Coal India stocks pile up at pitheads even as production falters

Coal is piling up at pitheads even as the country is scrambling for the fuel. As much as 70 million tonnes of it in 2011-12.

Because of a lopsided focus on production, without much attention on improving evacuation logistics, there was a steep increase in Coal India’s pithead stock throughout the last decade.

In 2010-11, Coal India did not post any growth in production. Yet its inventory moved up by close to 6 million tonne (mt) or 8.8 per cent, implying the economy could not even use all the coal produced during the year.

From 21.33 mt, or 7 per cent of the annual production in 2003-04, pithead stocks have grown to 70.88 mt (16.26 per cent) in 2011-12.

Produce to store

Between 2003-04 and 2011-12, while production increased by 129 mt, pithead stocks were up by 50 mt.

In 2009-10, when coal production increased by a peak rate of nearly seven per cent, well over half of the incremental production remained unsold. CIL simply lost the opportunity to realise cash and was happy with a book turnover, at cost price.

Revenue loss

This kind of a stock pile-up should have huge revenue implications for any company. At today’s average pithead sale price of Rs 1,200 a tonne, as much as Rs 8,400-crore cash remains unrealised!

At an average of Rs 300 a tonne pithead taxes and duties, the Centre and the coal bearing States lost an opportunity to earn approximately Rs 2,100 crore. A cash-strapped Railways has lost Rs 2,000 crore in freight revenue.

Actual loss to the exchequer is much higher as every value addition fetches tax revenue.

Corrective measure

While a long-term remedy of this problem lies with Government initiatives, CIL is reportedly considering a shift in its focus on offtake in the annual plan. If implemented, the mine manager will be responsible for growing inventories.

The move, sources said, began in 2011-12, when the coal major reported the lowest inventory growth of 2.4 per cent in a decade.

COMMENT NOW