

integrated energy policy of the country clearly indicates that coal is the main and

cheapest source for Indian energy sector. CIL currently accounts for 85% of the total

coal produced in the country and Power sector is the largest consumer utilizing 75% of

CIL production.

Coal based power generation constitutes 75% of power generation in the country

and CIL supplies coal to as many as71 power station.

Products and services of CIL

The following are the products offered by CIL:

i)COKING COAL

ii)SEMI COKING COALiii) NLW COKING COAL

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http://coalindia.nic.in/customer3.htm#COKING%20COAL

http://coalindia.nic.in/customer3.htm#SEMI%20COKING%20COAL

http://coalindia.nic.in/customer3.htm#NLW%20COKING%20COAL

http://coalindia.nic.in/customer3.htm#COKING%20COAL

http://coalindia.nic.in/customer3.htm#SEMI%20COKING%20COAL

http://coalindia.nic.in/customer3.htm#NLW%20COKING%20COAL



iv) NON COKING COAL

vi)WASHED AND BENEFICIATED COALvii)MIDDLINGSviii)REJECTS

ix)CIL - COKE / LTC COKEx)COAL FINES / COKE FINESxi)TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH

i) COKING COAL :These are such coal which when heated in absence of air form coherent bead,

free from volatiles, with strong and porous mass, called coke.

• These have coking properties• Mainly used in Steel making and metallurgical industries• Also used for hard coke manufacturing

ii) SEMI COKING COAL :These are such coal which when heated in absence of air form coherent bead

not strong enough to be directly fed into blast furnace. Such coals are blended withcoking coal in adequate proportion for coke making.

• These have comparatively less coking properties than cokingcoal.• Mainly used as bendable coal in steel making, merchant cokemanufacturing and other metallurgical industries.

iii) NLW COKING COAL:

These Are such Coal ,which are not used in metallurgical industries.Because of higher ash content, these are not acceptable to washeries for washing.These coals are used for power utilities and non core sector consumers.

iv) NON COKING COAL: Such coals which do not have coking properties, are Non-Coking Coal.

• Mainly used as thermal grade coal for power generation.• Also used for Cement, Fertilizer, Glass, Ceramic, Paper,

Chemical, Bricks manufacturing and for other heating purpose.

vi) WASHED AND BENEFICIATED COAL: Washed and beneficiated coal are such coal which have undergone process

of coal washing or coal beneficiation causing value addition of coal by way of reduction in ash %age.

• Beneficiated coking coals find use in manufacturing of hardcoke for steel making.

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http://coalindia.nic.in/customer3.htm#NON%20COKING%20COAL

http://coalindia.nic.in/customer3.htm#WASHED%20AND%20BENEFICIATED%20COAL

http://coalindia.nic.in/customer3.htm#MIDDLINGS

http://coalindia.nic.in/customer3.htm#REJECTS

http://coalindia.nic.in/customer3.htm#CIL%20-%20COKE%20/%20LTC%20COKE

http://coalindia.nic.in/customer3.htm#COAL%20FINES/COKE%20FINES

http://coalindia.nic.in/customer3.htm#TAR%20/%20HEAVY%20OIL%20/%20LIGHT%20OIL%20/%20SOFT%20PITCH

http://coalindia.nic.in/customer3.htm#NON%20COKING%20COAL

http://coalindia.nic.in/customer3.htm#WASHED%20AND%20BENEFICIATED%20COAL

http://coalindia.nic.in/customer3.htm#MIDDLINGS

http://coalindia.nic.in/customer3.htm#REJECTS

http://coalindia.nic.in/customer3.htm#CIL%20-%20COKE%20/%20LTC%20COKE

http://coalindia.nic.in/customer3.htm#COAL%20FINES/COKE%20FINES

http://coalindia.nic.in/customer3.htm#TAR%20/%20HEAVY%20OIL%20/%20LIGHT%20OIL%20/%20SOFT%20PITCH



• Beneficiated washed Non-coking coal find use mainly for power generation.• Beneficiated Non-coking coal can be used by Cement plants,Sponge Iron plants and other industrial plants.

vii) MIDDLINGS:Middling’s are by-product of three stage / coal washing / beneficiation

process, as a fraction of feed raw coal.

• Middling can be used for power generation.• It can also be used by domestic fuel plants, brick manufacturingunits, Cement plants, Industrial plants etc.

viii) REJECTS: Rejects are the product of coal washing process after separation of cleans

and / or middlings, as a fraction of feed raw coal.

• Rejects find use for Fluidized Bed Combustion ( FBC ) Boilersfor power generation, road repairs, briquette (domestic fuel) making,land filling purpose etc.

ix) CIL - COKE / LTC COKE: CIL - Coke / LTC Coke is smokeless environment friendly product of

Dankuni Coal Complex, obtained through low temperature carbonisation.

• It finds use in furnace, Kilns of industrial units.•

It can also be used as domestic fuel by Halwais, Hotels etc.

x) COAL FINES / COKE FINES:

These are the screened fraction of feed raw coal and screened fraction of LTC coke / CIL-Coke respectively, obtained from Dankuni Coal Complex. and other coke oven plants

• These are used in furnaces in industries as well as for domestic purposes.

xii) TAR / HEAVY OIL / PITCH:

These are products from Dankuni Coal Complex using low temperaturecarbonisation of Non-coking coal in vertical retorts.

• These find various industrial uses in furnaces of plants, boilersof industrial plants as well as power houses, oil industries, dyeindustries, pharmaceutical industries etc.

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Coal India:Key strengths-Drivers of Growth-

L

Resources base of 64.2 Production of 431 mt in

Bn tones and reserves of 18.9 bn tones FY 2010.82% market

Operates 471 mines in 21 major share in India in 2009.

Average cost of production per tonne In house exploration &

of INR744.9.Average cost of production mine planning capabilities

for open mines is INR 520.0.Increasing through CMPDIL.Approx.

efficiency 0.47 million meters drilling

Achieved in FY 2010.

Inclusive growth for the community and One of the premier state

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Largest coal reserves in the

World

Largest coal producer in

the world

Low cost of Production Extensive mining capabilities

Developed CSR,safety andenvironmental policies

Experienced Management



Robust rehabilitation policy.Health and run enterprise in India with

Education policies. High standards of

Corporate governance.

Highly experienced senior

Management team.

The Prominent Activities of Coal India in Recent Past:

Government decided to disinvest 10% of equity in CIL.The paid up equity of thecompany is Rs.6316.36 Crores.The total number of shares offered were 63.16 Crores.Expected to raise over Rs. 15,000 crores at the higher end of the price band of Rs.225-Rs.245. The exercise of Coal India’s Intial Public Offer (IPO) was a monumental

effort considering the size of the company.In a bid to expand the “people’sownership” in PSUs which has built assets overa period of time,divestment was takenas a policy by Govt.;CIL’s 10% divestment being part of the company which hasshared by public at large.

During IPO process,CIL had submitted its exhaustive Draft Red HerringProspectus (DRHP) during the month of August 2010 with the capital marketregulator Securities & Exchange Board of India (SEBI) and final Red HerringProspectus in September 2010.Innumerable road shows involving count less manhours of effort across the country and in US,Europe markets had resulted in thegrandsuccess of CIL’s IPO.

The IPO the largest so far in Indian capital market was over-subscribed 15.2times. The resondng success IPO with aggregate funds flowing amounting toapproximately Rs. 2,33,000 Crores.The over-subscription of the issue happened in allthree major segment i.e. Qualified Institutional Buyers (QIB),HNI and retail.The QIBfor which there was a reservation to the extent of 50% of the net issue of the shares,the over-subscription was as much as 23.46 times.Around 777 QIB investors had putin over US dollar 37 billion i.e. around 172,000 crores which is itself a record of thesort in the history of Indian IPO.In the retail segment nearly 16.64 lakhs applicantswere received-the highest among all PSU IPOs till the date.Interestingly,the foreign

investors alone had put in around US $ 27 Billion which is equal to first ten months of FII investment in India that year.

CRISIL the leading credit rating agency in the country has assigned maximumgrading of 5 to CIL’s proposed IPO-the best for any public sector.The Gradingindicates that the fundamentals of the IPO are strong compared to other listedsecurities in the country.Similar grading was given by other credit rating like ICRA &CARE.

4 November 2010 was a historic day not only for CIL and PSU faternity butalso for the Indian Capital Market in general.CIL share was listed at Rs. 291/- and

closed over Rs. 342/- on the first day of trading and listing gain was the perfectDiwali Bonanza for more than 15 lakhs successful investors.

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24



An analysis by financial news daily indicated that CIL’s IPO could be the thirdlargest in the world and the largest to hit the Indian market till date.

Post listing,the company pitched in with GoI for elevation from ‘Navaratna’ tothat of ‘Maharatna’ status. The resultant additional power s would help CIL in taking

speedier decisions for investing in its projects.And they finally got that ‘Maharatna’status in 2011.

The transformation of Coal India over the years is one of the fascinating stories of business transformation anywhere in the world.

Useful facts and figures of Coal India:

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25



Coal India dominates production market share in India:

Coal India

82%

SCCL

9%

TISCO

1%

Other

8%

Year-wise Coal Production by Coal India:

0

50

100

150

200

250

300

350

400

450

500

1 9 7 3 - 7 4

1 9 7 5 - 7 6

1 9 7 7 - 7 8

1 9 7 9 - 8 0

1 9 8 1 - 8 2

1 9 8 3 - 8 4

1 9 8 5 - 8 6

1 9 8 7 - 8 8

1 9 8 9 - 9 0

1 9 9 1 - 9 2

1 9 9 3 - 9 4

1 9 9 5 - 9 6

1 9 9 7 - 9 8

1 9 9 9 - 0 0

2 0 0 1 - 0 2

2 0 0 3 - 0 4

2 0 0 5 - 0 6

2 0 0 7 - 0 8

2 0 0 9 - 1 0

Year-wise Coal production of CIL Subsidiries:

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26



0

50

10 0

15 0

20 0

25 0

30 0

35 0

40 0

45 0

50 0

1978-791984-851989-901996-972001-022006-072007-082008-092009-10

M I L L I O N T

O N N E S

E C L B CCL C C L N CL W CL SECL M CL N EC

Production of raw coal:

361379

404

431

95

0

50

100

150

200

250

300

350

400

450

500

2007 2008 2009 2010 1Q 2011

P r o d u c t i o n

( m t p a )

27

27



Production cost (INR per tonne)

660

715 738 745

848

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 1Q 2011

I N R

p e r t o n n e

a) Average cost per tonne of raw coal produced.

b) Coal production from open cast and underground mines within

mixed mines have been included under production from open

cast underground mines respectively.

Average realization per tonne (INR per tonne)

812 841926

1,045 1,097

1,9441,890

2,2672,134

2,239

0

500

1000

1500

2000

2500

2007 2008 2009 2010 1Q2011

I n r p e r t o n n e

Raw coal(a) Beneficiated Coal

a) Calculated as total sales of raw coal divided by the volume of raw coal sold.

b) Calculated as total sales of beneficiated coal divided by the volume of beneficiated coal sold.

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28



Man Productivity (output per manshift in Tonnes )

3.263.54

3.79

4.09

4.47

0

0.5

1

1.5

2

2.5

3

3.5

4

4.55

2005-06 2006-07 2007-08 2008-09 2009-10

Year

T o n n s

Net Profit:

42

32

27

11

37

0

5

10

15

20

25

30

35

40

45

2005-06 2006-07 2007-08 2008-09 2009-10

year

P e r c e n t

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29



Net Profit to Net Worth

5892 57095243

2079

962210670

0

2000

4000

6000

8000

10000

12000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

year

R s .

i n C r o r e s

• Gradation of Coal

A. COKING COAL

GRADE PARAMETER

STEEL – I ASH NOT EXCEEDING 15%

STEEL – II ASH EXCEEDING 15% BUT NOTEXCEEDING 18 %

WASHERY – I ASH EXCEEDING 18% BUT NOT

EXCEEDING 21 %WASHERY – II ASH EXCEEDING 21% BUT NOT

EXCEEDING 24 %

WASHERY – III ASH EXCEEDING 24% BUT NOTEXCEEDING 28 %

WASHERY – IV ASH EXCEEDING 28% BUT NOTEXCEEDING 35 %

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B. SEMI COKING COAL

GRADE PARAMETER

SEMI COKING – I ASH + MOISTURE NOT EXCEEDING19 %

SEMI COKING – II ASH + MOISTURE EXCEEDING 19 %

BUT NOT EXCEEDING 24 %

C. NON-COKING COAL

GRADE UHV RANGE (KCALS/KG)

A EXCEEDING 6200

B EXCEEDING 5600 BUT NOTEXCEEDING 6200

C EXCEEDING 4940 BUT NOTEXCEEDING 5600

D EXCEEDING 4200 BUT NOTEXCEEDING 4940

E EXCEEDING 3360 BUT NOTEXCEEDING 4200

F EXCEEDING 2400 BUT NOTEXCEEDING 3360

G EXCEEDING 1300 BUT NOTEXCEEDING 2400

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31



D. ASSAM COAL

GRADE UHV RANGE (KCALS/KG)

A 6200 – 6299

B 5600 – 6199

E. HARD COKE

GRADE ASH %

BY PRODUCT PREMIUM NOT EXCEEDING 25 %

BY PRODUCT ORDINARY EXCEEDING 25 % BUT NOT EXCEEDING30 %

BEEHIVE PREMIUM NOT EXCEEDING 27 %

BEEHIVE SUPERIOR EXCEEDING 27 % BUT NOT EXCEEDING

31 %BEEHIVE ORDINARY EXCEEDING 31 % BUT NOT EXCEEDING

36 %

• Suitability of Coal

INDUSTRY TYPE OF COAL REQUIRED

Steel making Coking and Semi Coking Direct Feed and

Washed. Also blendable coals and low ash %Assam and Raniganj Coals.

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Steel Making and for Sponge iron industry Non coking coal of high Initial DeformationTemperature (IDT) (>1200 0C ).

Cokeries / Coke Oven Plants Coking and Semi coking.

Briquette Making / Domestic Fuel Making Semi Coking and Non-Coking, Middling &

Rejects of Washery.Special Smokeless Fuel ( SSF ) Semi Coking of Caking Index 8 – 10.

Power Sector Non Coking and Middlings of Coking coalWasheries as well as Washed Coal of Non-Coking Coal Washeries.

Cement Sector Non Coking, Middling of Coking CoalWasheries.

Glass and Potteries Long Flame Non Coking.

Cast Iron Castings Hard Coke

Steel Castings Industries Non Coking

Bricks Non Coking, Middling of Coking CoalWasheries.

Old Boilers Superior Grades of Non Coking.

Halwais, Domestic Use & Hotels etc. Non Coking Coal and CIL Coke/ LTC Coke.

Note: UHV: ‘Useful Heat Value’=8900-138(A+M) ;A=Ash content(%),M=Moisturecontent(%)

Introduction of the Study

EVOLUTION OF MARKETING POLICY

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Previous marketing policy of CIL:

Genesis Of Coal Marketing:

Prior to nationalization entire quantity of coal sold through middleman who

operated as del-cadre agents on behalf of producers and consumers and their

commission was fixed under the colliery control order 1945. The quality and quantity

of coal, price economics and terms of payments were finalized through negotiation

between customer and the coal producing company.

After nationalization coal consumer categorized in to two major sectors:

• Core Sector

• Non-core Sector.

Coal Marketing To Core Sector Consumers:

Most core sector consumers allocated coal on quarterly basis by standing

linkage committee (short term) function in Ministry of Coal under the chairmanship

of Addl. Secretary in consideration to long-term linkages of individual consumers,

except for minor variations. This committee governs allocation for power utilities,cement and captive power sectors. Other consumers of the core sector have separate

mechanism either by their Administrative Ministry or by coal India limited.

Coal Marketing To Non Core Sector Consumers:

After nationalization of coal sector demand from non core sector gradually

built up to unrealistic level due to excessive sponsorship by the Sponsoring

Authorities, leading to non-rationalization of coal demand versus availability. It

necessitate introduction of the system of linkage for non-core sector consumers like

core sector. Consumer draw coal prior to introduction of Non-core sector Linkage

Committee (NCLC) of coal India categorized as traditionally linked consumers. Apartfrom the linked non-core consumers for other buyers of coal in the country, separate

mechanism for coal supply were evolved as follows:

BRICK:

Brick manufacturing units (BRK sector) considered as seasonal consumer and kept

outside the preview of linkage system. Supply to this sector made against state

sponsorships subject to availability of coal in respective subsidiaries.

STOCKYARD:

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* With the objective of taking coal to the consumption point ( so that

requirement of tiny consumers was met) CIL Board during 1980 approved the

scheme for opening to stockyards for small and medium consumers of coal.

* By 1984-85, 56 stockyards under operation in various states, stockyard

operators appointed through open tender

WHOLE SALE TRADER/MINI TRADER :

* In January 1992, the scheme of “Whole Sale Trader” (WST) launched.

* CIL appointed Whole Sale Trader on cash and carry basis for a quantity of

9000 tonnes per quarter under an agreement with supplying Coal Company.

* These schemes were replaced in 1996 by liberalization sales scheme (LSS)

LSS/OSS:Before total deregulation of coal price and distribution on 1.1.2000, two sales

schemes, namely, Liberalized Sales Scheme (LSS) and the Open Sales scheme

(OSS) operated for regulated for and deregulated grades respectively. After

complete decentralization since 1.1.2004, only OSS was under operation by

CLL. Under OSS, coal offered for sale from identified sources on ‘first come

– first serve basis’ after meeting the requirement of core- sector and

linked/sponsored consumers. Price charged for sale under the OSS scheme

duly approved by the board of respective coal companies w.e.f 1.10.2004.

Although till 30.9.2004 there was no dual price and only one price prevailed.

With the changing scenario of demand and supply i.e. demand outstripping the

coal availability, vested interests including Coal Mafia and muscle power vitiate the

system of sale on ‘first come- first served’ basis. This led Coal companies to think

about a new system sale which could be more transparent and customer friendly.

Policy Progression:-

The winds of change started blowing on and from 1996, when the Govtdecided to de-control pricing and distribution of higher grades of coal, which were in

high demand then. So when the prices of such grades of coal (Grade A, B, C) was

refixed, a surge towards lower varities of coal was witnessed. Ultimately on and from

1st January, 2000, all the grades of coal were decontrolled. It was then that CIL started

contemplating replacement of system of linkages with new policy. On 06.06.01, the

Board of CIL decided to do away with the system of linkages and FSA as a concept

was conceptualized. For certain reasons, FSA could not be implements immediately

then and in the meantime, policy of e-auction, as a test case was introduced in BCCL,

which received tremendous response from the consumers. Gradually this policy was

spread in all the subsidiaries of CIL.

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35



CIL decided to refix weighted-average e-auction price for coal supply in

respect of then existing valid linked units. This led to discontentment amongst such

consumers, some of which then preferred to move before various courts. Whereas

some of the courts ruled in favour of CIL, other courts ruled said pricing policy as

unlawful. Hence, CIL decided to move to Apex Court, which upon prolonged hearingof either sides declared e-marketing as ultra-vires to the constitution and directed

Secretary (Coal) to formulate New policy.

• Need for review

In the present emerging market economy PSU’s are also expected to operate

on commercial principles so as to generate internal resources for revenue

production and foreign projects. This necessitates reorientation of marketing

policy to achieve twin objectives of consumer satisfaction and commercial

viability. The system of linkage, and its evolution since introduction in 1978, had put CIL before some challenges. There was obligation on the part of CIL to

supply coal, whereas consumer not having any commitment to lift coal. The

checks like discontinuance of linkage after non-lifting for a period of 12 months

and cancellation in case of non-lifting for a period of 36 months & the other

checks that of MPQ (Maximum permissible quota) system to limit quantities

endangered litigations. The present linkage system for non core sector industrial

customers indicates quality and source and supply leaving the demand/quantity to

be sponsored by respective sponsoring authorities. The linkage granted is being

taken as CIL’s commitment. On the basis of this commitment, even court cases

are being filed to hold CIL and subsidiaries companies accountable for non

compliance of the linkages. Also a tendency of biasness was observed among the

customers towards the high grade coal leaving a slump in the demand for the

lower ones. So all these points forced the management and the govt to think

otherwise. Coal linkage policy and its operational system at this juncture ,

therefore needs review. Hence NCDP came into the picture.

Drawbacks of the linkage policy:

i)Because of inadequate availability of coal, no new linkage could be granted after

2001 in non-core.

ii)The consumers having no linkage were constrained to purchase coal from black

market on higher prices.

iii)Even consumers having linkage had to depend on secondary market if they wanted

enhancement of the quantity.

iv)With existence of secondary market where coal could be bought on premium,

consumers getting coal through linkages on notified price tempted to divert their coal

to such market.

v)More the gap between the market price and the notified rice, more the temptation.

Logistic-A Key Parameter

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36



Fig: Schematic diagram of logistic system.

Fig: Schematic diagram of the supply chain management

PERIOD RAIL ROAD MGR BELTS/OTHERS

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37



2001-02(IX Plan) 53.3 18.2 22.7 5.8

2006-07 (X Plan) 47.1 25 23.2 4.6

2007-08 49.2 26.5 18.7 5.6

2011-12 (XI

Plan)--Projection

49 27.2 19.1 4.7

Fig: Percentage contribution of different modes of transport in coal dispatch

An overview of the logistic system:

• Railways play an important role in coal mining over 70% (including MGR)

coal moves by rail.

• Reliance of single mode transport exposes to risk of uncertainties and

therefore multi modal transport facility is essential.

• This necessitates kind of agreement between the producer / logistic provider

and the ultimate consumer (FSTA).

• Successful materialization of such agreement is necessary for delivering coal

from mine to market (consumption point).

• Even with growth in production coal scarcity in different consuming ends

likely to persist unless infrastructure develops to haul coal.

• Operational and commercial bottlenecks in transportation logistics to be

addressed at planning level.

• Opening up railway transportation to logistics providers likely to improve

reliability of supply chain at affordable cost.

• Technological innovation in transport logistics should be the thrust area for

ensuring energy security of the country.

SPECIFIC PROBLEMS OF THE PRESENT SYSTEM

The existing system for supply of coal to consumers of non- core sector

suffered the following disadvantage:-

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38



• Because of inadequate availability of coal, no new linkage could be

granted after 2001 in non-core.

• The consumers having no linkage were constrained to purchase coal from

black market on higher prices.• Even consumers having linkage had to depend on secondary market if they

wanted enhancement of the quality.

• With existence of secondary market where coal could be bought on

premium, consumers getting coal through linkages on notified price

tempted to divert their coal to such market.

More the gap between the market price and the notified rice, more thetemptation.

INTRODUCTION OF NEW COAL DISTRIBUTION POLICY

Consuming Sector Profile:

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39



POWER

72%

CEMENT

2%

BRK/OTHERS

24%

CEMENT

2%

Consumer profile of CIL:

Consumers are divided into 2 sectors namely:

i) Core sector ii) Non-core sector

The core sector includes Power, Captive Power Plants, Cement, Fertilizer, Steel,

Defence and Sponge Iron.

Whereas the non-core sector includes SSF units, Briquette manufacturing units,

Chemical, Glass and potteries, BRK, Leather units etc.

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40



Fig:representation of the new coal distribution policy

Overview of NCDP:

E-

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41



marketing or electronic marketing refers to the application of marketing principles

and techniques via electronic media specifically the internet. The terms e-marketing,

internet marketing and online marketing, are frequently interchanged and can often be

considered synonymous. E-marketing is the process of marketing a brand using the

internet. It includes both direct response marketing and indirect marketing elementsand uses a range of technologies to help connect business to their customers.

By such definition, e-marketing encompasses all the activities a business

conducts via the worldwide web with the aim of attracting new business, retaining

current business and developing its brand identity.

When implemented correctly, the return on investment (ROI) from e-marketing

can far exceed that of traditional marketing strategies. Whether you are “bricks and

mortar” business or a concern operating purely online, the internet is a force that

cannot be ignored. It can be a means to reach literally millions of people every year.

It’s at the forefront of redefining the way business interact with their customers.

The benefits e-marketing over traditional marketing-

• Reach- The nature of the internet means businesses now have a truly globalreach. While traditional media costs limit this kind of reach to hugemultinationals, e-marketing opens up new for smaller businesses, on a muchsmaller budget, to access potential consumers from all over the world.

• Scope- Internet marketing allows the marketer to reach consumers in a wide

range of ways and enables them to offer a wide range of products and services.E-marketing includes, among other things, information management, publicrelations, customer service and sales. With the range of new technologies

becoming available all the time, this scope can only grow.

• Interactivity- Where as traditional marketing is largely about getting a brand’s message out there, e-marketing facilitates conversations betweencompanies and consumers. With a two way communication channel,companies can feed off of the responses of their consumers, making themmore dynamic and adaptive.

• Immediacy- Internet marketing is able to, in ways never before imagined,

provide an immediate impact. Imagine you’re reading your favouritemagazine. You see a double-page advertisement for some new product or service, maybe BMW’s latest luxury sedan or Apple’s latest iPod offering.With this kind of traditional media, it’s not that easy for you, the consumer, totake the step from hearing about a product to actual acquisition. With e-marketing, it’s easy to make that step as simple as possible, meaning thatwithin a few short clicks you could have booked a test drive or ordered theiPod. And all of this can happen regardless of normal office hours. Effectively,Internet marketing makes business hours 24 hours per day, 7 days per week

for every week of the year. By closing the gap between providing informationand eliciting a consumer reaction, the consumer’s buying cycle is speeded up

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and advertising spend can go much further in creating immediate leads.Chapter 01 - Page 03 - Nov 2006

E-marketing: The Strategic Planning:

Strategic planning is the “managerial process developing and maintaining a viable

fit between the organizations objectives, skills, and resources and its changing market

opportunities”

Strategic planning are long-term plans based on the organizations overall business

objectives. Strategic plans are typically multiple years and reach out 5 or 10 years (or

more) using Scenarios or other planning methods that identifies assumptions, risks,

and environmental factors.

Online firms follow an e-business model and analysis of external factors like legal

and technological issues can really help to drive a successful e-business plan.

Dave Chaffey (2006) presents a model of strategic e-marketing on his website

davechaffey.com (figure 2.4). He divides the whole e-marketing process into three

activities: ‘Defining the online opportunity’, ‘Selecting the strategic approach’ and

‘Delivering results online’.

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E-auction

Electronic auctions are on-line auctions where selected bidders submit offers

electronically against the purchaser’s specification. All communication following and

including the invitation to pre-qualified bidders to submit new prices and/or values

must be instantaneous (electronic). Electronic auctions can be used for goods, services

and works.

Electronic auctions refer to those auctions conducted through the Internet with the

bidders (from one or more locations) simultaneously bidding to be selected for

supplying the item/s on auction. In other words, the venue for the auction is on an

Internet website/ platform. The "Service Provider's" website assigned by

"ServiceProvider" would constitute venue for the purpose of the online auction.

Bidding

Bidding is an offer (often competitive) of setting a price one is willing to pay for

something. A price offer is called a bid. The term may be used in context of auctions,

stock exchange, card games, or real estate transactions. Bidding up means raising a

price for an item by a series of rising bids.

Bidder

Contractor, supplier, or a vendor who responds to an invitation to bid (ITB), is

also called as offerer or quoter.

Coal India initially introduced this new system of e-auction in Bharat Coking Coal

Limited (BCCL) in 2004 and to expand the scope of e-marketing sale of coal, based

on the experience gained from the initial e-marketing conducted in BCCL, the Govt.

decided to sell 10 million tonnes of coal initially by CIL subsidiaries through e-

marketing for the year 2005-06 on trial basis. After watching the performance of sale

through e-marketing, another 10 million tonnes has been allocated under this for the

remaining period of the current financial year. A total number of 17403 bidders

participated in the e-auction and 10526 were successful. The total gain to CIL has

been Rs. 565.36crores.

The scheme is open to consumers of core and non-core sector as well as traders

who can participate and bid for the quantity as per their requirement from their

preferred sources. The system would further eliminate the unscrupulous traders and

black marketers.

Coal Junction and MSTC Limited are the two service providers of Coal India

and it follows the two types of e-auctions-

• Forward e-auction

•

Spot e-auction

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44

http://en.wikipedia.org/wiki/Offer

http://en.wikipedia.org/wiki/Competitive

http://en.wikipedia.org/wiki/Auction

http://en.wikipedia.org/wiki/Stock_exchange

http://en.wikipedia.org/wiki/Card_game


http://en.wikipedia.org/wiki/Real_estate_transaction

http://en.wikipedia.org/wiki/Offer

http://en.wikipedia.org/wiki/Competitive


http://en.wikipedia.org/wiki/Stock_exchange


http://en.wikipedia.org/wiki/Real_estate_transaction



Forward e-auction

Forward auction are electronic auctions, which can be used by sellers to sell their

items to many potential buyers. Sellers and buyers can be individuals, organizations

etc. Items are commonly placed at a special site for auction (e.g. eBay.com). Buyers

can continuously bid for the items they are interested in. Eventually the highest bidder

wins the item. In this type of auction there is one buyer and a single seller.

In terms new coal sales policy of Ministry Of Coal, a new scheme called “E-

AUCTION SCHEME 2007” for forward e-auction has been formulated and circulated

for implementation with due approval of COAL INDIA LIMITED BOARD in

October 2007.

Under this system, all consumers of coal located in India, such as

proprietorship/partnership firms registered in India, companies incorporated in India

and aiming for supply over a long period can participate for procurement of coal for

their own consumption, but not for transfer, resale or export.

CIL, on its part, has imposed certain conditions for participation in this type of

auction. The conditions have been imposed keeping in mind the fact that coal is a

scarce commodity, to put a check on any possible black marketing and also to ensure

that only genuine consumers participated in the auctions.

Objective :

Coal distribution through forward e-auction is aimed to provide access to coal for such coal consumers who wish to have an assured supply over a long period, say one

year, through e-auction mode so as to plan their operation etc.

The purpose of forward e-auction is to provide equal opportunities to all intending

coal consumers to purchase coal for own consumption through single window

services as per requirement and at a price determined by themselves through the

process of online bidding.

Forward e-auction will facilitate all the consumers of coal across the country with

wide ranging choice for booking coal online, enabling them to buy coal through asimple, transparent and customer-friendly system of marketing of coal.

Spot e-auction

In order to provide coal to small companies and those without linkages, the

government in 2007 introduced a system called spot e-auction of coal in which coal

was offered for sale through the process of online bidding. In this system, any

registered entity, including traders, could purchase coal either for its own

consumption or for sale to actual consumers.CIL, on its part, has imposed certain

conditions for participation in this type of auction. The conditions have been imposedkeeping in mind the fact that coal is a scarce commodity, to put a check on any

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45





possible black marketing and also to ensure that only genuine consumers participated

in the auctions.

Objective :

Coal distribution through e-Auction has been introduced with a view to provideaccess to coal for such buyers who are not able to source coal through the available

institutional mechanism. In the long run it is expected that e-Auction may help in

creating spot as well as future market of coal in the country. The purpose of e-Auction

is to provide equal opportunity to purchase coal through single window service to all

intending Buyers. E-Auction has been introduced to facilitate across the country wide

ranging access to book coal on-line for all sections of coal Buyers enabling them to

buy coal through a simple, transparent and consumer friendly system of marketing

and distribution of coal.

Features of normal bidding process

• Goods kept on auction floor.

• Auction event on fixed date and time and place

• Earnest money taken.

• Physical presence of bidder and oral bids needed.

•

Any numbers of bid are allowed but within fixed time. Bidding stops if no bidis received before ‘three hammer’ warning.

• Bidders remain identified in a physical gathering.

Features of electronic bidding process

• Coal is made available at rail heads or pit heads or satellite delivery points.

• Auction event on same principle but converted to information technology

platform.

• Earnest money is taken.

• Anybody can bid from any place.

• Bidding continues throughout the whole bidding session. Beyond the fixed

time, the last bid will stop if time elapse is more than 3 minutes of the latest

bid (Provision of auto extension).

• Fellow bidders remain unnoticed from each other.

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Online Auction Technical Requirements

There is a great deal of functionality available in today’s online auction tools, so

much that it can be overwhelming for the Sourcing Professional. The Sourcing Team

should make sure that its e-Sourcing tool has some core, basic functionality. This core

functionality helps improve sourcing efficiency through increased speed, improved

accuracy and consistency, greater collaboration with stakeholders and suppliers,

broader knowledge transfer and security.

Bid management controls

Sourcing Professionals need to have control during a live auction. Control helps

them manage supplier and system problems that may arise. Important bid

management controls include:

• pausing auctions

• resuming auctions

• canceling auctions

• erroneous bid removal

• proxy biddingThe presence of bid management controls affects speed, accuracy, consistency and

security.

Configurable lot cascading and overtime

This functionality allows the Sourcing Team to structure the auction so that all

interested suppliers can participate. Suppliers can focus on one or more lots since the

ending times are different and dependent on the conclusion of earlier lots. Overtime

allows bidding to continue beyond the scheduled lot closing time. Overtime enables

all suppliers the opportunity to respond to the most recent bid. With overtime,

suppliers do not need to time their best bids to beat the market. Sourcing Teams are

secure knowing that they received the best bids.

The presence of configurable lot cascading and overtime affects speed, accuracy

and consistency.

Configurable bid views and reports

To improve ease of use and access to information for the Sourcing Team, it is

important that the user can see the bids as they come in and make adjustments to the

graphical display when necessary. The ability to flexibly rank suppliers by lots or

bundles of lots helps the Sourcing Team anticipate award scenarios. After an auction,

it is important to be able to access bid results for analysis and documentation either

via integrated reports or spreadsheets.

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47



The presence of configurable bid views and reports affects speed, accuracy,

consistency, collaboration and knowledge transfer.

Data import/export capability

To improve ease of use and access to information for the Sourcing Team, it is

important that information can be easily imported into or exported from the auction

tool.

The presence of data import/export capabilities affects speed, accuracy,

consistency and security.

Integration points

Integration helps streamline the entire sourcing process. A user should be able

to effortlessly, with few key strokes, move between different sourcing tasks. Some

key integration points include:

• communication tools – such as an online communication forum for asking andanswering questions, email

• spreadsheets

• e-RFx – so a buyer does not need to create a separate, distinct project for anauction

• Optimization – so a buyer does not need to export auction data then import itinto an optimization engine for data analysis and scenario building

The presence of integration point affects speed, accuracy, consistency,

knowledge transfer and security.

Security and access controls

Security and access controls allow companies the ability to limit users to what

they can see or do within an e-Sourcing tool. The controls reinforce operational procedures depending on security levels, organizational level or role level.

The presence of security and access controls affects speed, consistency and

security.

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The E-Auction Process

1) Coal companies would draw program for at least two e-auctions per month

and notify the same minimum seven days in advance for hoisting in Coal

Company’s website for wide publicity. The program will be intimated to the

service providers accordingly for hoisting the same at their websites also.

2) The service providers would conduct the e-auctions as per the said program on

the scheduled date and time.

3) The bidder has to bid for a price equal to or above disclosed reserve price so

as to secure consideration in the concerned e-auction.

4) The buyers would bid for basic price and intended quantity only from the

desired sources of their choice during such e-auctions. Other charges, taxes &

duties will be extra as prevailing from time to time.

5) Following criteria would be adopted in deciding the successful bidders:

i) Preference will be given to the highest bid price in the descending order as

long as the offered quantity is available for allocation.

ii) If two or more parties bid the same highest price, preference for allotment

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will be given to the party who has placed the bid for highest quantity.

iii) In case two or more parties bid the same price and the same quantity ,

preference will be given to the party who has placed the bid first with

reference to time.

6) There will be a separate auction for dispatch by rail and road. In case of road ,

the minimum quantity for bidding would be 50 tonnes whereas in case of rail ,

the minimum quantity for bidding would be one full rake.

7) After the auction is completed, the successful bidders would be intimated

through e-mail/SMS by the service providers.

8) The successful bidders after having received such intimations will be required

to submit coal value with the concerned coal company within a period of 7working days from the date of intimation. Seven working days would be

reckoned as applicable to the respective coal company’s office.

9) EMD of such bidders would be adjusted at the time of depositing coal value if

the bidders so desire.

10) In case of road supplies, once the coal value is deposited, delivery orders will

be issued by the coal companies after encashment of their financial

instruments whereas in case of rail supplies, there shall be two options

available. While submitting program, the bidder at his option can deposit

100% BG on the prescribed format or else 100% amount through Demand

Draft. In case of BG, however, the 100% coal value will have to be deposited

before allotment of rakes.

11) The validity period to complete the lifting of coal by road shall be 45 days

from the date of issue of sale/delivery order. No extension of time shall be

allowed. The validity period in case of rail, however, shall be guided by the

prevailing railway rules.

12) In case the coal could not be made available to the successful bidder from the

specific source where he became successful, there will be an option to supply

the same grade/size of coal from the neighboring collieries, if available, at that

highest bided price of the concerned neighboring colliery. This is to be

applicable only if the customer had agreed for the same before participating in

the bid.

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SERVICE PROVIDER-MSTC INDIA PROFILE

MSTC India is a customer friendly Government of India Enterprise and is

engaged in domestic and international trading activity for over 30 years. Its marketingdivision largely undertook import and export of Carbon Steel Melting Scrap and now

enlarging its import activity in Steel/Coal/Coke as also other nontraditional items like

SKO, non ferrous and ferroalloy items. It provides path breaking e-commerce

services. The first of its kind in India , MSTC has been credited with creating a web

based market across the country through its sales program , procurement transactions ,

bulk import and supply of a wide range of industrial raw material for Indian industry.

MSTC earned the status of a Mini Ratna Grade II in 2002, which was enhanced to

Grade I in 2005. Recognizing its capabilities and performance, it was upgraded to

Schedule B in 2007. In 2008, it received the ISO certification for its e-commerceservices. This entire web based system with latest technological innovations has been

set up with technical support from IBM.

MSTC Trade

MSTC imports virtually all kinds of raw materials from across the globe for its

buyers in India. With more than 30 years experience in international trade, it enjoys

excellent goodwill in the international market and shares tremendous confidence of

bankers, which ensures obtaining credit / foreign exchange credit at a very

competitive rate. Offices in major cities extend unhindered service to the clients.

MSTC e-commerce

It is conducting e-procurement transactions through a web based system, that

helps build an efficient vendor base, encourages healthy competition, provides faster

service to the buyers, while being completely transparent. The four main modules in

this process are : reverse e-auction(price bidding only), reverse e-auction(price &quantity bidding) , e-tendering with multiple bids.

MSTC e-sales

Through its web based sales program, MSTC has created a virtual market for its

20,000 plus registered clients, which provides an effective set up for disposal of scrap,

plant & machinery etc. offering most competitive rates. Most of the transactions are

done through e-auction, thereby, ensuring total transparency. At present , e-sales

clients include all major PSUs , central and state government departments in India.

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SERVICE PROVIDER - METAL JUNCTION PROFILE

METAL JUNCTION Services Ltd is a 50:50 joint venture between Tata Steel

and Steel Authority of India Ltd ( SAIL) . The buyer community of 5400 plus buyers

comprising traders , fabricators , re-rollers and end-users have placed their confidence

on Metal junction because of its operational efficiency, transparency and equal access

that the platform provides. Metal junction’s clients have experienced significant

benefits on migrating to online selling. Immediately on migration, from their

traditional sale process , to the Metal junction online process, their price realizations

increased by up to 23%.

Metal junction began operation in 2001 only with steel products while its first

year’s turnover was about Rs 94 crore .The turnover grew over Rs 4000 crore in the

year 2004-05. In 2005 formally Metal Junction launched its new e-auction coal sales

services under the name ‘coal junction’. The new service line intended to leverage the

power of internet and e-commerce technologies to make coal available at market

driven prices to all consumers , big and small , including traders.

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RESEARCH OBJECTIVE OF THE STUDY

1. To study the e-auction process.

2. To find out whether e-auction is able to fulfill the demands of the customers participating in e-auction.

3. To find out the level of customer satisfaction participating in e-auction of COAL INDIA LTD.

4. To evaluate the quality of the services of the service providers of the e-auctionof CIL.

5. To find out the deviations between customer expectations and the servicesrendered.

6. To uncork the bottlenecks in the total system and provide recommendations tothe service providers and to CIL to hit a high level of customer satisfaction.

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Need or Significance of the Project:

Coal India declared a consolidated 13 per cent increase in net profit during 2010-11 to Rs 10,867 crore. This is against an identical growth rate in revenue to Rs 50,233crore.

Nearly 56 per cent of the profit was contributed by sales through e-auction andMoUs (bilateral contracts for supplying in excess of agreed quantities at higher thannotified price), accounting for merely 12 per cent of its annual production of 431million tonnes of coal.

Of the total the 45 million tonnes of coal sold through e-auction,which is merely

10% of its annual production,the contribution was a little less than 40 per cent of thenet profit.

From the above facts we can see that the e-auction process is indeed a very profitable system. Smooth running of the system will definitely ensure huge profit inthe future.

If the e-Auction concept implemented properly then the return on investment(ROI) from e-Auction can far exceed that of traditional marketing strategies. Theinternet is a force that cannot be ignored. It can be a means to reach literally millionsof people every year. It’s at the forefront of redefining the way business interact with

their customers. Through e-Auction Coal India Ltd. can achieve a true global reach.

The internet marketing is the future of marketing.It is easy to use and consumershave a lot of choices, that is why the concept has been accepted hugely by thecustomers. In recent past we have seen that, after the Indian Railways introduced thee-ticketing most of the customer do their railway reservation through internet rather than the traditional way of counter reservation. The fact is that nobody wants to standin a line and wait for their turn to come.People always opt for the system which is fastand where they have to dedicate less time. That is why we have seen a constantincrease in the number of consumers registered in e-Auction process over the last fewyears.

The e-Auction scheme is open to consumers of core and non-core sector as well astraders who can participate and bid for the quantity as per their requirement from their

preferred sources. The system would further eliminate the unscrupulous traders and black marketers.

Those are the few factors, which can surely depict the significance of the e-Auction process. And that goes without saying that if monitored and implemented properlythen the prospect of e- auction will increase gradually in future.

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BENEFITS & LIMITATIONS OF E-AUCTION:

• Benefits of E-Auctions

– Benefits to Sellers

• Increased revenues• Optimal price setting• Removal of expensive intermediaries• Better customer relationships• Liquidation• Lower transaction costs

• Lower administrative costs

– Benefits of E-Auctions to Buyers

• Opportunities to find unique items and collectibles• Lower prices• Entertainment• Anonymity• Convenience

– Benefits to E-Auctioneers

• Higher repeat purchases

• A stickier Web site• Expansion of the auction business

• Limitations of E-Auctions – Possibility of fraud – Limited participation – Security – Auction software – Long cycle time – Monitoring time

– Equipment for buyers – Order fulfillment costs

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CHAPTER-II

EXECUTIVE SUMMARY

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EXECUTIVE SUMMARYThis project has been a great learning experience for me; at the same time it gave

me enough scope to implement my analytical ability.

Prior to nationalization entire amount of coal was sold through middle- men or

agents on behalf of producers and consumers and their commission was fixed under

the colliery control order. After nationalization of coal sector, demand from non-core

consumers slowly built up to unrealistic level leading to rationalization of coal

demand versus availability. It necessitate introduction of the system of linkage for

non-core sector consumers like core sector. But this system for supply of coal toconsumers of non- core sector suffered from disadvantages like because of

inadequacy in availability of coal new linkage could not be granted after 2001,

consumers purchasing from black market etc.

After complete decontrol of coal distribution from 1.1.2004 many

traders/consumers challenged the system of linkage/sponsorship in non-core sector in

Courts. CIL submitted a special leave petition to evolve a new system based on

modern technology. CIL wanted to evolve a transparent and equitable policy of coal

marketing to all non-core sector consumers making use of modern technology through

electronic auction route. During the year 2005-06, E-marketing was conducted in allthe coal producing subsidiaries of CIL. The government in 2007 announced its new

policy for distribution of coal (NCDP), which re-introduced e-auction and for the first

time made it binding on the producers to deliver assured supplies of coal at the pre-

determined price. In 2008 Coal India Ltd introduced forward e-auction of coal. The

new instrument was launched on the existing spot e-auction platform to help the users

especially the small and medium enterprises (SME) plan their procurement on a long-

term basis. Presently CIL is conducting e-Auction through the following service

providers MSTC India and Metal Junction.

All the topics have been covered in a very systematic way. The language has beenkept simple so that even a layman could understand.

Through this project I have tried to put forward how Coal India Limited can excel

in the field of E-Auctioning by reducing the gap between customer expectation and

the service rendered and how they can uncork the bottlenecks of the system and hit a

high level of customer satisfaction. I have used both primary and secondary data for

my project. From the study it has been concluded that CIL and the service provider

should ensure that the dissatisfaction among the customer are removed and CIL,the

coal companies and the service provider should work towards committing a high level

of satisfaction.

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CHAPTER-III

RESEARCH METHODOLOGY AND

DESIGN OF THE STUDY

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RESEARCH METHODOLOGY & DESIGN OF THE STUDY:

The service providers of e-auction are just two companies. But there are many

customers and the numbers are increasing every year. The service providers are

entrusted with the responsibility of only the e-services, the financial transactions and

all the non physical transactions. But the quality of the product served comprises an

important part of the entire service quality so the quality of the physical services is

important too. Since the service providers are just two in number , so we designed an

open ended questionnaire for them to get an entire information and behavioral pattern

and based on those findings , we designed a close ended questionnaire for the

customers to understand the deviations between the customer expectations and

services offered.

We also used certain parameters which are the main dimensions for measuring

e-service quality of an e-auction system and we wanted both the service provider and

the customers to rate those parameters. Those 9 dimensions to measure e-SQ(service

quality) are

1. Transparency

2. Reliability

3. Security/privacy

4. Responsiveness

5. User friendliness

6. Information quality

7. System quality

8. Customization

9. Trust and assurance Now these parameters were asked to rate on a scale of 10 by the service

providers as they think the extent of quality of these parameters they provide and

these same parameters were asked to rate by the customers as per their satisfaction on

these dimensions. So by this method, we can evaluate the e-SQ as well as the

deviation between the customer expectations and the services rendered. We can point

out the points where the customers are satisfied and dissatisfied.

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SAMPLE DESIGN

POPULATION

The target population is all the registered e-auction consumers that is around 15000

and the 2 service providers of COAL INDIA LTD.

SAMPLE SIZE

The survey is conducted among 42 respondents (2 service providers and 40

consumers).

SAMPLING METHOD

The sampling procedure used was simple random sampling and a sample of 40

customers was taken to understand the behavior of the entire customer base. The

mode of survey was of personal interview, where the respondents filled up the

questionnaires.

Duration of Study:

The study was carried out for a period of 8 weeks, from 2nd May to 30th June 2011.

METHOD OF DATA COLLECTION

Instrument for Data Collection

A questionnaire was designed to collect all the data which contained both open

ended and close ended questions.

Drafting of a Questionnaire

• A semi structured kind of questionnaire was designed which contained open

ended questions to carry out an elaborate evaluation and analysis.

• The questionnaire designed was to provide dual information sharing type, it is

seriously undertaken that anyone who is undergoing the process, should find

his interest in filling the questionnaire.

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CHAPTER-IV

FINDINGS AND ANALYSIS

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Findings & Analysis From the Service Providers’ Response

Qualitative Analysis

This analysis is done based on the survey data and response from MSTC India and

Metal Junction.

Sales through e-marketing

• The method used by both for coal auctioning is yankee auction or price

quantity method.

• Both uses forward auction for sale of goods.

• Metal junction has its own business unit coal junction which conducts online

auctions for the sale of coal and coal products from clients like CIL.

• MSTC India is following B2B and B2C modes.

• MSTC has a fixed a sales target of Rs 4780 crore through e-auction for the

present year and Metal Junction fixes its target as per CIL’s policy.

• Reserve prices for the auctions are fixed by CIL. Auctions are started at these

reserve prices , which normally closes at higher prices than the reserve prices.

Customer Growth

• For MSTC prioritization of customers is done based on volume of business,

length of relationship, future scope and prospects.

• Metal junction has 10,000 registered customers while MSTC has about 6000

customers.

• The growth trend of coal auctions of Metal Junction in terms of volume is at

CAGR of 7.58 % approximately and that of MSTC is 8-10%.

Product Line

• MSTC is auctioning manganese ore , ferro manganese, iron ore, raw lignite,

ferrous scrap, non ferrous scrap, vehicles, machinery, items etc. beside coal.

• Metal Junction is also auctioning steel and ferrous and non ferrous scrap along

with coal.

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Pricing

• MSTC does not play any role in fixing the floor price of the commodities.

• Metal Junction provides CIL with MIS regarding e-auction prices, which helps

CIL in fixing the floor price.

• For Metal Junction the role played by it in fixing prices varies according to

product.

• groups/business units.

• The cost components for conducting e-auction include hardware and software

development and maintenance cost and human resource cost as per MSTC.

Customer Satisfaction

• Both MSTC and Metal Junction give stress on transparent, smooth, prompt,

hassle free services to their clients.

• Metal Junction has introduces an unique service called Coal Movement

Services, which intends to take care of the rail logistics requirements of the

customers.

Technical Issues

• Metal junction monitors the e-auction software regularly and upgrades when

required.

• MSTC upgrades its e-auction software as and when it is necessary to

accommodate specific requirements of the clients.

• The MSTC e-auction server consumes about 1300 watt of power maximum.

• MSTC has a scalability feature which allows them to upgrade the capacity of

the server.

Employees

• The technical skills according to MSTC that employees should possess for

handling the e-auction site includes, knowledge of web based programming,

ability to understand the business logic and write codes for the same and also

the package should be user friendly.

• For Metal Junction the technical skill varies across different departments, and

levels, which constitute the entire team.

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• Both Metal Junction and MSTC stresses upon training process of employees

handling e-auctioning on a regular basis so that there is regular update of

technological advancements in the allied fields.

E-Auction security

• The security aspect of both MSTC and Metal Junction has been taken care of

by the way of ISO 2001:2005 certification.

• As per MSTC, e-auction system should be secured from hazards originating

from the internet through preventive firewalls and other software. The

hardware should be protected from physical intrusion by way of access control

and Data Centre.

• Metal Junction has established and is maintaining an Information Security

Management System.

• Metal Junction is also CMMI Maturity level 3 certified.

• Both MSTC and Metal Junction have a DMS (Disaster Management System)

in Delhi and Mumbai respectively to get back all the information if the system

gets affected badly and the all the data gets lost.

• Both have introduced Digital Signature as instructed by CIL.

Content Analysis Inference

Auctioning is done mainly by Yankee Auction Method. For both MSTC and

Metal Junction growth in customer registrations has been considerably high of about

8-10%. Both are auctioning variety of products ranging from coal and coal products

to steel, ferrous and non ferrous scraps. Both MSTC and Metal Junction are not

directly involved in setting floor prices for the products that are to be auctioned.

Customer satisfaction has been given very high importance by both the companies

and gives stress on smooth, transparent, prompt and hassle free services to their

clients. Where capacity of e-auctioning server is concerned, both the companies

upgrades the capacity of the server. Both Metal Junction and MSTC has given stressupon training process of employees handling e-auctioning on a regular basis so that

there is regular update of technological advancements in the allied fields. The security

aspects that an e-auctioning server should have, has been taken care of with ISO

2001:2005 certification.

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Quantitative Analysis & Interpretations of Service Provider’s Responses

The data which are collected from the survey have been analyzed by graphical

representation and the outcomes are interpreted clearly.

SERVICE PROVIDERS

1) The present system is offering only 10% of the total production for sale do youthink more amount of coal should be allocated for sale under this system?

Interpretation

Both the Service Provider responded positively to this question. So the response to the

above question is that 100% of the service providers saying that the demand for coal

will increase under e-marketing and much more amount of coal is needed to be

allocated under this system for sale.

2) If Yes, what should be the % of the total production to be sold under e-auction?

Ans: MSTC told they want it to be 30%.

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Ans: Metal Junction told they want to be 25%.

Interpretation

Both the service providers want the % of coal to be sold under e-auction to beincreased drastically due to huge demand of coal.

3) Rank Order Test of the 9 PARAMETERS of e-SQ. ( The scale was of 10 points ,10 being Highest and 1 being Lowest)

Parameters Total Points Number Of

Respondents

Average

Points

Rank

Transparency 18 2 9 2

Reliability 19 2 9.5 1

Security/Privacy

18 2 9 2

Responsiveness 17 2 8.5 3

User Friendliness

17 2 8.5 3

InformationQuality

16 2 8 4

System Quality 18 2 9 2

Customization 14 2 7 5

Trust &Assurance

19 2 8.5 3

Interpretation

Here the respondents are just 2 as there are only 2 service providers. We can see thaton a scale of 10, the ratings are mostly given as 8 , 9 and even 10. Doing Rank Order Test, we see that as per the Service providers’ perception of their service qualityregarding those parameters is quite high. In fact though there were 9 parameters, the

ratings were equal for many parameters, so we got only 5ranks.

So as per the service providers’ e-SQ’s rank are:Rank 1- ReliabilityRank 2- Transparency, Security/Privacy, System QualityRank 3- Responsiveness, User friendliness, Trust and AssuranceRank 4- Information QualityRank 5- CustomizationOut of the 9 parameters, only Information Quality and Customization has scored littlelow ratings. This is due to because, service providers believe that CIL’s chain of communication for some important matters is not very efficient , so they cannot

provide efficient and correct.

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Findings & Analysis From Customers’ Response

Quantitative Analysis & Interpretations of Customers’ Responses

1)Which is the best way to get coal?

e-Auction

95%

FSA

5%

Interpretation:

Almost every customer feel that e-Auction is the better way to get coal. Because, the

system is transparent,availability is very high and the system provides the customer

some choices of field.These are the main factors behind the huge acceptance of thesystem.

2) Quantity of coal you source through e-auction monthly-

The figures are in metric tonnes(MT).

Interpretation

The responses were that 37% of the customers buy less than 5000 metric tones in a

month in e-auction and after that , we can see that 22% customers buy between

10,000 and 15,000 MT in a month and even 18% also buy from 15000-20000 mt per month , so we can see that the demand is quite high.

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3) Is the above quantity required for own use or trading or both?

4) Preferable auction type-

Interpretation

The response is 62% of the consumers prefer forward e-auction who wish to have an

assured supply over a long period and 38% prefers spot e-auction.And the other

reason of preferring the forward e-Auction is the success rate of bidding,which is

greater than spot e-Auction.

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5) Do e-auction is sufficient to fulfill your demand?

Interpretation

95% of the customers surveyed told that their demand of coal is not satisfied by

e-auction , so it can be understood how high the demand of coal is. On asking from

where they source their unfulfilled demand of coal , they told they buy it from other

traders or sometimes other companies or they import the coal.

6) Do you think more coal should be allocated for sale under e-auction system?

Interpretation

100% of the customers surveyed want more coal to be sold under e-auction , so

it can be understood the huge potential for e-auction.

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7) If Yes, what should be the % of the total production to be sold under e-auction?

Interpretation:

We can see that the maximum numbers of customers are saying that it should be

between 20-25%. CIL should see this figure to understand how huge potential e-

auction is having though the price of coal under e-auction is more.

8) Do you think that CIL should provide its own service for e-auction?

Interpretation

Just 37% customers surveyed wanted that CIL should provide its own e-auction

service. This means that the customers believe that CIL do not have the necessary

infrastructure and technical set up to provide e-auction service on its own. And the

customers also feel that the third party transparency, which is needed in the case of e-

Auction, can’t be provided by Coal India. This is a serious note to be looked upon for

a Maharatna status company.

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9) What is the probability of getting coal from e-Auction?

Success rate of bidding in Spot e-auction

1 3 9 9

2 7 7 3 9

1 1 7 1 1 1

2 6 4 4 4 4

7 3 2 4 8

7 8 1 5 5

6 1 1 1

8 5 6 3 5

8 7 5 5

7 1 4 8 6

4 3 4 2 8

4 0 8 4 8

0

50000

100000

150000

200000

250000

300000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

year

No. of bidders

No.of successful bidders

Very High

5%High

20%

Average

60%

Low

15%

Interpretation:

We can see from the above chart of bidding success rate of spot e-Auction that the

success rate of bidding is not more than 45-50%, which can be considered as low

success rate. However in the case of forward e-Auction the success rate is very

high.In the year 2009-10 the total no. of bidders of forward e-Auction were 22 and the

no. of successful bidders were 22 . The customers also feel that the bidding time is

very long and some time the server also gets jammed.They have to be there all the

time otherwise they will get timed out and they have to login again, that is not very

convenient for them.

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10) What is the gestation period between delivery/sale order and lifting day?

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

15-30 da ys 30-45 da ys 45-60 da ys more than

60 da ys

P e r c e n t o f r e s p o n d e n t

Interpretation:

I have got a mixed response on this question. Some of them said that the gestation

period is 15-30 days and some said its more than 60 days.The difference of the

gestation period occurs due to the mode of transport the customer choose. If they want

to transport through railways, then CIL arranges that , but if the customer choose to

transport their coal through road then they have to arrange the transport on their own.

11) Time needed to settle the dispute (if any) by the company?

20%

10% 10%

60%

0%

10%

20%

30%

40%

50%

60%

70%

Less than 1

month

1-2 months 2-3 months More than 3

months

P e

r c e n t o f t h e r e s p o n d e n t

Interpretation:

60% of the surveyed customer said that CIL take more than 3 months to settle the

disputes. That is not good for the smooth running of the system .Taking that long to

settle the disputes can create anarchy in the system and dissatisfaction among the

customer.

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13)Time taken to refund/adjustment of the accounts:

85%

10%

0%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Less than 1

month

1-2 months 2-3 months more than

3 months

P e r c e n t o f r e s p o n d e n

Interpretation:

Most of the respondent (almost 90%) said that the adjustment of the accounts happen

in less than 1 month, which is quite fast. The credit should go to the service providers

for the fast adjustment of the accounts.

13) Rank Order Test of the 9 PARAMETERS of e-SQ and of some other parameters. ( The scale was of 10 points , 10 being Highest and 1 beingLowest). The customers were asked to rate in terms of their satisfaction withthese following parameters.

14)

Parameters TotalPoints

Number Of Respondents

AveragePoints

Rank

Price of coal in e-auction 184 40 4.6 12

Terms & Conditions for e-auction 265 40 6.625 7

Transparency of the e-auction process

266 40 6.65 6

Registration fees of e-auction 358 40 8.95 1

EMD amount 230 40 5.75 10

Success rate of your bidding 246 40 6.15 9

Reliability 333 40 8.325 2Security of the system 322 40 8.05 4

Privacy of the customer bidding 332 40 8.30 3

Communication of the service provider with you

288 40 7.20 5

User Friendliness 180 40 4.50 14

Information Quality 190 40 4.75 11

System Quality 182 40 4.55 13

Customization 128 40 3.20 15

Trust & Assurance 264 40 6.60 8

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Interpretation

We have given ranking in the average points in descending order because higher the

points determines high level of satisfaction, so given higher rank.We can see that the parameter in terms of ranking stands as follows

Parameters Rank

Registration fees of e-auction 1

Reliability 2

Privacy of the customer bidding 3

Security of the system 4

Communication of the service provider with you 5

Transparency of the e-auction process 6

Terms & Conditions for e-auction 7

Trust & Assurance 8

Success rate of your bidding 9

EMD amount 10

Information Quality 11

Price of coal in e-auction 12

System Quality 13

User Friendliness 14

Customization 15

A detailed analysis and interpretation of these ranks of why some parameters havevery low satisfaction and why some have high level of satisfaction are given below in

the qualitative analysis.

Qualitative Analysis & Interpretations of Customers’ Responses

The analysis is done on the basis of rank.

1) Registration fees of e-auction: Rank 1

The Registration fee is :

(i) Rs.1000/- for 03 months registration.(ii) Rs.3000/- for 01 year registration.

(iii) Rs.10000/- one time.

In addition Service Tax @10% and Educational CESS @3% shall be payable on the

registration fee.

Almost all the customers were pretty happy with the registration fees and had not

much dissatisfaction with it and thus it got highest rating of customer satisfaction.

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2) Reliability: Rank 2

The word reliability comes with credibility too. Both these service providers are big

in their e-commerce operation and both have a credible background. MSTC is a

government undertaking and Metal Junction is from the house of TATA. So the factor

of reliability also scored high in customer satisfaction.Though Metal Junction’sinfrastructure is superior to that of MSTC but some customer feel that MSTC’s

service is much better than the previous.

3) Privacy of the customer bidding: Rank 3

This parameter also scored very high in customer satisfaction because privacy of the

customer bidding is maintained at its best and no person comes to know the profile of

the customer who is bidding from the other side. So the privacy of the bidder is

maintained at very high level

4) Security of the system: Rank 4

This parameter also scored very high as the customers are very satisfied with the

security of the system as through this system , high magnitude of financial

transactions take place.

5) Communication of the service provider with you: Rank 5

From this parameter, customers’ dissatisfaction started. They complained that theservice provider do not communicate with them frequently when it is needed. Neither

have they ever met physically. Moreover when the service providers need money,

they communicate a lot but when it comes to communicating some changes or other

revisions, communication is very bad. Moreover the complaint that came from

customers was that there was no consistency in their communication. Sometime

frequent SMS and mails come but sometimes it seems there is no relation between the

service provider and the customers.

6) Transparency of the e-auction process: Rank 6

Actually the privacy of the bidder is costing the transparency of the e-auction process

because the customers feel that since they do not know who are the other customers

bidding , their own mental process of bidding is getting disturbed because they feel

that there are lot of traders who are bidding at a very high price and eliminating many

customers whose budget has been crossed by the new bided price so that the

customers cannot buy coal from the coal companies and instead buy from those

traders. So the customers feel that though privacy should be maintained but at least

they must know something about the person bidding.

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7) Terms and Conditions for e-auction: Rank 7

Customers were quite dissatisfied with the terms and conditions of the e-auction

process. Mainly because they feel they are simply harassed by extreme documentationwhich happens twice creating more problems for the customers. They opined that

already they submit more than enough documentation to CIL, then only after lot of

verification, they are given username and password to register in the e-auction. But it

is their complaint that after they deposit EMD and after they are successful in their

bidding and they can get coal from the coal companies , the coal companies are again

demanding lot of documents in order to facilitate their delivery of the coal. Those

documents demanded are Memorandum & Articles.

8) Trust and Assurance: Rank 8

Though this is wide term , but here customers talked about their mistrust in the

transparency and fairness of the bidding process which is not allowing them to buy

coal or buy coal at a much higher price. CIL being a PSU do not provide any

assurance to those small customers who are being cheated at the hands of fake bidders

and traders who are increasing the bidding price.

9) Success Rate of your bidding: Rank 9

The response from the customers was that, the average success rate of their bidding is

just 40-50%. This is because, the price at which mostly bidding takes place goes out

of the budget of most of the customers and sometimes even when they bid, the server

gets jammed and all the process get hindered. They also feel that the bidding process

is very long. And that is not very convenient for them.

10) EMD amount : Rank 10

The revised EMD amount is Rs 500 per tonne for E grade coal and above and Rs 400

per tonne for F grade coal. Most of the cuatomers were dissatisfied with it as they

want EMD to be somewhere between Rs200-300 per tonne.

11) Information Quality: Rank 11

This refers to the information hoisted in the system. The customers are deeply

dissatisfied with this parameter as they complained that most of the new revised termsand conditions of revised financial aspects are never communicated to the customers

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and even never uploaded in the service providers’ websites. Moreover if any new

person want to know about the entire process, their website does not have good

navigation to quality information which will help new customers.

12) Price of Coal in e-auction: Rank 12

Customers are deeply dissatisfied with the price of coal in e-auction because

already the bidding starts at 130% of the notified price and then due to traders high

bidding , the bidding price mostly on an average goes to 160% of the notified price.

Sometimes it even goes to 190% or even more than 200% of the notified price.And

the customers are also dissatisfied with the recent price hike by CIL,the price of A

and B grade coal almost doubled,and the price of C,D,E & F grade coal also

increased.That price hike causing a lot of problem in running the operations of their

business. That unfair price hike put many small enterprise out of the business.Theyalso feel that price should not be increased drastically,a periodic increase of price can

be handled,but the sudden hike can be damaging.

13) System Quality : Rank 13

Customers were very dissatisfied with the system quality because since this is an

e-commerce system and mostly when an e-auction takes place , the quality of the

system must be very efficient. But most of the customers told that the system qualityof specifically Metal Junction is very poor as after successful bidding, mostly the

server of Metal Junction gets hanged or jammed destroying the entire bidding process

of the successful bidder.

14) User Friendliness: Rank 14

Most customers were of the opinion that the system is extremely non user friendly and only a highly computer literate person can operate this system which

mostly is deficient in most of the customers participating in e-auction so they haveto hire another person to operate or bid on their behalf which increases their costfurther.

15) Customization : Rank 15

All customers are treated equally and there is no customization for separate

customers.

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LIMITATIONS OF THE STUDY

a. Time was the biggest constraint in my research study, getting the appointment

from the customer was a time taking process, as they are very busy man. And they

did not give that much time for the interview, which I would have liked.

b. Possibility of error in data collection because some consumers may have not

given actual answers of my questionnaire.

c. Some of the people involved in the survey were not co-operative.

d. Traveling at various locations to collect data was very tiring and hectic.

e. The confidentiality deed between the service providers and CIL was the main

hindrance for me in this project. The service providers were not ready to disclose any

information or talk anything about the e-auction system to me but still I with

permission from some high authority went to take their interview but they were very

reluctant to give any information or answer anything of the questionnaire.

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CHAPTER-V

CONCLUSION AND RECOMMENDATION

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MAIN FINDINGS

1) E – Auctioning is a right step for both CIL which increased their profit

considerably and also for the small customers who cannot buy coal throughnormal procedure.

2) An easy access to place one’s demand of coal.

3) E – Auctioning is a legitimate channel for supply of coal to non –consumer.

4) Registered traders also get opportunity in the platform.

5) More awareness, training and education is needed to be provided to the

consumers for efficiency of transactions and more efficient participation.

6) It has high prospect in fulfilling the demand of consumers in future and will

help to shorten the demand-supply gap.

7) It has helped to eliminate the middle men and illegal transactions benefitingthe buyers and the sellers.

8) Most of the customers are pretty satisfied with most of the aspects of this

system.

9) Most of the customer feel the amount of coal offered in the e-Auction should

be increased.

10) The gestation period is quite high in case of some customers.

11) Coal India usually takes a long time to settle the disputes.

12) The customers have some dissatisfaction regarding the price of the coal in e-

Auction and the EMD amount and the bidding time which normally takes a

long time.

13) The probability of getting coal through e-Auction is very low.The average rate

of successful bidding is 40%-45%.

14) The service providers are specialized and unbiased.

15) The e-auction software should be able to eliminate jamming and blockade to

increase customer satisfaction level.

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RECOMMENDATIONS

1) More quantity is needed to be allocated for sale under e-auction to satisfy

customers’ needs and so they do not need to resort to other source for their

unfulfilled demand.

2) More awareness, training and education of e-auction is required for the

consumers.

3) Auction software should be improved and upgraded to fight with system

jamming and blockade.

4) It needs to be cost effective on both the buyers and consumers end. EMD if

possible should be lowered

5) The service provider must make some representative for the customers and

must meet them for physical interaction and training to be more efficient on

the bidding system.

6) The service provider if introduces some new technological changes must

ensure to train the customers for example recently introduced digital signature

is causing lot of tensions in the entire customers’ segment.

7) CIL should evaluate the e-auction process frequently, the quality of servicerendered, the customer satisfactions and excreta.

8) The double documentation should be avoided. If once the customers have

been verified and granted username and password, I do not think there is a

need for the same documents to submit again at the concerned coal companies.

CIL should send those documents so that those coal companies do not need

those to be submitted by the customers again.

9) When such a big system is running electronically, documents to be filed

electronically to save time and harassment.

10) Logistics system to be monitored by CIL because the customers are paying

EMD and even coal value after successful bidding but they are not getting the

delivery of coal in time. In fact it is some times gets delayed by 3 months and

above, so the whole logistics system is getting into problem as auction takes

place every month. The customers are not very big who buy coal from e-

auction so they are losing the interest on their blocked money.

11) Metal Junction must upgrade its system quality so as to avoid getting hangedand jammed in critical time.

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12) The service providers need to have an efficient & frequent communication

process with the customers through SMS, email.

13) The service providers must look for an efficient and prompt redress of thecustomers’ complaints.

14) The service providers must upload important information on their website and

must pave for an easy navigation to lot of information for beginners.

15) The system should be made more customer friendly rather than customer

compulsion.

16) In this modern world of customization, the service providers must maintainthe database of their customers, must try to create customer profiling and must

try to package customized service for separate profiles.

17) CIL should see to the extreme increase in the price in the bidding which is not

allowing many customers to buy coal under e-auction. CIL must ensure social

vision as it is a PSU as well as profitability.

18) CIL should see how they can settle the disputes quickly so that the process

become more fast and smooth.

19) The service provider rated all the parameters mentioned quite high on the basis their perceptions about their service quality but we saw in the aboveanalysis in which parameters the customers are satisfied, little dissatisfied,highly dissatisfied and very highly dissatisfied. So the service providers needto understand those dissatisfaction, CIL must ensure that these dissatisfactionsare removed and CIL, the coal companies and the service providers must work towards committing a high level of satisfaction on all those parametersmentioned.

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CHAPTER-VI

BIBLIOGRAPHY

WEBSITES

www.wikipedia.com

www.coalindia,in

www.mstcindia.co.in

www.metaljunction.com

www.energybusiness.in

Chaffey, D. (n.d.). http://davechaffey.com/internet-marketing/C4-Strategy/Internet-

strategy-process . Retrieved June 25th, 2011, from davechaffey.com:http://davechaffey.com/internet-marketing/C4-Strategy/Internet-strategy-process

MAGAZINE & Other Articles

Coal insights.

A.PARASURAMAN. (2008). Defining, Assessing, and Measuring Service Quality: AConceptual Overview. University of Miami.

Coal India Diary 2011

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http://www.wikipedia.com/

http://www.mstcindia.co.in/


http://www.metaljunction.com/

http://www.energybusiness.in/

http://www.wikipedia.com/


http://www.metaljunction.com/

http://www.energybusiness.in/



APPENDIX

(Questionnaire for Service Providers of e-Auction of Coal)1)Name of the company: ……………………………………………………………..

2)Name of the person interviewed (optional) :………………………………………..……………………………………….…………………………………………………

3)Designation: …………………………………………………………………………

4)Total Number of customers registered at present in your entire e-commerce system:………………………………………………………………………………………….

5)Number of customers registered at present for buying coal under e-Auction:………………………………………………………………………………………….

6)The annual growth % of the customers getting registered for e-auction:…………………………………………………………………………………………..

7) Kindly name the companies other than CIL for which you usually conduct e-auction and their products:…………………………………………………………….……………………………………………………………...…………………………………………………………………......................................…………………………

8) What encouraged your company to become e- Service Provider for Coal? .................................................................................................................................…………………………………………………………………......................................………………………………………………………………….............................................

9) As the present system is offering only 10% of the total production for sale under e-auction, Do you think more coal should be allocated for sale under this system :

• Yes

• No

10) If yes, what should be the % of the total production to be sold under e-Auction: .......................................................................................................................................

11) Do you provide any MIS to CIL which help them to fix the floor price of coal?

• Yes

• No

12) What is the chain of communication between you, CIL and the subsidiary coalcompanies?.....................................................................................................................

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…………………………………………………………………....................................

13) Has CIL ever done assessment of your service quality?

• Yes

• No

14) What type of measures is taken so that the site does not crash at anytime? .....................................................................................................................................………………………………………………………………….................................

15) What type of measures is taken so that the accuracy and transparency of the

bidding process is maintained at its best?...................................................................... .....................................................................…………………………………………………………………........................................................................................................

16) What are the risks involved in e-auction? ...............................................................…................................................................…………………………………………………………………........................................................................................................

17) What type of special security and safety measures do you take to operate thissystem as this system encompasses business comprising huge financialwealth? .........................................................................................................................................…………………………………………………………………………………………..…………………………………………………………………......................................

18) What type of measures do you take to maintain the privacy of the bidders? .........................................................................................................................................…………………………………………………………………......................................…………………………………………………………………......................................

19) Have you ever personally interacted with the customers registered in your system?

• Yes

• No20) Do your customers have any grievances against your system?

• Yes

• No21) If yes, kindly specify those grievances : …………………………………………..

…….…………………………………………….…………………………………………………………………......................................

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...........................................................

22) How do you handle those grievances against your company? ..........................................................................................................................................

…………………………………………………………………......................................

23) How frequently do you update the details of the customersregistered? ..........................................................................................................................................

24) How frequently do you upgrade your website?.........................................................

25) Do you communicate with the customers informing them of revisions made by theCIL regarding e-auction?

• Yes

• No

26) If yes, how do you do it?

• E-mail to every customers

• SMS to the every customers

• Upload in your website as a highlight

• Other methods( please specify):…………………………

27) From the inception of e-auction till today, what improvements have you broughtin this system to increase customer confidence?..............................................................…………..........................................................................................................................

28) What type of technical skills your employees possess for handling the e-auctionsite?.................................................................................................................................…………………………………………………………………....................................

29) Do you provide customization services based on the profile of each customer?

• Yes

• No30) If yes, what are the services you customize and how do you customizethem? ...................................................................................................................................…………………………………………………………………......................................…………………………………………………………………………………………..

31) Do you think the customers registered to you are loyal to you?

• Yes• No

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32) If yes, how have you measured their loyalty?

• Yes

• No

(P.T.O)

33) Rate your own service quality on a scale of 10

(1 being lowest – 10 being highest)

Dimensions Ratings

Transparency of e-auction process

Reliability of your system

Security / Privacy maintained by your system

Responsiveness

User friendly

Information Quality

System Quality

Customization

Trust and Assurance provided

Thank You for your co-operation in this research

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(Questionnaire for Customers/Traders of e-Auction of Coal)

1)Name of the company: ……………………………………………………………………………………………………………………………….…………………………

2) Are taking coal through:

• FSA

• E-Auction

• Both3) According to you which is the best way to get coal?

• FSA

• e-Auction(4) Kindly state your reason :………………………………………………………… .………………………………………………………………………………………………………………………………...............................................................................

5) Quantity of coal sourced through e-auction monthly:……………………………….……….....................................…………………………………………………………

6) Is the above quantity required for own use or trading?

• Own Use

• Trading• Both

7) Quantity of coal required/ traded monthly:…………………......................................

8) Is e-auction is sufficient to fulfill your demand?

• Yes

• No

9) ) If e-auction is insufficient to fulfill your demand, from where do you source your

unfulfilled demand of coal?........................................................................................................................................................................................................................................

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..........................................................................................................................................

10) Which service provider are you registered with?

• MSTC

•

Metal-Junction• Both

11) Kindly state the preferable auction type:

• Forward e-auction.

• Spot e-Auction

12)Why do you prefer above mentioned auction type?......................................................................................................……………………………………………………………..…………..............................................................................................................

13) As the present system is offering only 10% of the total production for sale under e-auction, Do you think more coal should be allocated for sale under this system?

• Yes

• No14) If yes, what should be the increased % of the total production to be sold under e-auction?............................................................................................................................

15) Do you think that CIL should provide its own service for e-auction?

• Yes

• No16) Please state your reason:………………………………………………………………………………………………………………………………………………………..

17) What do you feel about the EMD amount?

• Very High

• High

• Fair

• 18)What is the mode of payment?....................................................................................

....................................................................................…………………………………

19) What is the probability of getting coal from e-Auction?

• Very High

• High

• Low20) What percent of your total demand get satisfied through e-Auction of CIL? ..........................................................................................................................................

21) What is the gestation period between delivery/sale order and lifting day?

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• 15-30 days

• 30-45 days

• 45-60 days

• More than 60 days.

22) Time needed to settle the dispute(if any) by the company?

• Less than 1 month

• 1-2 months

• 2-3 months

• More than 3 months.23) Time taken to get the refund/adjustment of the accounts:

• Less than 1 month

• 1-2 months

•

2-3 months• More than 3 months

24) Rate the following parameters of e-auction with regards to your satisfaction on ascale of 10 (1 being lowest and 10 being highest)

Parameters Ratings

Price of coal in e-auction

Terms and Conditions for e-auction laid down by CIL

Transparency of e-auction process

Registration fees of the e-auction

EMD amount

Success Rate of your bidding

Reliability of the system

Security of the system

Privacy of the customer bidding

Communication of the service provider (MSTC) with you

Communication of the service provider (Metal- Junction) with you

User friendliness of the system

Information Quality of the system

System Quality of the system

Customized services provided to you by the service e provider

Trust and assurance provided

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25) Kindly state the reasons if any parameter’s rating is less than 6:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

26) Do you have any suggestions to improve the e-auction system?…...................................................................................................................................…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

(Thank you for your cooperation in this research)

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Documents

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