Coal India's supply-first strategy holds as August production declines

Coal India raised August supplies by 5.5 per cent despite a 5.7 per cent production decline, as the miner continued to draw down accumulated pithead inventories

Coal India Ltd (CIL) increased coal supplies by 5.5 per cent year-on-year in August, even as its production declined during the month, underscoring the miner’s growing focus on dispatches and liquidation of accumulated pithead inventories.

 

The country's largest miner supplied 60.60 million tonnes (MT) of coal in August, compared with 57.40 MT in the corresponding month last year, according to the company's monthly provisional production and offtake data. In contrast, production declined by 5.7 per cent to 47.5 MT from 50.4 MT a year earlier.

 

The divergence reflects CIL’s new supply-first approach, with the company drawing down accumulated stocks to meet demand.

  

CIL chairman and managing director B Sairam had told Business Standard in May that supply or offtake had become one of the company’s top priorities.

 

“The three key priorities for CIL right now are supply or offtake, production, and large-scale reforms and consolidation. Supply has become the top priority because we began this year with around 130 million tonnes (mt) of coal stock at our pitheads,” he had said.

 

CIL now has around 76 MT of coal at its pitheads, after the inventory reduction during the first five months. The company aims to eventually bring stocks down to around 50 MT to maintain more optimal inventory levels and operational flexibility, Sairam had said.

 

During the first five months of FY27, CIL liquidated around 55 MT of pithead coal inventories, while total supplies increased 6.7 per cent to 322.90 MT from 302.60 MT in the year-ago period.

 

The strategy is particularly visible in the April-August numbers. CIL’s production during the period declined 4.5 per cent to 267.5 MT from 280.2 MT in the same period last year. Yet, total supplies rose 6.7 per cent to 322.9 MT from 302.6 MT.

 

The gap between production and supplies indicates that CIL has been able to support higher dispatches by drawing on its existing stocks. In August, supplies of 60.6 MT were about 13.1 MT higher than the month’s production of 47.5 MT.

 

The company has also set a higher supply target than production target for FY27. CIL plans to produce 815 MT of coal during the year, based on anticipated demand from the power and non-power sectors, while its supply target has been fixed at 850 MT, Sairam had said.

 

“Efficiency will now be measured not only in terms of production, but also supply and dispatches,” he had said.

 

Supplies to the power sector rose 4.5 per cent to 48.46 MT in August from 46.39 MT a year earlier. Supplies to the non-regulated sector increased 9.6 per cent to 12.12 MT from 11.06 MT.

 

CIL said it currently has sufficient inventory to support power generation requirements in the coming months. With intense rainy spells gradually receding and drier months approaching, the company is preparing to ramp up both production and supplies.