Coal India admits restricting coal mining

15 March 2016, Week 10, Issue 348

Coal India Ltd (CIL) has admitted curbing output at some of its mines in response to slower-than-expected growth in domestic consumption.

The state-run mining giant has increased extraction at a record pace since April 2015 in order to meet growing demand for the fuel.

Yields totalled 144 million tonnes in the last three months of 2015, up 9.3% year on year.

But there are now signs CIL is struggling to offload its product onto the market.

In a filing to the Bombay Stock Exchange (BSE), the company said that coal stocks at some mines had risen as a result of power plants limiting their purchases.

“Increase in stocks will create stock management problems, deterioration in the quality of coal, and they may even catch fire,” the note said. “As such, some of the mines have regulated production.” It was reported in December that CIL’s growth in sales was being hurt by higher inventories at power plants. According to the Central Electricity Authority (CEA), power plants held on average a 24-day supply in February, up from a 9-10 day supply a year earlier.

In the same month, CIL’s sales grew at a slower pace of 5.5% year on year. Production, meanwhile, rose by only 6.3% year on year.

This bodes badly for New Delhi, which is seeking to auction off 10% of CIL’s shares later this year to increase efficiency and help meet a budget deficit target.

To make matters worse, CIL’s share price plummeted by 8% on March 14 after announcing its stock had gone ex-dividend.

Plans to reform the company have been met with opposition from workers. Last month four unions announced they would lay down tools on March 29 in protest over the divestment and other issues such as pension plans.

The unions are due to meet with Coal and Power Minister Piyush Goyal on March 14.

New Delhi sold 10% of the firm in January 2015, raising 220.5 billion rupees (US$3.29 billion).

By 2020, the government wants to almost double CIL’s annual output to 1 billion tonnes of coal.

Edited by

Richard Lockhart

Editor

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