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Coal of India may scale back production to deal with 40Mt stockpile

Indian government is considering issuing a directive to force the country’s largest coal producer, Coal India Limited (CIL), to cut back its production in a bid to deal with the miner’s rising coal stockpile.

In a sharp reversal of fortunes, from production shortages to a surplus and falling demand, CIL, which accounts for about 80% of domestic coal supply, was likely to be nudged to ease production, as it would soon run out of stockyard capacity and risk mounting carrying costs, an official in the Coal Ministry has said. The official added that Coal Minister Piyush Goyal had made it clear that CIL would need to aggressively liquidate the estimated 40-million-ton pithead stocks and even consider lowering prices to increase offtake by consumers.

However, with sales remaining slow, CIL was fast being left with little option but to prune production to avoid the imminent problem of oversupply, the official stated. The latest trigger for the miner to ease off the production pedal was the Coal Ministry’s cancellation of the latest round of coal e-auctions for the power and nonpower industries, in a bid to liquidate its stocks.

Source: Mining Weekly