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Informist, Friday, Jun. 20, 2025

 

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--Coal India official:Subsidiaries to allot 40% monthly output to e-auctions
--Coal India official: Aim to maximise e-auction sales volume in coming mos
--Coal India official: Higher e-auction sales may reduce pithead coal stocks
--Coal India official: Need more e-auction sales to hit 900 mln tn/yr sales
--Coal India official: Will follow norms for e-auction sales quantum in FY26

 

By Avishek Rakshit

 

KOLKATA – Laden with over 100 million tonnes of unsold inventory at its coal pitheads as sales remain low due to tepid demand, Coal India Ltd. is asking all its subsidiaries, barring one, to allot 40% of their monthly production to e-auctions in the coming months. 

 

The Maharatna company believes this could help clear the inventory, at least partially, as well as push sales from current production when demand from pre-negotiated long-term contractual sales remains muted. Higher sales volume from e-commerce channels will also boost the revenue and profit of the company in the current financial year started Apr. 1.

 

"All the subsidiaries, except Northern Coalfields Ltd., have been asked to offer 40% of the monthly production in e-auctions after meeting their fuel supply agreement commitments," a Coal India official told Informist. "However, these sales will have to be in compliance with the existing regulations and cannot exceed 20% of the total annual coal production for the subsidiary."

 

The world's largest coal miner may offer a maximum of 180 million tonnes of coal in the e-auctions in 2025-26 (Apr-Mar) as against around 120 million tonnes in FY25, according to estimates by Informist. Despite poor demand for most part of the last financial year, Coal India offered a little over 15% of its annual production of 781.1 million tonnes in the e-auctions, but ended up actually selling only a little over 10% of its annual output, or 79.1 million tonnes, via e-auctions. This was due to a fall in the bookings at e-auctions.

 

In FY25, Coal India was able to sell only 66% of the total coal volume offered at such auctions due to an abundant availability of coal, the company official said. The last time it was able to sell all the coal offered at e-auctions was in FY22. 

 

For FY26, the state-owned miner has decided to maximise sales through all possible channels and is targeting to sell a higher percentage of its annual production at the e-auctions. It is also aiming for a higher conversion of bids into actual sales at the e-auctions.

 

Assuming a 5?ll in price at the e-auction due to higher volume being made available, if Coal India could sell the entire 180 million tonnes, or around 20% of its targeted production of 915 million tonnes, at e-auctions at the rate of INR 2,414 a tonne – 5% lower than the average realisation of INR 2,541 in FY25 – it would translate into revenues of around INR 435 billion in FY26. This will be over 116% higher than the INR 201 billion of total revenue it booked from e-auction sales in FY25. E-auction sales accounted for around 16% of Coal India's annual revenue of INR 1,269.6 billion in the last fiscal.

 

If Coal India's price realisation from the e-auctions drops by 10% on year, or to INR 2,287 a tonne, the company will book revenues of INR 412 billion from the e-auctions, which will be 105% higher than FY25 revenue from such sales. However, the actual revenue from e-auctions will depend on the company's ability to convert the bids into actual sales and the price realisation at the auctions.

 

Around 25 million tonnes of coal are expected to go under the hammer this month, which may increase by 1-2 million tonnes during July. However, the coal finally offered at the e-auctions will also depend on the uptake from power and steel companies under pre-negotiated long-term contracts.

 

Coal India's largest subsidiary, Mahanadi Coalfields Ltd., which has a considerable pithead stock of over 36 million tonnes, is expected to offer the highest quantity at the e-auctions, followed by the second-largest subsidiary, South Eastern Coalfields Ltd., which has stocks of around 27 million tonnes. Another major subsidiary, Central Coalfields Ltd., holds around 13 million tonnes of unsold coal at its mines, and is also expected to offer a high amount of coal at the upcoming e-auctions.  

 

According to the guidelines from the coal ministry, all Coal India subsidiaries can allot a maximum of 20% of their output at the e-auctions. "But it is an annual cap which gives us the flexibility to push more coal into e-auctions in times of need and then balance it out during the remaining part of the year," the company official cited earlier said.

 

Thus, six out of seven Coal India subsidiaries can now offer more coal at the e-auctions to clear their inventory and to also push the monthly sales. However, later in the year they will have to reduce the allotment at the e-auctions to comply with the guidelines.

 

"Considering the current state of demand, complying with the ministerial guidelines will not be a problem," the Coal India official said, adding that supplies under fuel supply agreements, which are e-auction and price agnostic, will be given first priority.

 

THE FLIP SIDE

But there is a flip side to this strategy of offering more coal via e-auctions, which are an important determinant of Coal India's profits. If Coal India offers more coal at the e-auctions, prices could fall further on account of higher coal availability, which may ease the competition among buyers, the company's officials feared.

 

"We are aware of that (risk to price) and our guess is that prices in e-auctions will moderate further this year. But we also need to clear the stock and meet the annual offtake guideline of 900.49 million tonnes," the official said. In the coming months, Coal India will push sales volume despite possibly risking lower prices at the e-auctions, the official added.

 

Prices at e-auctions depend on three factors – coal demand, which depends on domestic availability; international coal price movements; and the quality of coal going under the hammer.

 

"If we are able to get a higher sales volume from the e-auctions, then even if prices come down further, we will be able to register higher total sales realisations from the auctions, and it will directly add up to our profit," the Coal India official said.

 

On Friday, shares of Coal India ended 4.8% higher at INR 389.05 on the National Stock Exchange. End

 

Edited by Tanima Banerjee

 

 

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