Coal linkages: captive power segment comes to CIL’s rescue

Lack of demand for Coal India’s linkages from sponge iron and cement sectors is being made up in a small way by the captive power segment.

“Excepting the small offerings of a Western coalfields mine, the rest of the coal offered in the first three days found buyers. In a majority of the cases, coal was sold at a (small) premium ranging up to ₹100 a tonne,” a CIL source said.

CIL is scheduled to auction linkages worth 18 million tonne in the current round that will continue till August 3. Nearly 5 million tonne linkages were sold in the first two days.

After improved demand in May, when offtake was up by almost three per cent; demand for the fuel slowed down in July.

According to the latest information, offtake grew by merely one per cent during the month. The modest growth came in the backdrop of a one per cent reduction in coal-based power generation during the month as hydro-electricity was available at a cheaper rate.

The situation could have been worse had hydroelectricity availability not remained relatively muted in July. After a 6 per cent rise in June; hydroelectricity generation remained flat in July.

Imports from Bhutan, which rose 44 per cent in June, were up a mere 2.3 per cent in July.

Coal demand usually slows down in the monsoon months till September.

What is abnormal this year is low demand in the summer months of April-May when coal generation was up nearly 14 per cent, as power plants used the opportunity to clear high (26 days) coal inventory. CIL had over supplied to them in the January-March 2016 period to push up sales numbers.

Plants came on buying mode again in June leading to an increase in average coal stock by nearly three days from 20 to 23 days. So there is little prospect for demand for coal to increase this quarter.

This coupled with the pressure of high pit head inventory forced CIL to go slow on production that had grown by nearly 3.5 per cent in April-July.

COMMENT NOW