India: CIL’s coal sales in e-auction drop over 60% y-o-y in H1FY’23

State-run miner Coal India Ltd (CIL) has reported a decline in e-auction sales volumes during the first half period of FY’23.

In the series of auctions held by its various subsidiaries during April-September 2022, the miner has sold 21.3 million tonnes (mnt) of coal, registering a drop of 63% from 57.6 mnt in April-September 2021. Otherwise, it had attained new highs in coal production and dispatches in the half-year period.

The subdued performance in auction sales was primarily due to the continued supply prioritisation accorded to the power sector via Fuel Supply Agreements (FSA). This came at a time when several thermal power plants facing critical inventory levels were in need of immediate attention amid soaring power demand.

Consequently, there was lesser intend shown by the companies toward e-auctions, the offerings in which had been low.

Notably, CIL subsidiaries were conducting progressive auctions initially in FY22, even bringing in unsold volume from previous month’s auction, with an objective to raise sales. However, with an uptick in demand from power sector this year, these subsidiaries had been inconsistent in conducting auctions, instead most of the coal was diverted to the power plants.

Overall, coal volumes offered in the auctions dropped 79% y-o-y to 22.01 mnt in H1FY’23 as against 103.78 mnt in H1FY’22.

Soaring bid prices

The disparity in coal supply resulted in aggressive bidding from the buyers relying on these auctions. This was further boosted by the introduction of common window for coal sale from March, 2022 which further increased competition.

Bid premiums over the notified price for the quantity booked in these auctions rose 334% in H1FY’23 as against 41% in H1 FY’22. This translates to a price realisation of INR 7,471/t as against INR 1,781/t in the year-ago period.

Besides, soaring global prices and supply tightness resulting from cancellation of linkage contracts for non-power sector were some of the major factors which supported higher bid prices in the auctions.

Bid premium started to ease in tandem with improvement in supplies to the power plants, currently assessed at a 7-month low of 276% in September. With an expected rise in production from October onwards, further price correction is anticipated in the near-term.