CIL in a fix over out­put, pric­ing


Resource Digest - - CONTENT -

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

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