ET reported that domestic coal supply remains significantly short of the domestic demand, on the back of a strong recovery in power demand, lower hydropower generation in the current fiscal, as well as a healthy growth in production levels from non-regulated consuming sectors like cement, aluminium said ICRA in a recent statement. the rating agency said in its statement This is despite Coal India achieving a double-digit production growth of 10.6% during the first six months of the current fiscal, a feat which has not been seen in recent history. Notwithstanding the healthy growth, on September 30; 22 non-pithead power plants had less than 7 days of coal stock.
Notwithstanding this healthy growth, on September 30: 22 non-pithead power plants had less than 7 days of coal stock. As per an ICRA report, during the just concluded monsoon season, domestic coal production growth slowed down to 3.8% and 3.2% in September and August of 2018 respectively, against 10.6% in July 2018 and 13.2% in June 2018, leading to coal stocks at power plants steadily deteriorating from a high of 21.1 million tonnes in end-July 2018 to an estimated 15.8 million tonnes in end-September 2018.
Mr Jayanta Roy, senior vice-president, and group head - corporate sector ratings at ICRA, said that “Given the tightness in domestic coal availability, and the healthy demand from coal consuming sectors, spot e-auction premia have reached 102% in September 2018, surpassing the level of 95% reached during October 2017, when coal stocks at power plants were at their lowest levels. With Coal India’s pithead stock running critically low at around 18.4 million tonnes as on September 30, 2018. against a much higher level of 55.5 million tonnes as on March 31 2018, the central miner’s ability to stage a quick recovery in production levels after the monsoon would remain critical to close the gap between coal demand and supply."
On the back of coal stocks at many power plants remaining critical, despatches to the power sector has consequently taken a higher priority, growing at a stronger pace of 9.6% year-on-year during the first six months of FY2019, compared to a Y-o-Y growth of just 2.8% in despatches to the non-regulated sectors during the same period.
Domestic coal shortage has led to rising thermal coal imports by end-users in the non-regulated sectors in the last one year increasing from 75.1 million tonnes in H1 FY2018 to 84.7 million tonnes in H1 FY2019. and accounting for around 68% of the incremental thermal coal imports during this period.
Mr Roy said that “Apart from rising import dependence, a steep increase of over 25% in seaborne thermal coal prices during the current fiscal thus far, a sharp depreciation of the rupee, and rising spot e-auction coal prices are estimated to have led to a 20-34% rise in coal costs between April 2018 and October 2018 for a player depending entirely on e-auction and/or imported coal, with the extent of increase depending on the mix between domestic vs. imported coal, as well as the grade of coal consumed.”
ICRA believes that over medium to long term, a major thrust towards CIL’s coal production is expected to come from the coalfields of North Karanpura (in Jharkhand), Mand-Raigarh (in Chhattisgarh), Korba - Gevra (in Chhattisgarh), Talcher (in Odisha), and lb Valley (in Odisha).