Indian coal production is progressively rising to cater the growing demand of the nation. According to the data provided by Indian Bureau of Mines, coal production in the country totaled 667.12 MnT in CY17, up 2.51% from 650.74 MnT in CY16.
Coal in India is majorly used for power generation due to its abundance nature and that too at a cheaper rate. The ‘National Energy Policy’ prepared by NITI aayog has emphasized that coal will remain as an important source of energy and electricity even in the near future. Plus the positive growth in steel, as well as the other industries dependent on coal, are likely to keep the demand for coal in the near future.
What Happened in CY17?
India’s coal Production is majorly dominated by CIL, which contributes nearly 80% of the total coal output. CIL’s yearly coal production had increased 4% Y-o-Y to 560.331 MnT in CY17 against 540.635 MnT in CY16.
The growth in CIL’s coal production was ascertain given the rising demand; however, it had come rather on the back of a scare in domestic coal supply.
CIL was primarily engaged in liquidating the excess of coal stock available at its mine. Moreover, lower demand from the power sector had also forced the miner to limit its monthly coal production during Apr’17-Jun’17.
During the period of sudden surge in demand for thermal power amid lower hydro power generation in Aug’17, CIL was unable to meet the coal demand of the power sector. Consequently, the country had witnessed shortage of domestic coal.
Thereafter, CIL had posted regular growth in monthly production to revive the coal availability to the power sector.
On the other hand, India’s second-largest coal producing company, Singareni Colliery Company Ltd (SCCL), had witnessed almost flat production on the year-on-year basis in CY17. Total production was recorded at 60.93 MnT during the year compared with 59.56 MnT in CY16.
While the production from public and private sector continues to be low, since recording its peak production in 2014. Total production from the other sources stood approximately 46 MnT in CY17. Many auctioned coal block have been non-operational due to land acquisition issues and insufficient funds.
What May Happen in CY18:
Indian Government has announced that it will allow the public auction of coal mines for commercial purposes, ending nearly forty years of monopoly held by Coal India (CIL).
The move would certainly increase the competitiveness of the domestic coal supply. CIL had repeatedly under performed relative to the targets set by the government, with the talks of commercial mining going on, the coal major would certainly raise its production standards in CY18 to match the private miners.
Following are some of the reasons that would boost higher coal production by CIL:
1. Capacity Addition: 11 coal blocks have been allocated to CIL in FY18, that would enhance the company’s coal production by more than 100 MnT per annum. In addition, the company has obtained 21 with a total estimated capacity of 222.12 MnTPA in 2017-18. This will add 43 MnT coal to the annual production capacity of CIL in FY19.
2. Better Coal Stock Position: CIL had lowered its monthly coal production, in order to liquidate the excess stock in CY17. However, the coal major has reported coal inventory of 55.49 MnT as on 1 Apr’18, against the year ago-date of 68.42 MnT. Certainly, the stock position in mines is in good health, which would help to company to coordinate its monthly coal production in a better way.
3. Continual Demand from Power Sector: Despite the enhanced coal supplies to the power plants, coal stock at the power plants stand 16.519 MnT as on 12 Apr’18, 34% lower on the year compared with 25.057 MnT as on 12 Apr’17. The focus to maintain the normative coal stocks by the power sector, would also keep the CIL’s coal production upside in CY19.
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