Coal India Ltd. (CIL) registered a decline in coal sales via auctions as prevailing strong demand for power forced the company to cut down its offerings. Sales in the series of auctions held in April, 2022 decreased 80% m-o-m to 1.62 million tonnes (mnt) as against 7.89 mnt in March, 2022.
In order to ensure optimum utilisation from the power plants, CIL has been augmenting coal dispatches to the power sector via FSAs (Fuel Supply Agreements) with the aim to maintain adequate inventory levels. However, in doing so, the offered volume in auctions has reduced.
The situation turned from bad to worse in April as intense heatwave in midsummer kept power consumption elevated. Notably, the country has been on a record breaking streak in terms of peak power demand.
Highest demand met was recorded at 201 gigawatts (GW) on 26 April, surpassing the previous year’s peak of 200.53 GW on 7 July, 2021. The maximum demand again rose to 204.65 GW on 28 April and peaked to a new high of 207.11 GW on 29 April, as per Union Power Ministry data.
Due to this few auctions for coal were seen lately. In fact, only four CIL subsidiaries viz. Bharat Coking Coal (BCCL), Eastern Coalfields (ECL), Western Coalfields (WCL) and Northern Coalfields (NCL) had shown interest in auctions during April. These subsidiaries together offered a nominal volume of 1.6 mnt.
In sharp contrast, the offered volume was 7.92 mnt in Mar’22, with the all the subsidiaries participating in auctions.
BCCL lags in bid premium
Aggressive coal procurement in auctions continued, as buyers lifted the entire volume that were made available to them at a bid premium of 345% during Apr’22. The premium had been recorded at a mere 14% in Apr’21.
While subsidiaries like ECL, NCL and WCL recorded bid premium in excess of 250% over the notified price, BCCL only managed premium of 135% in these auctions.
The subsidiaries offer different coal grades on sale depending on the availability, with the price also varying according to quality.
In case of BCCL, coking coal grades (W-II, W-III and W-IV) fetched bids in the range of INR 6,000-7,000/t over the notified price. But washed coal garnered premium of INR 2,322/t, which was particularly low compared to the other subsidiaries.
Subsidiary-wise auction summary for Apr’22
Source: CoalMint Research | Quantity in mnt | Prices in INR/t
Upcoming auctions
CIL’s major coal-producing subsidiaries – South Eastern Coalfields (SECL) and Mahanadi Coalfields (MCL) – have returned to auction sales in May after a month’s gap.
These companies have offered 2.2 mnt and 0.68 mnt of coal respectively for auctions to be held on 9 May and 5 May. However, the quantity remains lower compared to the last auction held in March.
In the short-term, any significant increase in auction volumes seems unlikely with demand for power expected to reach about 215-220 GW in May-June.
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