CIL optimistic of 5-7% increase in output

Coal India Ltd (CIL) is hopeful of achieving 5-7 per cent growth in production at around 640-650 million tonnes (mt) in FY21, as compared with 602.14 mt in 2019-20.

CIL witnessed close to 12 per cent drop in production and around 22 per cent decline in offtake due to poor demand during the first quarter of this fiscal. However, with industrial and commercial activities picking up from July onwards and demand for coal improved, CIL was able to shrug off the Q1’s tepid growth and clocked 11 per cent rise in production and nearly 10 per cent increase in off-take during Q2 over the same quarter last year.

In September, CIL recorded the highest ever production at 40.51 mt (30.78 mt), while off-take grew by nearly 32 per cent to 46.46 mt (35.28 mt).

The growth momentum has continued in October with the company posting around 20 per cent rise in output and 24 per cent growth in offtake as on date.

It is to be noted that the coal behemoth had fallen short of its targeted production in the last fiscal. There were apprehensions that the company might witness de-growth this year on the back of the poor demand situation in the wake of the pandemic.

For FY20, CIL achieved 91 per cent of its targeted production of 660 mt. The company closed the fiscal year 2019-20 with an annual coal production of 602.14 mt, which is marginally lower than 606.89 mt of coal it had produced last fiscal.

However, company insiders believe that CIL would be able to register a growth in production on a year-on-year basis in 2020-21.

“We will definitely be doing better than what the market expects. Even if we grow by 5-7 per cent, which is our normal growth rate, then our production would be close to 640-650 mt in FY21,” a senior marketing executive told BusinessLine on conditions of anonymity.

According to Jayanta Roy, Senior Vice-President and group head, corporate sector ratings, ICRA, the expectation of a revival in the economy could lead to higher demand for coal thereby leading to a spurt in production moving forward. “Power consumption is improving and given the expectation that the revival in economy would lead to a higher demand, coal production is likely to grow. However, if there is a second wave of the pandemic post the festival season, it could throw the plan out of place,” he said.

Focus on OB removal

Following the dampening of demand, CIL directed its attention towards overburden removal (the process of removing the top soil and rock to expose coal seams in its open cast mines) in order to be prepared to ramp up production as and when the demand revives.

“When the lockdown was announced in March, the physical movement of trucks and availability of manpower got affected. There was a liquidity crunch because goods which were manufactured were not being sold. This, in turn, impacted the demand from industry and there was drop in demand for energy from power generators. Since the demand for power was low we focused our attention on overburden removal on a large scale. We wanted to use the time and be prepared when demand recovers and give as much coal as the country demands,” the official said.

During the first half of this fiscal, CIL posted over 22 per cent growth in overburden (OB) removal and nearly 71 per cent growth in September alone.

“From now on, ramping up coal production would not be a problem especially with coal seams exposed, and ready for production,” he said.

Offtake dips

Coal offtake till October 20 is, however, lower by around five per cent at 287.19 mt compared to the same date last year. “We are confident of removing the negative trend in coal offtake by November and grow from there on especially with thermal power plants and non-regulated sector customers showing keenness to lift increased quantities of coal. There is also a spike in the auction sales,” he said.

Given the slowdown in demand from the power sector, CIL had started moving coal more towards the non-regulated sectors.

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