Informist, Wednesday, Jul 3, 2024

--Coal India official: Aim to sell 35-40% of coal stocks in monsoon

--Coal India official: Pithead stocks currently at 81.5 mln tn

--Coal India official: To retain FY25 output aim despite high inventory

--Coal India official: Eye import substitution at coastal power plants

--Coal India official: Setting up 10-mln-tn coal washeries by FY30

By Avishek Rakshit

KOLKATA – Faced with a huge inventory overhang, Coal India Ltd plans to clear 35-40% of its pithead stocks of 81.5 mln tn through sales under the contractual supply and e-auction route in Jul-Sep, a senior company official told Informist.

Even if the world's largest coal miner manages to clear 40% of the stock, it will still be left with an inventory of 49 mln tn of coal at the end of the monsoon, which is around 63% more than the stock levels it usually maintains. Pithead stocks could rise further during the winter as the pace of production could outstrip the increase in sales.

Since Coal India has decided to meet the production target of 838 mln tn set by the government for the current financial year, the company risks building excessive stockpiles during Jan-Mar, which will be passed as inventory costs in the coming financial year. Coal India's current pithead stocks are already 40% higher on a year-on-year basis, but down 10% from a quarter ago.

"Due to rains and flooding in the mines, production gets impacted during the monsoon. This happens every year, whatever steps we take. Although we plan to maintain the production momentum during the monsoon, supplies to the power sector from pithead stocks will increase during this time (monsoon)," the company executive said.

"We are working out a way how we can clear the stocks. It will be challenging given that power plants now have more coal stocks with them and demand at e-auctions is also moderate," the official said.

On account of higher supplies by Coal India and increased captive mining by power companies, power plants had 30% more coal stocks at warehouses at the end of June at 46.7 mln tn compared to a year ago. Production from captive mines surged 32.8% year-on-year to 13.8 mln tn in May, according to latest government data.

During Apr-Jun, Coal India's supplies to thermal power plants rose 4% to 160 mln tn.

A second Coal India executive said the country might continue to rely on thermal power production during the monsoon due to the erroneous nature of hydel power generation, owing to flash floods and incessant rains at hydel power generating locations. "Hence, coal demand in the monsoon is expected to remain strong, which will help clear some of the pithead stocks," the official said.

The official reasoned that last financial year, growth in coal production was more than the growth in power demand, which led to excessive stocks with Coal India. During the year ended March, both thermal power generating stations and Coal India registered 10% year-on-year growth in production, but coal production was more than the anticipated demand from the power sector.

"But then, in the longer term, there is scope for import substitution in coastal plants where we can supply indigenous coal from the washeries which are of higher quality," the first official said. "In the future, this will help clear stockpiles."

Unlike pithead thermal power plants, which are fed by indigenous coal, coastal power plants are designed to operate on high-grade coal, which is imported. Coal India officials said these plants cannot generate power solely from the usual Indian coal, owing to its inherent high ash content and lower grade.

"Washeries can help in this regard as washed coal can be mixed in higher quantity with imported coal to obtain the required heat to generate power," the first official said.

The average price of non-coking washed coal, which can be used in these coastal power plants, is usually 1.8 times the normal price at which Coal India sells the commodity to power companies.

To tap the demand from these coastal power plants, Coal India is expanding and renovating the capacity of its washeries to produce 10 mln tn of washed coal by April 2030.

At 1213 IST, shares of Coal India were up 0.9% at 483.50 rupees on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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