Coal India expects to increase in average price realisation in Q3FY22

Shobha Roy Kolkata | Updated on August 19, 2021

Demand for coal is likely to continue, says Pramod Agarwal

Coal India Ltd (CIL) is expecting around 10-15 per cent increase in average price realisation on a sequential basis through the e-auction route in Q3FY22. The average price realisation is expected to be close to ₹1,700-1,800 a tonne in Q3 this fiscal as compared with ₹1,569 a tonne in Q2.

The country’s largest miner is also contemplating an increase in coal prices and is in talks with stakeholders for the same.

According to Pramod Agarwal, Chairman and Managing Director, CIL, the average realisation in the June quarter was about 10 per cent more than the notified tariff. However, the company has been getting 30 per cent over its notified price in August.

Firm dispatch figures

“June quarter average was slightly less. There are two things- one is dispatches and another is booking. The June quarter dispatch figures were slightly less, just because whatever we dispatched in June quarter was mainly what was booked in December or the third quarter and fourth quarter of last year, the average realisation was about 10 per cent more than notified tariff, but in August we are getting 30 per cent over our notified price and these figures will now get reflected when the dispatches take place,” Agarwal said in an earnings conference call.

The country’s largest miner expects premiums to increase further in the third and fourth quarter of this fiscal, because of the firming up of international coal prices.

Depending on the demand situation, CIL injects a reserve price, which is basically the floor price, over and above the notified price, at which the auctions begin. This is done based on the kind of response received at e-auctions and the amount of premium garnered. An improvement in premiums over notified value is expected to boost the company’s bottom line.

Coal sold through e-auction route accounts for around 15-16 per cent of the total volume of coal sold.

CIL has restored the base price of auction in most cases and is also providing some premium right at the beginning.

“We are adding some premium at the best price only and there is no opposition from any quarter, whatever opposition is there, we are tackling that. Coming to the price point, we are in discussion with all stakeholders and in general, everybody is on board because our costs have increased everywhere so there is no reason that CIL should not increase the price,” he said.

Production and offtake

Coal India has set a target of producing close to 670 million tonne (mt) of coal in FY22 and expects sales of around 740 mt. However, it expects to grow its production by around seven per cent at close to 640 mt (596.22 mt in FY21) and offtake by 22 per cent at around 700 mt (574.48 mt in FY21) during the current fiscal.

“Actually in the first four months, we have reduced our inventory by 45 mt and our dispatches to this date is about 46 mt more than last year and it is much higher than the 2019-2020 figure as well, so this demand is very huge and it is likely to continue unless something related to Covid happens,” he said.

CIL has set a capital expenditure target of ₹17,000 crore for FY22, which is around ₹4,000 crore more than its spending last year.

Published on August 19, 2021

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