State-run miner-Coal India Ltd (CIL) attained the highest-ever production and dispatches in FY’22. However, it failed to replicate this performance in auction sales due to the priority accorded in catering to the Fuel Supply Agreements (FSAs) commitments.
The company had registered sales of 108 mnt of coal in the series of auctions held during FY’22, down 13% y-o-y from 124.04 mnt in FY’21.
The decline came on the back of strong demand from the power sector, which compelled CIL to increase its dispatches via FSAs, thereby, curtailing offerings via auctions.
Notably, the subsidiaries of CIL were offering coal to the tune of 20 mnt in the beginning of the fiscal up to Aug’21, but later the volume was reduced significantly in view of the coal shortages faced by the power plants. In fact, the volume was assessed at around 7 mnt in the final two months of FY’22.
Moreover, preference to the power sector was seen even in case of auctions. Incidentally, the company had offered the highest quantity of coal under special forward scheme.
These auctions, earmarked specifically for the power sector, had recorded higher sales compared to the previous fiscal, whereas booking across remaining auction scheme was down on a y-o-y basis.
Quantity in mnt
Higher premium boosted by supply tightness
The disparity in coal supply resulted in critical situation for the non-power sector, at a time when imported prices were also rising. Consequently, domestic buyers were seen aggressively procuring coal at higher bid prices.
Evidently, bid premium over the notified price jumped to 88% for auctions held in FY’22 from a mere 17% registered in FY’21.
Strong demand continued in Mar’22, where the entire volume was booked at a premium of 290%. This was also supported by the introduction of single window which garnered improved participation inflicted by the merger of the different auction schemes.
However, market participants who took part in these auctions have reported that they have not received timely dispatches against their booked quantity which remains an issue on part of CIL to resolve in the short-term.
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