Coal India Ltd (CIL) is tipped to offer more coal quantity for sale in the E-auctions during the second half of the CY18. In Q1 FY19 (Apr’18-Jun’18), CIL’s coal sale in the e-auctions was affected as the company had prioritised coal supply for the power sector, rather than selling coal in the open market.
According to the data provided by Coal Ministry, coal allocation in Special forward e-auction for power sector had fell 23% Y-o-Y to 14.17 MnT in Q1 FY18, against 18.39 MnT in Q1 FY17. Allocations in Exclusive e-auction for non-power sector were also down 22% Y-o-Y to 3.38 MnT in the first quarter against 4.32 MnT in the same period last year. However, sales in spot auctions had increased 8% Y-o-Y to 10.5 MnT in Q1 FY18.
Moreover, with a gradual increase in coal stock at the power plants and strong growth in coal dispatches, CIL is poised to increase its e-auction volumes during the second half period.
One serious threat to the growth in volume remains the performance of hydro power plants. If there is unfavourable output from hydro plants insufficient to support the rising power demand, then it is likely that CIL may again prioritise coal supplies for power sector over sales in auctions.
Coal stock situation at the power plants also remains a cause of concern, which was recorded 20 MnT at the end of Jun’18. Closing stock had improved on the month from 19.084 MnT in May’18, but was still 10% lower on the year compared with 22.261 MnT in Jul’17.
Tightness in domestic market to support e-auction price:
What Happened:
During Q1 FY19, CIL had achieved net sales of INR 24260.87 Crore, company’s total coal dispatch during the period had registered a growth of 12% Y-o-Y to 153.43 MnT. Net profit before tax totaled INR 6086.87 Crore.
Lower allocation in the e-auctions was partially offset by strong realisation of INR 2,399/MT, rising 51% Y-o-Y.
FSA realisation had also increased 9% Y-o-Y to INR 1313/MT in Q1 FY19, in line with CIL’s price revision that was carried out in Jan’18. In addition, other operating income rose by 120% Y-o-Y to INR 1663.04 Crore with introduction of evacuation charges worth INR 50/MT in Dec’17.
What May Happen:
The increase in coal imports during the first quarter in spite of the rising production reflects tightness in domestic coal market, which is likely to keep e-auction prices elevated. Besides, strong demand in ongoing fourth tranche of linkage auction should further support FSA realisation.
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