Informist, Tuesday, Sep 10, 2024
--Source: Coal India's stocks currently at 67 mln tn, up 52% on year
--Source: Coal India's daily output currently at 1.7 mln tn
--Source: Coal India to up daily output to 1.9 mln tn in Sep
--Source: Coal India to raise production despite muted demand
--Source: Coal India's sales may improve in Sep-Mar compared to Apr-Aug
--Source: See stocks of 65-75 mln tn as new normal for Coal India
By Avishek Rakshit
KOLKATA – Pithead stocks at Coal India Ltd's mines are expected to increase further in the coming months as production is set to pick up pace from this month despite muted demand for coal.
Pithead stocks, or the coal inventory idling at mines, are currently at 67 mln tn, 52.3% higher compared to a year ago, a Coal India official told Informist. "A stock level of 65-75 mln tn is going to become the new normal going forward from the previous usual levels of 30-40 mln tn," the official said.
Carryover unsold stocks limit a company's ability to step up production and lead to higher inventory costs, which hit profits.
In April, the company's pithead coal stocks were around 90 mln tn, before falling to around 82 mln tn in July. Since then, stocks have fallen further as production declined in the monsoon and Coal India was able to clear some of its stocks.
"In August, average production per day was around 1.4 mln tn due to excessive rain and some flooding in the mines, and we cleared some of the stocks. But September onwards, production has picked up pace again at 1.7 mln tn per day, and we hope to take it up to 1.9 mln tn this month," the official said.
So far, the Maharatna company has been able to exhaust only 18% of its July stock levels, against the plan of 35% it had set internally.
From November, daily production is set to pick up pace further, the official said. October usually coincides with the festival season, when production is hit by holidays and workers going on leave. But with the onset of autumn and winter, production has historically picked up pace for Coal India.
On the other hand, coal sales through long-term supply agreements were on the decline in August, but are expected to improve from this month, the official said. Average daily coal sales were flat on a year-on-year basis at 1.9 mln tn in July, before declining to 1.7 mln tn in August.
"Going forward, we are going to increase production as well as sales. Hence, on one hand, we are faced with a substantial inventory, and at the same time, increase production as well. So, the inventory may keep piling up despite an improvement in sales," the Coal India official said.
As of August-end, the world's largest miner had a sales backlog of 40.4 mln tn, which the company will try to make up for in Jan-Mar. Its total sales volume was 310 mln tn as on Aug 31.
Although Coal India is faced with tepid demand, it has decided to keep increasing production. Company officials said the company is prioritising sufficient coal availability in the country across sectors. "As a result, coal stocks may keep increasing, but we will continue to increase production as per the target of 838 mln tn in the current financial year," the company executive said.
Thermal electricity generation in the country declined 5.5% year-on-year to a little over 104 bln units in August, according to data from the power ministry. However, total coal-based electricity generation increased 7.8% to 587.8 bln units during Apr-Aug.
The company official said pithead stocks increase risks of fire at mines, as coal, a highly combustible mineral, is left exposed to the vagaries of nature. Coal is prone to catch fire due to high temperatures and extreme sunlight.
"But these are risks which we will have to accept. There is enough coal at the power plants as well, and captive miners are also increasing production. So, we will have to keep stocks with us and dispatch it to consumers as the need be," the official said.
As on Sep 7, total coal stocks with power plants were up 43.7% year-on-year at 39.9 mln tn, the Coal India official said. Production from captive miners increased 30.6% to nearly 69 mln tn during Apr-Aug, data from the coal ministry showed.
At 1508 IST, shares of Coal India were up 1.3% at 490.90 rupees on the National Stock Exchange. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
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