The country’s largest coal miner, Coal India Ltd (CIL), has registered robust growth in profit on the back of improved coal sales in the quarter ending 30 Jun’21.
CIL’s dispatches in the first quarter (Q1) of FY’22 increased in comparison to the year-ago period which was mainly hit by the Covid-led demand contraction. Consequently, consolidated revenues from operations rose 37% to INR 25,282 crore in Q1FY’22.
The company had also reported an increase in expenses by 31% y-o-y at INR 21,626 crore in Q1FY’22, but that didn’t have any negative impact on the net profit which rose 53% y-o-y to INR 3,174 crore in Q1FY’22 against INR 2,078 crore in Q1FY’21.
Price realisation fails to emulate higher earnings
The coal behemoth experienced higher coal sales via the two modes of dispatches- fuel supply agreements (FSAs) and e-auctions.
Sales under FSA increased 25% y-o-y to 127.48 million tonnes (mn t), while supply via e-auctions recorded an exponential growth of 90% y-o-y to 30.19 mn t in Q1FY’22.
Incidentally, this was the highest coal volume sold under auctions since Q1FY’17 (the time period from which CoalMint has started tracking quarterly sales of CIL).
However, average realisation from these sales have translated into comparatively lower prices as the coal volume takes into account dispatches of the previous quarter when auction prices were still recovering.
Price realisation in case of sales via FSAs recorded a modest rise of 3% y-o-y to INR 1,394.06/t, whereas in case of auctions the same decreased 2% to INR 1,569.05/t in Q1FY’22.
As a result, the disparity between these prices have contracted to INR 175/t during the quarter, declining significantly from the highs of INR 1513/t seen in Q3FY’19.
Latest developments
In order to have a seamless evacuation system, an action plan has been kept in place to enhance and strengthen coal supply.
In this regard, the company has approved procurement of 40 rakes of BOXNS railway wagons under Railway’s General Purpose Wagon Investment Scheme (GPWIS) at a capital cost of INR 675 crores.
Besides, steps have been taken to upgrade the mechanized coal transportation and loading system under ‘First Mile Connectivity’ projects. In the first phase, tender for 35 projects have been floated, of which 4 projects of 30 mn t per annum capacity are already commissioned.
In terms of cost control measures, CIL has initiated phased closure of coal mines where operations are unviable.
Moreover, output enhancement through MDO (Mine Developer cum Operators) are identified as effective measure for efficient operationalization of green field projects. Initially, 15 projects have been earmarked with combined targeted annual capacity of about 160 mn t.
Outlook
With improvement in demand, CIL has witnessed gradual rise in auction prices in recent sales which are expected to push realisation from second quarter onwards.
Going forward, the company has set an aspirational target of 740 mn t coal dispatch for FY’22, but that would depend majorly on the impact of monsoons and demand from power sector which has been fluctuating for most period in this fiscal.
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