The Hindu Business Line : Lower growth in despatches worries Coal India

Kolkata, Oct. 7 Lower growth in despatches of coal or net sales vis-À-vis growth in coal production continues to be a cause of concern for Coal India Ltd (CIL) and its customers.

As against a near 10 per cent growth in production in the first half of this fiscal, coal despatches increased by merely 4.3 per cent. Despatches to the power sector – consuming 70 per cent of CIL’s production – have witnessed a marginal increase of approximately one per cent.

Traditionally, CIL’s sales in the first half of a year are more than its production in the same period. The additional sales come through a depletion of pit-head inventory. Production remains relatively low during this period primarily due to monsoon.

The trend reserves in the second half when the company produces approximately 60 per cent of its annual production but sells relatively lesser quantities of coal – primarily due to low wagon availability in the post-harvest period – so much so that the company generally ends up accumulating its pit-head inventory in an year-on-year basis.

One major pitfall of this vicious cycle is developing 50 million tonnes of pit-head inventory – approximately 12 per cent of CIL’s production of 403 million tonnes as in 2008-09.

Cycle breach

Like previous years, this year too CIL sold (194 million tonnes) more coal than it produced (184 mt) in the first half ended in September. However, the pit-head stock depleted by merely 10 mt compared with 18 mt during the corresponding period of the previous year.

The Chairman of CIL, Mr Partha S. Bhattacharyya, admitted that the coal off-take was a cause of concern in the first half. He blamed the fall in road despatches to low availability of trucks during the General Election in 2009, the series of bandhs called by Naxalites in the coal belt and other law and order issues for impacting sales.

Though he said the despatches to power sector calls for an improvement, Mr Bhattacharyya claimed that the company had supplied 96 per cent of its committed quantities to thermal power stations (TPS).

“A total of 33 TPS are currently having critical coal stocks as against 50 during the corresponding period in 2008-09, indicating that the coal availability has improved,” he said.

“Only 11 TPS have received less than 90 per cent of the contracted volumes, and that too primarily due to several administrative or logistics issues. CIL is responsible for low despatches in merely two TPS – one in Punjab and one in Uttar Pradesh.”