Coal India Ltd output falls for second year in a row in FY21

By: |
April 03, 2021 1:30 AM

Production in its Northern Coalfields and Mahanadi Coalfields subsidiaries increased 6.5% and 5.5% year-on-year, respectively, in FY21. South Eastern Coalfields, CIL’s largest subsidiary in terms of production, also managed to inch up its output by 0.04% to 150.6 MT.

With reduced domestic demand of coal in the fiscal, CIL had shifted its focus to overburden removal — the process of removing the top soil and rock to expose coal seams in its open cast mines — which will enable it to accelerate production and supply the fuel at short notice.With reduced domestic demand of coal in the fiscal, CIL had shifted its focus to overburden removal — the process of removing the top soil and rock to expose coal seams in its open cast mines — which will enable it to accelerate production and supply the fuel at short notice.

Coal India’s output declined 1% annually to 596.2 million tonne in FY21, mainly due to lower demand from power plants in the fiscal amid reduced electricity requirement. This is the second year in a row when the coal behemoth — which produces about 80% of the country’s coal — reported a decline in production.

Consumers procured 573.8 MT of coal from the miner, which is 1.3% lower than FY21. With lower offtake, stock of excavated coal lying at CIL mines has swelled to an all-time high level of 96 MT. Coal companies have to moderate production according to offtake, as coal cannot be stockpiled beyond a certain quantity without the risk of catching fire.

Production in its Northern Coalfields and Mahanadi Coalfields subsidiaries increased 6.5% and 5.5% year-on-year, respectively, in FY21. South Eastern Coalfields, CIL’s largest subsidiary in terms of production, also managed to inch up its output by 0.04% to 150.6 MT.

With reduced domestic demand of coal in the fiscal, CIL had shifted its focus to overburden removal — the process of removing the top soil and rock to expose coal seams in its open cast mines — which will enable it to accelerate production and supply the fuel at short notice.

Thermal power plants currently have sufficient coal stocks to last them for 15 days. Coal is mainly used in power generation and in April-December FY21, the country imported 121.2 MT of thermal coal for producing electricity — 38.4% lower than the same period in FY20.

According to analysts at Edelweiss Securities, high level of inventory may lead to grade slippage and consequently lower realisation for CIL, which can be a concern. “Despite a likely improvement in sales volume going ahead, we expect cash accretion to be a major concern considering the escalation in working capital,” the analysts added.

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