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  1. Coal India puts itself in slowdown mode; here’s why

Coal India puts itself in slowdown mode; here’s why

Coal India (CIL) has adopted the strategy of having coal ready for mining on shelf following the setback the company faced with a 55 million tonne pithead stock at the end of FY16.

By: | Kolkata | Published: July 7, 2016 6:06 AM

Coal India (CIL) has adopted the strategy of having coal ready for mining on shelf following the setback the company faced with a 55 million tonne pithead stock at the end of FY16. During the April-June quarter, the company restricted its production growth to 3.5%, although as a whole it produced 125.65 million tonne of coal during the quarter, compared to 121.35 MT in the corresponding period last year.

The 55-MT pithead stock had offset CIL’s margin, since the stock was a cost to the company and there was no price realisation from it in FY16.

“High coal stock inventory at coal fired power utilities as well as at pitheads of Coal India restrained the company to go for higher production during the months of April and May,” a company statement said.

In the approach of coal ready for mining on shelf, the coal seams have been exposed for future mining and CIL would be in a position to scale up production deploying additional machinery as and when the demand picks up.

A CIL official on the condition of anonymity said the coal ministry was only following a strategy of increasing production, without keeping the demand in consideration. Even when CIL officials pursued the ministry saying that after a 9.01% year-on-year production growth and 9.22% y-o-y off-take growth in FY16, the growth in profits would be tepid because of the 55 MT pit head stock that would have to be factored as a cost in the balance sheet, the ministry believed that there would be a sudden surge in the demand of coal and CIL at that time would not be ready to meet the demand if it had not increased production.

Coal secretary Anil Swarup earlier told FE that the low demand of domestic coal was due to the power plants running at low PLF and the situation would not continue for long. However, the situation of surplus coal still continues with thermal power plants holding 30.51 MT of coal stock ending June 2016. This is equivalent to 22 days of coal stock and no thermal power plant in the country has a critical stock condition, reported CIL adding that for such a situation coal off-take for the quarter grew only 2.9% y-o-y. Coal off-take for the quarter ending June 2016 has been 133.19 MT against 129.39 MT during the same period last fiscal.

FE earlier reported that with pit head stock lying open, the piled up coal gathered moisture, which actually effected in quality degradation. Besides some of the stock piles caught fire, which was an absolute loss for the CIL.

To prevent repetition of such a loss CIL has adopted the procedure of coal ready for mining on the shelf, for which over burden removal, an important performance criterion in exposing coal seam, registered a 13.3% growth.

Production for of June was 42.72 MT, registering a 10% growth compared to the same month last year, while the growth in coal off-take for the month was 6.9% at 44.96 MT.

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