CIL’s Coal Auction Quantity drops by 15% Y-o-Y in ongoing FY20

According to the CoalMint Research, the total quantity of coal auctioned by India’s largest miner, Coal India Ltd (CIL) has registered a decline of 14.6% y-o-y during the first nine months (Apr-Dec’19) of ongoing fiscal year 2019-20 ending in Mar’2020.

The company has auctioned a total quantity of 46.2 MnT of coal during Apr-Dec’19 against 54.1 MnT in the same period last year. In the Dec’19, the company auctioned 7.6 MnT against 5.5 MnT in Dec’18 and in previous month of Nov’19 the same stood at similar level of 7.6 MnT.

What led to this drop?

The fall in CIL’s auction quantity in ongoing fiscal can be attributed to increase in long-term contracted supplies primarily with the power sector and the plunge in the international coal prices. that have softened by almost 20-35% y-o-y basis during Apr-Dec’19.

India is one of the largest coal producing countries in the world but still imports form a sizable portion of the country’s domestic coal consumption. This is because the domestic demand for coal is far outstripping the rate of indigenous production and Coal India alone, despite its best efforts, is not able to meet the burgeoning domestic coal demand. Apart from this, the quantity of coal produced by CIL is primarily offered to power sector followed by steel. The companies in these two sectors usually sign long term FSAs (Fuel Supply Agreement) which enables them to secure their fuel supplies from CIL without any interruption. Every year CIL usually pre-decides a certain quantity of coal to be offered via auctions and this quantity can be curtailed in case of increased requirement by the power sector.

According to the reports, the company had decided to offer about 60-70 MnT of coal in spot and forward auction market in the ongoing fiscal which is little less than the last fiscal year’s offerings of 76.4 MnT. During Apr-Dec’19 auctions, premiums fetched by Coal India on spot auctions stood at 66% on an average against 92% in last fiscal, while premiums fetched for forward e-auctions for the power sector were 32% on an average against 72% in FY19.

Qty in MnT