CIL in a fix over output, pricing
COMBINED STOCKS OF THERMAL COAL AT 101 POWER PLANTS HAVE RISEN TO A NEW RECORD OF 34.2 MT
Coal India achieved a 9.8% growth in sales volumes in the first 10 months of this financial year as production improved amid concerns of an oversupply after demand from power companies grew less than expected. The company sold 437.6 million tonnes of coal during the April-january period as output increased 9.6% to 426.31 million tonnes, Coal India said in a statement.
Although higher production helped the company to boost sales, stockpiles of coal with the company declined marginally to 42.25 million tonnes. This, along with 34 million tonnes of stocks with power plants, has led to a situation of oversupply.
Coal India's output rose 13.4% to 52.86 million tonnes in January from a year earlier, while offtake climbed 9.8% to 48.32 million tonnes.
The company now finds it hard to sell its entire output because thermal power companies, its biggest customers, are unable to accept more coal as their stockpiles have ballooned enough to cover supplies for an average of 25 days. “Our stock yards are almost full and we are not in a position to take increased volumes of coal. Stocks have increased due to the dual effect of a less-than expected rise in demand growth and a phenomenal rise in coal production and supplies,“said a senior official from NTPC, which is Coal India's biggest customer.
The NTPC official said stocks have touched on an average 25 days compared with barely enough for three-four days earlier. Two Coal India subsidiaries surpassed 100 million tonnes of production in December. Sales and production for both January and the first 10 months fell short of their respective targets. The coal ministry is worried that Coal India may be forced to curtail production and miss its targets if it is unable to sell all its output. Officials are considering options such as reducing coal prices, offering more coal through e-auctions and increasing sales to thermal power plants that are eligible for and can receive additional coal, although no decision has been taken.
Amid sluggish demand, Coal India is facing dilemma over production and finding it difficult to further stock the fuel, even as the PSU major is not keen to rationalise prices and rather prefers to look at other methods to boost sales to keep weak subsidiaries in profit.
CIL has reached a situation where the production cannot be optimised due to inability to stock coal further, which has already reached 40 MT due to sluggish demand. “The current pricing has