Coal India may sacrifice approximately Rs 500-600 crore profit opportunity in 2012-13 due to lower e-auction sales, according to market sources. However, this should not impact the company’s profit growth as lower revenues from e-auction will be compensated by a robust growth in overall sales.
Aiming to step up supplies by 37 million tonnes (mt) more this fiscal, CIL had so far supplied approximately 26 mt more coal in the first nine months of 2012-13.
Pressure on profitability, however, will increase in case of any major cut in interest rates, during the current quarter, bringing down fixed deposits earnings from the company’s Rs 58,000 crore cash reserves. With production remaining stagnant, interest earnings and e-auction were major contributors to CIL’s profit growth, in the last couple of years.
Though e-auction fetches approximately Rs 1,000-1,200 a tonne higher revenue, over and above the notified price of coal, sales through this route were curbed to ensure higher supplies to power sector.
According to sources, CIL sold approximately 30 mt coal through e-auction during April-December 2012, lower than the auction sales in the comparable period in 2011.
The lower spot sales, however, are unlikely to have affected consumers – primarily the iron and steel and, cement sectors - significantly, as open market price of coal has come down drastically due to global softening of energy prices.
Realisations of Bharat Coking Coal (BCCL) – the only producer of coking coal in the country and a top draw in e-auction - declined from double the notified price to 75 per cent higher than the price paid by power sector.
Also with increasing availability, consumers have become quality conscious. As in September, the quantity sold through e-auction was 3 mt less than total offerings. The gap widened to 6 mt in November.