Coal news and updates

The government has set unrealistic targets for Coal India Ltd this year after the company fell 4.21 per cent short of its production target to 462.53 million tonnes (mt) in 2013-14.

 

Coal India’s production and offtake targets for 2014-15 are 507 mt and 520 mt, respectively. The Kolkata-headquartered company’s performance grew only 2.3 per cent and 1.4 per cent, respectively, on these indicators in the last financial year.

 

‘Extraordinary effort’

Experts said meeting the target of raising production by 9.6 per cent and offtake by 10.3 per cent needed “an extraordinary effort from the company”. An incremental growth target of 45 mt in a single year becomes difficult considering it is 60 per cent of Coal India’s projected increase during the Eleventh Five-Year Plan. The company added 74.93 mt in production between April 1, 2007, and March 31, 2012. Even during its best years, 2009 and 2010, the incremental production was 6-7 per cent.

 

Government-owned companies sign memoranda of understanding with the secretaries of their administrative ministries, setting out performance targets. Last year’s memorandum for CIL had set targets of 482 mt for output and 492 mt for offtake. The targets were getting harder to reach as mining clearances became scarce, said an official who did not wish to be named.

 

Railways is key

Though CIL did not comment on the targets, its chairman said improved offtake depended on the railways. “Key rail projects like Tori-Shivpuri-Kathotia in North Karanpura, Jharkhand; Bhupdeopur-Korichhaapar to Mand Raigadh mines in Chhattisgarh; and Barpali-Jharsuguda in Ib Valley, Odisha, are vital,” S Narsing Rao, chairman and managing director, told Business Standard.

 

The pressure from the government coincides with demand for coal dropping rapidly in the power sector. Rajasthan, Gujarat and West Bengal are buying less coal from CIL; Haryana has stopped buying completely.

 

Even if Coal India managed  to produce 507 mt, there might not be many takers for its coal, said an analyst who did not wish to be named. Rao said there was a drop in demand from the power sector but the situation would improve in summer.

 

According to the Central Electricity Authority, India’s power deficit has come down to 4.3 per cent in 2013-14 from 8.8 per cent in 2012-13 on slowing demand growth. The power sector consumes 76 per cent of Coal India's output.

 

Fall in power deficit

Government-owned NTPC buys 30 per cent of Coal India’s supply and 38 per cent of some 353 million tonnes shipped to the sector. Its electricity generation target for 2014-15 has, however, been set at 240 billion units, a 3 per cent increase over last year. Also, power producers like the Damodar Valley Corporation are struggling to find consumers for its electricity.

 

“There is an overall demand slump in power purchase by distribution companies. However, that does not mean that companies like NTPC are cutting their coal intake,” said a senior NTPC executive who did not wish to be named. In 2011-12, the domestic coal intake by NTPC was 129 million tonnes, which climbed to 146 million tonnes in 2012-13 and 149 million tonnes in 2013-14.

 

Analysts, however, are optimistic about Coal India meeting its production target for 2014-15. “Last year, the 20 million tonne drop in production from target was due to the cyclone in October, which cut short at least 6 million tonnes of incremental production, and another 13-14 million tonnes were reduced by held-up clearances from environment ministry. Many of these clearances are in the final stage and are likely this financial year,” said Rupesh Sankhe, a research analyst at Karvy Computershare.

 

 

Source: Business Standard