Coal India upbeat about FY19, looks forward for some good business

Posted on 21 Mar 2018

There are bright prospects on the horizon for Coal India (CIL) in FY19. The domestic market is going good. There is a good demand for the fuel produced by CIL and with significant volumes of coal in its mine-heads there is not much of an issue in off-taking the coal to the end-customers, in a recent media interview Gopal Singh, CMD of CIL, said.

CIL is producing around 2.3 million tonnes (mt) of coal on a daily basis. However, the off-take is around 1.9mt due to logistical constraints. This has forced the coal major to restrict production. Singh noted that it is not the lack of production by CIL or a lack of demand for the fuel from buyers; it is rather logistics which is hurting the business.

The current mine-head stock level of CIL is about 45mt. Experts expect that the company will end the financial year with at least 5mt more of it. They also expect CIL to end the production of March ending current fiscal year around 560mt against a target of 600mt.

In the meantime, there are reports that suggest shortage of coal has been hampering power generation in the country presently. Central Electricity Authority data suggest that the coal stock situation with plants hasn’t changed much in last two-three months. As of March 6, when its daily coal report was last published, 20 out of 113 power plants in the country were under critical stock positions with an average of only 10 days’ stock left with them.

A trader from Mumbai recently told Indoen that unavailability of CIL coal is compelling several of the cement manufacturers to look for import sources for meeting their fuel requirements.

However, the government has taken some wise steps which are favourable for the industry and it is expected that 2018-19 will improve the off-take situation further. The government has also given CIL the green signal to supply coal to power plants which are located within a 100 kilometres distance from the mine-head through road transport systems. This arrangement will continue for 2-3 years until other friendly measures come forth.

Power plants which are located in a periphery of 20 kilometres can establish belt conveyors and carry coal through those belt conveyors. For power plants which are located around 40 to 100 kilometres are free to explore possibilities of establishing a merry-go-round (MGR) and carry the coal for their needs through this system. This will reduce the pressure on railways and the available rakes can be used for long distance transport.

There is a fine synergy between coal and rail ministry currently. Around 325 rakes are being dispatched every day which is a very good achievement. This was unbelievable to have happened a few years ago, Singh said in his interview to The Economic Times.

Giving his thoughts on price factor, Singh said that CIL is striving very hard to supply coal at minimum price. If it is successful to do so then the electricity cost will also come down dramatically. He added that CIL has tried to reduce its production costs and it has been successful in its endeavours.

Throwing light on the third quarter results he noted that CIL had reduced its cost of production by Rs.53 per ton and it had registered a growth rate of 11% profit-before-tax. Beginning 9th January the company has rationalized the prices and this will have some positive effect.

CIL had earlier decided to charge the consumers on the basis of the gross calorific value of the coal. This will make the system transparent and easier for everyone. The new pricing mechanism will take effect beginning April this year.