State-owned miner Coal India Ltd is set to end the fiscal with a production of around 462 million tonnes (mt), up over 2 per cent from last year’s 452 mt.
Supplies are expected to have grown by 1.5 per cent to 472 mt, riding on liquidation of pit-head stock. Overall, the miner is 20 mt short of its annual target for coal supplies.
CIL sources say efforts to step up supplies by liquidating pit-head stock remained unsuccessful partly due to weak demand from power stations and lack of flexibility both on the part of the miner and the Railways that transports the fuel.
Demand for coal from power utilities remained weak this fiscal due to the dual impact of the economic slowdown and weak financials of the State-owned power sector.
The demand scenario worsened since October, as CIL enforced ‘cash-and-carry’ norms, denying rolling credit to power companies, to put a check on mounting coal dues. A number of financially weak companies denied maintaining more than seven days’ coal stock against the normative 21 days. Some even stopped coal purchases from February.
Though the fuel supply agreement (FSA) allows CIL to penalise the consumer for not lifting the promised quantity, no such step was considered to avoid controversy.
CIL sources say there are select power stations, mostly in the South, which are starved for coal.
This opens opportunities for rerouting supplies. But there are two major hurdles in implementing it.
Firstly, the Railways is not keen to engage its wagons in less profitable lines, due to higher turnaround time or lower availability of return cargo.
Secondly, in the existing corporate structure of CIL vis-à-vis the FSA modalities, any such manoeuvring may be questioned by the Government auditor (Comptroller and Auditor General), for potential opportunity loss to mining subsidiaries.