Coal India Ltd (CIL), the country’s largest coal miner, has seen improved coal sales via fuel supply agreements (FSAs) in the quarter ending 31 Dec’21 (Q3FY’22).
Driven by strong restocking demand from the power plants, the company’s dispatches via the FSA route increased 17% y-o-y to 144.59 mnt in Q3FY’22 compared to 123.13 mnt in Q3FY’21.
Notably, post-relaxation of Covid-led lock-downs, there was an abrupt rise in coal-based power generation for which the domestic coal supply was not adequate. Consequently, coal inventories at the plants fell to a 3-year low of 11.41 mnt at the end of Sept’21, compelling CIL to raise coal dispatches through long-term FSA contracts.
In turn, sales via the auction route were curtailed in order to aid the reeling power sector. The mode of sale is envisaged to allocate coal to those buyers which do not possess long-term FSA contracts with CIL.
But, in view of coal shortages at the plants, dispatches via auctions were down 5% y-o-y to 25.95 mnt in Q3FY’22, registering its lowest mark since Q2FY’21.
Price disparity widens
Priority to the power sector lent support to higher price realizations in auction sales as aggressive bids were seen from the buyers for procuring the limited amount of coal that was made available to them.
Evidently, auction prices jumped 33% y-o-y to INR 1,947/t in Q3FY’22 compared to INR 1,466/t in Q3FY’21. In contrast, the price realization with regard to FSAs was almost flat q-o-q at INR INR 1,370/t in Q3FY’22, while a modest rise was registered y-o-y from INR 1,354/t in Q3FY’21.
Historically, prices in auction sales hold a competitive edge over the FSA prices, but the gap was reduced in the wake of the Covid outbreak when CIL had capped e-auction sales at the notified price.
However, with revival in demand, the disparity between these prices improved to INR 577/t during the quarter, registering a significant progress from the lows of INR 25/t in Q2 FY’21.
Financial highlights
In terms of the financial results, CIL reported a growth of 48% in net profit to INR 4,558.39 crore for the third quarter, on the back of higher revenue from operations.
The company’s turnover increased 20% y-o-y to INR 28,434 crore in Q3FY’22, which was also 22% higher on the quarter from INR 23,291 crore in Q3FY’22. Total income in the third quarter was marked at INR 29,086 crore.
On the other hand, expenses rose 16% y-o-y to INR 22,781 crore in Q3FY’22, mainly on account of employee benefits and contractual obligations.
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