Kolkata: India's leading e-commerce company, mjunction, a joint venture of Tata Steel and Steel Authority of India Ltd (SAIL), on Wednesday launched first coal spot price index, which will help a better price discovery of coal for e-auction.

The index will also act as a reference for the government, which is regulating domestic coal prices only to make it cheaper by 55% than the import parity prices.

Coal India's marketing director AK Sarkar, after the launch of coal price index, said while the index will serve as a barometer of the coal market discovering a bench mark price, it will also be a specimen of market dynamics for coal consumers under the ambit of fuel supply agreement.

He said according to government stipulation, CIL can sell only 10% of its total production through e-auction, of which 50% is sold via mjunction platform. With CIL expecting to produce 435mt in 2009-10, around 20-21 mt will be sold through mjunctuion platform.

Although this would be a narrow sample size, but based on actual transactional data, the price index will be formed, Sarkar said.

He said, "This index can give a kind of a signal to the government that price needs to be market-determined."

"The coal spot price indices will eventually work as a benchmark when the coal derivatives market take its route in India. Buyers and sellers can hedge their risks through use of coal derivatives," Sarkar added.

mjunction has developed four separate indices, Mjcomposite, Mjsteel, Mjcement and Mjpower, which together have included all 550 varieties of coal.

Viresh Oberoi, managing director of mjunction Services Ltd, said the benchmark price derived from coal price index, will act as a reference for long- term contract too.

"The coal industry in India has so long relied on international coal spot price indexes like Richard Bay Coal, Japan Power Utility Index, Australian New Castle Coal and ACR Asian Index. With the advent of Mjcomposite, Mjsteel, Mjcement and Mjpower, the industry will now have a much accurate and authentic coal price index," Oberoi said.

The foreign coal price indexes are based on polling, while the Indian coal price index will be based on actual transactional data, Oberoi added.