Coal India in dilemma over production, pricing

Company has reached a situation when the production cannot be optimised due to inability to stock coal further

Amid sluggish demand, Coal India is facing dilemma over the production and finding it difficult to further stock the fuel, even as the PSU major is not keen to rationalise prices and rather looks at methods to boost sales to keep weak subsidiaries in profit.

Coal India has reached a situation when the production cannot be optimised due to inability to stock coal further which has already reached 40 mt due to sluggish demand.

"The current pricing has helped Eastern Coalfields to pull it out of red. If prices are rationalised it might turn difficult to keep weak subsidiaries in profit," a Coal India official told PTI.

"We are trying our best to use alternate economic strategies to push sales keeping pricing tool as the last resort," he added.

Eighty per cent of Coal India's coal sales is to power plants and dumping further coal at their stock yards is getting difficult due to security reasons.

"Dumping more coal to power plants is getting difficult as average stock to them has gone up to 25 days against 11 days last year. This is neither economical and increases risk of fire," the official said.

Combined stocks of thermal coal at 101 power plants in the country has risen to a new record of 34.2 mt.

CIL expects its dues will rise in the coming months as payment schedules has to be relaxed to push coal.

Lower demand from state generation companies and continuing easing of international coal price has multiplied the problem.

The dilemma is despite the fact that under the circumstances government wants coal production growth should continue at the same rate of over 9%, officials said.

"Coal India is unable to sell more coal. Evacuation of coal is a problem as we are unable to stock further. I have talked to Coal India chairman and discussed how to liquidate the coal stock. I have said get this coal out so that production does not fall," Union Power and Coal Minister Piyush Goyal had said recently.

The minister indicated that he did not mind if price of pithead stock coal was reduced to liquidate the stock. But, Goyal did not want to intervene in the pricing decision of CIL.