Coal India Ltd (CIL) has witnessed uptick in coal supplies made against fuel supply agreements (FSA) indicating a gradual recovery for coal demand from the end-user industries.
Dispatch under FSA route recorded growth of 4% y-o-y to 108.15 mn t during the second quarter of FY ’21 (Jul-Sep ’20) compared with 103.84 mn t in Jul-Sep ’19 period, which was also 6% higher than the levels seen in the previous quarter.
Higher sales improved company’s price realization under FSA as it increased to INR 1412.12/t in Q2 FY ’21 from INR 1359.5/t in Q1 FY ’21, but was marked 2% lower on the year from INR 1438.61/t in Q2 FY ’20.
Coal dispatch through auction:
Dispatch under auctions was marked 22.36 mn t in Q2 FY ’21 in line with the bulk coal being offered, thereby attaining its highest total in past 10 quarters. Nevertheless, subdued premium received for coal sales has brought down price realization by 29% y-o-y to INR 1437.36/t.
Allocation under e-auction has been an expensive mode of coal sales compared to the FSA, however, with the discount offered on notified price, the gap in terms of price realization for these two routes reduced to lowest level since Q2 FY ’17, assessed at INR 25/t in the second quarter period.
Outlook: Restocking demand due to steady decline in coal inventory at power plants is expected to keep CIL’s coal supplies elevated, but any noticeable improvement in coal pricing is unlikely given that the economy has not fully recovered.
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