 "Coal price boom evades Coal India")
Last year it was Rs 1,430 in the same period. CIL had raised its prices in May this year. However, the company’s average price realisation per tonne declined, cancelling the benefits of the price hike. In case power demand remains subdued in the next quarter, the average realisation may remain weak.
Globally thermal coal prices have been up 95 per cent this year.
On an average, coal prices were raised by 6.29 per cent a tonne and CIL had said it would earn additional revenue of Rs 3,234 crore during May-March this financial year.
CIL increased the prices of the lower-grade coal (G8-G13) by 13.60-18.03 per cent while reducing the prices of the higher-grade ones. Lower grades are used extensively by power-generating stations and account for more than 80 per cent of the coal production by CIL.
Company executives say the sharp decline in higher-grade coal prices; weak demand, especially in the power sector, its key customer; and lower price realisations in the e-auctions are the primary factors behind the bleak picture in the April-October period.
Looking at the demand situation, a further increase looks difficult, according to sources. The government decides whether to increase the price.
According to analysts, the demand for power will not accelerate unless industrial activity picks up. State discoms’ demand has a direct correlation with the index of industrial production.
“As a result of low power demand, the uptake by power companies has been lower than expected. This situation might prevail for the coming two quarters,” said Debasish Mishra, partner, Deloitte Touche Tohmatsu India LLP.
However, CIL executives said the global surge in coal prices would lead to greater demand for domestic coal, a situation CIL could exploit.
While the e-auction volume increased to 39.52 million tonnes (mt) during the April-October period, the average price per tonne declined by 27 per cent at Rs 1,463 a tonne.
“The auction prices are higher than the notified one. However, prices depend on the market conditions as well,” a CIL executive said.
Industry analysts have a different take on the matter. They say the fall in the average price realisation is primarily on account of the government’s drive to contain grade slippage, which is supplying inferior coal at the prices of better ones, and raise the correct invoice for the grade of coal supplied.
Coal consumers and analysts have been blaming CIL for grade slippage, something Anil Swarup, as coal secretary, had taken up.
“According to our estimates, grade slippages have been controlled, for which CIL could raise the invoice in terms of the correct grade of coal. This has affected the net earnings and hence the average realisation from coal sales fell,” an analyst said.
In July-September, CIL posted its worst quarterly results since its listing, with a 77 per cent fall in net profit at Rs 600.17 crore and a decline of eight per cent in net sales at Rs 15,645.05 crore.
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