CIL may cut output

Peeved at the nonchalant attitude of thermal power sector in lifting coal from core linkages, Coal India Limited (CIL) is actively contemplating slowing down production in the coming days and diverting it to the non-core consumers at a higher price.

However, if it so happens, the two subsidiaries of CIL which are likely to be affected most are Mahanadi Coalfields Limited (MCL) and South Eastern Coalfields Limited (SECL), which has the maximum core linkages with thermal power plants in Orissa and Maharashtra, CIL sources said.

The sudden slackness in demand from thermal power plants stems from the higher generation by hydel projects following heavy rains, which has increased flow of water in several rivers.

The current stock at pitheads is at a record high of 19.2 million tonne (mt). Normally, CIL has a pithead stock of around 12 mt, sources said.

Sources exuded confidence that the only credible way to redeem the situation was to direct this coal, earmarked for the core sector, to non-core consumers like SSI units, albeit with logistical problems.

The price realised from the non-core sector customers is often substantially higher compared to core sector linked consumers, who include power, steel and sponge iron sectors. So if we are able to give this coal to the non-core consumers, we will get better prices," they reasoned.

The coal ministry is said to have already taken up the matter with the power ministry but directing core sector coal to non-core consumers required a policy decision.

Also, the availability of railway wagons is a bigger problem for the non-core sector buyers as they are more dependent on road transport, sources said.

It may be recalled that sometime ago, the coal ministry had nearly decided to snap the core linkage of certain thermal power plants for their inability to lift adequate coal from the pitheads, which had resulted in rising inventories for the coal companies.

All said and done, the public sector behemoth would continue to produce coal as per the target envisaged in the mou with the government.

During the past few years, the PSU and its subsidiaries have been meeting the requirements of the core sector and would continue to do so in the future, sources added.

The coal-starved thermal power sector has already been procuring coal from the open market to meet its shortfall and has suggested to the government that the issue of coal pricing be left to the market forces. After much deliberations, the centre has finally referred the matter to the tariff commission.

However, the government is also trying to explore the possibility of reducing the coal linkage from 100 per cent to 80 per cent in order to allow key buyers procure coal from the open market to the extent of 20 per cent of their needs at market prices.