Coal India Ltd (CIL) has witnessed drastic fall in coal supplies made against fuel supply agreements (FSA) resulted from the lower coal demand prevailing in the country due to COVID-19.
Coal dispatch under FSA route decreased 22% y-o-y to 102.23 mn t during the first quarter of FY ’21 (Apr-Jun ’20), thereby attaining its lowest total since Q2 FY ’17.
Apart from the subdued demand, FSA supplies were also impacted by the discount offered on auctions, following which buyers especially from the non-power sector shifted towards auctions to meet their demand.
Inventory liquidation impacted realization: CIL had significantly increased the coal volume offered under auctions in order to lower the inventories at its mines. However, mass number of auctions conducted across various subsidiaries have attracted lower premium in the oversupplied market.
Price realization for coal sales under auction declined 26% y-o-y to INR 1598.14/t in Q1 FY ’21, which was hovering above INR 2000/t in the past 9 quarters. In contrast, downfall in price realization for FSA route was limited to 0.8% y-o-y at INR 1359.5/t in Q1 FY ’21 as against INR 1369/t in Q1 FY ’20.
Incidentally, the gap in terms of price realization for the coal volume sold under FSA and auction route was reduced to its lowest level since Q4 FY ’17, assessed at INR 238.64/t in the quarter period.
Outlook: Rise in coal dispatches has provided encouraging signs for CIL in recent months, but given the economy has not fully recovered, a considerable uptick in prices is not expected.
Leave a Reply