Coal India Ltd (CIL) has witnessed a fall in e-auction price realization for the second successive quarter, driven by subdued domestic coal sales and weaker international coal prices.
The coal company had fetched an average price of INR 2155.26/MT during Q1 FY20 (Apr-Jun’19), down 22% Q-o-Q from INR 2754/MT in Q4 FY19. Price realization was also 10% lower on the year from INR 2399/MT noted in Q1 FY19.
E-auction prices had seen an upsurge in the past fiscal, thanks to a spurt in demand and higher international coal rates. However, a muted June quarter coal off-take, had restrained CIL’s net earnings from e-auctions to the lowest in the past 5 quarters.
Notably, CIL’s off-take in Q1 FY20 remained almost flat y-o-y at 153.49 MnT as against 153.47 MnT in Q1 FY19, thereby limiting coal offerings in the e-auction.
Coal volumes sold under e-auction rose 14% Q-o-Q to 19.05 MnT in Q1 FY20, but had fell 2% Y-o-Y from 19.41 MnT noted in Q1 FY19.
CIL’s price realization under e-auctions is poised for further downturn in FY20, given the company has envisaged offering lower coal volumes comparable to the previous year. It is pertinent to note that the company intends to tentatively offer 10% of its targeted production of 660MT in FY20 through e-auctions.
In addition, the government’s plan to allocate 42 new coal mines to end-users is also looked upon with concern, given it may lead to competition for CIL.
Coal Sales under FSA
Coal volume allocated under FSA (Fuel Supply Agreement) suffered a heft fall of 8% Q-o-Q to 130.33 MnT in Q1 FY20 compared with 142.42 MnT in Q4 FY19.
Notably, due to higher dispatch made against supply contracts, very few thermal plants are currently having critical low stocks compared to the situation last year.
CIL’s price realization under FSA was marked 6% lower on the quarter at INR 1369.96/MT during Q1 FY20, but was 4% higher on the year from INR 1313/MT noted in Q1 FY19.
Considering the FSAs executed the power plants under the provisions of NCDP (New Coal Distribution Policy) and the FSAs executed under various provisions of SHAKTI, CIL holds an operative linkage for a total quantity of 572 MnTPA with the Power Sector as on 31 Mar’19, which is bound by long term supply commitments through FSAs.
The total commitments under FSA with non power consumers stand at around 95 MnTPA in the same period.
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