Production by Coal India (CIL) declined 1.9% annually to 517.8 million tonne (MT) in the first 11 months of FY20, mainly due to excessive rainfall hampering mining operations during the monsoon earlier this financial year. Law and order issues in some major mines, and several employee union strikes following the Union Cabinet’s February 2019 decision to ease mining norms for private companies also hampered the world’s largest miner’s output. The drop in CIL production in the fiscal year would have been much lower had it not recorded a 14.2% annual rise in its February output. The coal production scenario has improved, at least, from the November 2019 levels when CIL output was lower by 7.8% year-on-year (y-o-y).
Production in its high capacity mines under South Eastern Coalfields and Mahanadi Coalfields increased 19.2% and 11.9% y-o-y, respectively, in February. The coal behemoth’s smaller subsidiaries — Central Coalfields and Western Coalfields — recorded annual increases of 20% and 26.7%, respectively. ICICI Securities expects CIL to produce 600 MT in FY20, lower than the 603 MT mined by the company in FY19. “Average production for February 2020 is already at about 2.3MT/day,” ICICI Securities noted. “With CIL having clocked an average production of 2.55 MT/day in March 2019 (which will be sufficient for achieving our estimates), we may even be positively surprised on the production numbers for the year,” it added.
CIL’s supply to its customers, including the power sector, fell 3.7% annually to 528.3 MT in April-February, FY20. “As power demand has witnessed a material improvement from January 2020 onwards, despite the prolonged cold season in north India, we expect off-take to improve significantly in March 2020 and CIL to end FY20 at 595-600 MT,” the research firm said. Coal is mainly used in power generation and in April-January, FY20, the country imported 58.1 MT of thermal coal for producing electricity — 15.7% higher than the same period in FY19. Coal imports by power plants have increased even as total coal consumption used for electricity generation dipped 1.4% to less than 520 MT in April-January due to lower power demand stemming from economic slowdown.