Coal India Ltd. (CIL) reported subdued performance in terms of coal dispatches to the non-power sector in the first half of FY’23 as steady rise in power demand led to higher diversion of supplies to power plants.
The non-power sector, comprising sponge iron, cement, captive power plants, steel and other associated industries, were supplied 47.29 million tonnes (mnt) of coal during April-September, 2022, down 26% y-o-y as against 64 mnt in April-September, 2021.
In the same period, coal supply to the power sector increased 17% y-o-y to 284.73 mnt.
Source: Coal Ministry | Quantity in mnt
It is important to note that the miner had attained its highest-ever dispatches in the half-year juncture this fiscal, surpassing the previous high recorded in FY’19. However, additional supplies were diverted to the power sector in order to address the concerns of power plants facing critical inventory levels, thereby depriving the non-power sector of their share.
This came at a time when demand for power remained strong this year. In fact, barring a slowdown in the July-August period, power consumption registered a double-digit growth in each of the remaining months.
Rise in imports
The end-use industries facing a persistent coal crunch in domestic market have increased their imported coal sourcing to meet the shortfall. This followed a sequence of events that have curtailed their supplies.
Notably, Mahanadi Coalfields (MCL), the largest subsidiary of CIL, extended supply curtailment to non-power sector by informing the customers that coal allotment against fuel supply agreements (FSAs) would remain at trigger level for October. The provision has been kept in place since February this year.
Apart from FSAs, minimal volume being offered on sale via regular spot auctions have propelled bid prices to record-levels, that have become unviable for small-scale user industries.
Consequently, thermal coal imports have grown 29% y-o-y to 95.5 mnt in April-September 2022, supported by discounted price offers available for coal from Russia.
Going forward, supply disruption for the non-power sector is expected to ease with gradual improvement in coal production during the second half period, especially when power plants are having better inventory position this year.
Nevertheless, a lot would depend upon the power consumption pattern that has been a deciding factor governing the supply chain.
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