For years it has been Coal India’s practice to accumulate inventories. And as of 2011-12, nearly one-sixth of the company’s annual production, valued at Rs 8500 crore, has been lying at the pithead.
All this will now change. With the fiscal coming to a close, CIL expects its pithead stocks to come down by at least 18 mt — close to one-tenth the estimated annual production of 450 mt — from 71 mt last year.
“We envisage stocks to come down by 18-21 mt this fiscal,” a senior company official told
High offtake
In fact, stocks were down by 29 mt in November. But, as rake availability didn’t match the high winter production, fresh stocks began piling up at the pithead beginning December.
In the last two months, inventories went up by nearly 4 mt. Another 4-6 mt are expected to be dumped near the pithead in February and March. In a way, the stocks offered CIL a much-needed cushion to significantly step up supplies to the power sector in 2012-13.
Having suffered near zero production growth for two preceding years, CIL set a target to increase supplies by 37 mt this fiscal.
Current trends suggest, however, that production growth may be restricted to 14-15 mt (approx 3.5 per cent), because of the heavy rains and the three-day strike in February.
However, the stocks came to CIL’s rescue to keep the sales moving.
And if the Railways improve rake availability from 215 a day in February to 220 a day in March, the company may well post over 7 per cent growth in supplies to approximately 466 mt — that is, 6 mt short of target — this fiscal.
Challenges ahead
And that actually makes the challenge for 2013-14 bigger. CIL has targeted the supply of 492 mt coal next fiscal.
With the stock cushion dwindling, the bigger share of incremental supply should come from production.
CIL officials, however, are banking on a slew of open-cast capacity expansion projects — such as Deepka (5 mt), Bhubneswari (5mt) Lakhanpur (5 mt), Kaniha (10 mt), Rajmahal (3 mt), Kushmunda (35 mt) — to manage production growth.
The first sign of this, they say, will be evident in April 2013, when production is estimated to grow 15 per cent, year-on-year.
Quality of stock
But that’s not all. CIL may face challenges in liquidating stocks next year. Having diluted 20 mt inventory this fiscal, the company will be left with older stock. Since coal can catch fire if left in the open, there is serious concern about the quality of the remaining stock.
Thus, further attempts to dilute stocks in a big way may bring CIL face to face with the bitter truth: Much of this historic inventory may have ended in smoke.