India: CIL’s FSA price realization drops 4% y-o-y in Q3 FY ’21

Coal India Ltd (CIL) is facing hard time in reviving sales earning even though the company continues to see regular improvement in operational performance post easing of lock-down.

Sales volume increased 9% y-o-y to 150.39 mn t in the third quarter of FY ’21, but the growth was attributed to higher booking in the e-auctions whilst coal supplied under fuel supply agreement (FSA) decreased 4% on the year to 123.13 mn t.

Although, net sale via FSA route was down y-o-y from December quarter but improved 9% Q-o-Q to INR 16675 Crore. Nevertheless, major inclusion of low grade coal in the product mix pulled average price realization down by 4% y-o-y to INR 1354/t.

CIL Quarter Results At a Glance

Focus of raising e-auction sales:

CIL board approved reserve price of up to 10% for the auctions in Oct ’20, which was earlier removed in order to provide much-needed financial relief to the customers. The provision not only helped the company in raising net sales via auction route, but also fetching marginal rise in price realization.

Notably, coal in the auction was sold at an average price of INR 1466/t in Dec ’20 quarter against INR 1437/t in Sep ’20 quarter, thus broadening the price disparity with the FSA sale which was significantly reduced in the previous quarter.

However, latest auction prices remain way-off from the levels recorded in the year-ago quarter, when the coal was sold at price realization of INR 2623/t.

In general, the miner has been determined to lower the excessive coal stock available at the mines by offering additional volumes for e-auction. Notably, coal put up for sale under various auction schemes has reached 400 mn t during the first 10 months of FY ’21 (Apr ’20-Jan ’21), registering a 5-fold growth from the year-ago period.

Overall, higher availability of relatively cheaper coal in auction has affected CIL’s sale via FSA route which is its chief source of earning. During the first 9 month of FY ’21, volume sold under FSA was down 8% y-o-y to 333.51 mn t, while that under auction route has increased 48% y-o-y to 65.49 mn t.