 "coal india, CIL, Coal Bhawan, coal India office")
Coal India (CIL) has reported a production of 51 million tonnes (mt) for September, up 10.4 per cent month-on-month (M-o-M), but down 1 per cent year-on-year (Y-o-Y). This aggregates to 341 mt of production for the first six months of FY25 (H1FY25). Offtake volumes were reported at 54 mt for September, adding up to 363 mt for H1FY25.
Coal India’s production is seasonal with the second quarter of any financial being softer. The historical trend implies full-year production of 825 mt versus the company’s guidance of 838 mt for FY25. Q4 tends to be the best-performing quarter. However, the August 2024 production of 46.1 mt was down 12 per cent Y-o-Y. The erratic monsoon in the key states of Odisha, Jharkhand, and West Bengal was a dampener. Between April-August 2024, CIL supplied 81 per cent of the thermal power industry. Dispatches in e-auction were at 15 per cent of total volumes.
In FY24, CIL achieved 100 per cent of its yearly production target. Subsidiaries (BCCL, CCL, NCL, WCL, and MCL) exceeded their targets. Production at SECL and ECL was confined to 98 per cent and 93 per cent, respectively.
Peak power demand (non-solar) rose to 234GW in May 2024 against 221GW in March 2024, and CEA (Central Electricity Authority) projected all India peak demand to reach 277MW by FY27 (366GW by FY32). Thermal power capacity increased by 5.7GW in FY24. Another 29.4GW of thermal power capacity additions are expected to come on stream by November 2028 (11.5 GW is expected to be commissioned by December 2024).
Given the expected growth in power demand, CIL may post an 8 per cent CAGR in production volume over FY24-26. It targets one billion tonnes of production volume in the next 2-3 years. In FY24, India’s coal production stood at 997mt, of which 77 per cent was by CIL, which recorded the highest production and sales of 773.6mt and 753.5mt in FY24.
Record dispatches of Rs 619mt were to the power sector (up 5.7 per cent Y-o-Y). CIL is increasing its coal-washer capacity by setting up eight coking coal washeries, which will strengthen its position in coking coal. The washed coking coal capacity will rise to over 7mt from 1.5 mt.
Global coal prices have significantly corrected. In line with global trends and domestic demand, CIL’s e-auction prices were range-bound at Rs 2,400-2,500 per tonne during October 2023-June 2024 vs Rs 3,400 per tonne in Q3FY24.
In FY24, CIL sold 70mt (9 per cent of total volume dispatched) via e-auctions at a 99 per cent premium over FSA (fuel supply agreement) prices. In Q1FY25, the e-auction premium declined to 58 per cent but volume share rose to 12 per cent, offsetting the impact. In the future, CIL aims at 15 per cent of e-auction volumes. The historical trend is e-auction premiums averaging 55-70 per cent.
CIL has intensified capex to improve its evacuation infrastructure. Capex was around Rs 6,500-8,500 crore until FY20 and rose in FY23 to Rs 18,600 crore. Over the last three years, capex has exceeded budget estimates. CIL has earmarked Rs 16,700 crore capex in FY24 and plans to incur Rs 17,500 - 18,500 crore in FY25 and FY26, to develop infrastructure like railway corridors, land acquisitions, HEMM (Heavy earth moving machinery) procurement, and CHP (combined heat power) capacity.
Expansion of coal mines may be funded via internal accruals but debt to undertake diversification projects is possible, for RE (renewable energy) facilities and coal gasification. CIL recently acquired a 300MW solar RE Contract in Gujarat. MCL has commissioned a 10mt non-coking coal washery at Lakhanpur, Odisha. BCCL has commissioned its Madhuban coal washery, currently operating at a 5,000 tonnes per day capacity. Compliance is underway for the 3mt Kathara and 2.5mt Dhori coking coal washeries, which are expected to be commissioned by FY27.
Given predictable demand and steady growth, if e-auction at 15 per cent is achieved, the outlook is positive.
