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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
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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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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
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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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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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• 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
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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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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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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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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 )
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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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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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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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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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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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Fig: Schematic diagram of logistic system.
Fig: Schematic diagram of the supply chain management
PERIOD RAIL ROAD MGR BELTS/OTHERS
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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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• 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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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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Fig:representation of the new coal distribution policy
Overview of NCDP:
E-
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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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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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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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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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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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