Informist, Tuesday, Feb 20, 2024
--Coal India official: May end FY24 with 80 mln tn inventory, up 15%
--Coal India official: India stocks seen 120 mln tn end FY24, up 17%
EXCLUSIVE
--Coal India official: Power cos demand less than projected earlier
--Coal India official: Power cos' stock seen 40 mln tn end FY24, up 16%
--Coal India official: Cut FY25 output, sales aims on higher stocks
--Coal India official: FY25 output, sales aim now 838 mln tn vs 850 mln
--Coal India official: Talking to non-power cos to clear inventory
By Avishek Rakshit
KOLKATA - State-owned Coal India Ltd is likely to kick off the new financial year in April with about 80 mln tn unsold stocks of the fuel, 15% higher than the year-ago level, primarily due to low demand from the power sector, a senior company official said. Going by the government mandate, the coal behemoth prioritises sales to the power sector, which accounts for 75-80% of its annual number.
The inventory overhang has upset Coal India's production and sales growth plans for the next financial year and has led to a cut in its targets for production and sales, the official told Informist. The world’s largest coal miner has cut its output and sales targets to 838 mln tn each from 850 mln tn due its higher inventory burden.
At 1525 IST, shares of Coal India traded 3% lower at 447 rupees on the National Stock Exchange.
Coal India had started the current financial year with around 70 mln tn of pithead stock, more than double the normal level. Company officials were then optimistic that an uptick in coal demand would help trim its inventory. However, the 8.3% sales growth for Apr-Jan, the first 10 months of the fiscal year, fell below its initial projections. During the period, Coal India continued to raise output, clocking a 10.8% rise during the period – with the growth in production outpacing sales, and leading to an inventory pile-up.
"We are facing potentially a huge inventory overhang of 80 mln tn at our pitheads and in addition, there is also another 38 mln tn of inventory at the power plants," the senior company official said. "Under all possibilities, looking at the demand condition, another 2 mln tn of inventory could get added by March-end at the power plants."
This will take India's total coal inventory, across mines and power plants, to 120 mln tn by the end of the financial year in March, which is 17% higher than the year-ago level. This projected stock position is about 12-13% of the total coal that would be required by the country's power plants in the new financial year. According to Coal India officials, about 30 mln tn stock at the pitheads and 40 mln tn at the power plants is ideal. As on Apr 1, the country's power plants had a total coal stock of 34.5 mln tn.
Pithead stocks refer to the unsold coal that has been extracted by the miner but is kept at the mines. On the other hand, the stock at the power plants refers to the coal being supplied and kept at the power plants' warehouses to generate electricity at a later date.
Accumulation of coal stocks at the mines leads to congestion and Coal India finds it difficult to blast new coal seams and increase production. An inventory overhang at the pitheads not just upsets and limits the coal miner's production and sales plans, but can also lead to accidents like fires.
The last time the Maharatna company had faced such a huge inventory overhang was in 2021, during the weak demand scenario of the pandemic period. At that time, Coal India's inventory was at 78 mln tn, and it was unable to sell the fossil fuel despite offering discounts. Later, an acute coal scarcity worldover, and its effect on India, had helped Coal India clear its inventory.
"Global coal demand and prices are stable and are expected to remain stable in the near term as well; there are some disturbances which keep happening but not serious enough to upset the global demand-supply balance," said an official at a state-owned power generation company.
For the upcoming financial year, the world's largest coal miner, in consultation with the power and coal ministries, has increased its sales target to state-owned power plants by 8.4% at 661 mln tn in 2024-25. For the non-power sector, which comprises largely of steel, cement, ferro-alloys and other sectors, the sales target has been kept at 100 mln tn. The remaining 9% of the targeted 838 mln tn coal sales volume, or 77 mln tn, could be offered through auctions, linkage contracts and other means, the Coal India official said.
"Apart from selling the targeted production for 2024-25, we will also need to reduce the inventory as much as possible," the official said attributing the pile-up to the mismatch between Coal India's internal projection of demand from the power, steel and allied sectors and the actual coal production. Unavailability of rail rakes is also contributing to the pile-up.
To clear the inventory in the next financial year, Coal India officials have already started talking to private power plants and non-power sectors to substitute their imported thermal coal with stocks of Coal India. The company is targeting import substitution of 175-200 mln tn during the year.
On the other hand, Coal India officials also said that a huge pithead inventory will ensure higher coal supply to power plants if there is a sudden demand. "It will help us avoid any coal shortage in the country if it pops up." End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
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