After missing 1st-quarter targets, Coal India is facing criticism yet again

After missing its first-quarter targets, Coal India is facing criticism yet again as the country's power plants continue to reel under coal stock shortage. This is even after the coal monolith stepped up production and sales dramatically on a year-on-year basis.

Company sources suggested that the prevalent 10-day coal stock with the power generators in the country against the 22-day stipulated norm is primarily owing to the hydel power sector missing its targets in the first quarter. In turn, to maintain power generation, there was increased pressure on the thermal power segment. This put serious pressure on Coal India.

During April-June, production in the coal-based power segment stood at 248453.54 million unit (mu), which exceeded the targeted production by 1.63 per cent but the hydro-power generators produced 30,510.24 mu, thereby missing the target by 6.54 per cent.

The Maharatna company produced 136.87 million tonne (mt) of coal during April-June this year, which is an increase of 15.2 per cent as compared to the output of 118.84 mt in the similar months of the last fiscal year. Nevertheless, it missed its output target for the given quarter by nine per cent.

On the other hand, coal supplies to power stations grew by 15.4 per cent at 122.84 mt which helped in bringing down the count of power stations having critical coal stocks from 30 (as on April 1, 2018) to 16 backed by an increase in rake loading. 

As per company officials, the coal behemoth loaded 217.04 rakes per day on average to the power sector, during April-June 2018 as against 189.9 rakes loaded during the same period last year. The overall rake loading, comprising despatches to power as well as non-power sectors like steel, cement and others stood at 238.8 rakes a day recorded a growth of 9.1 per cent on a year-on-year basis.

Coal India officials are of the view that the shortage of coal in the power plants can be eased once hydel power production picks up in the country and are optimist on account of a good monsoon forecast.

Given the optimism around the monsoon, when coal stocks are poised to ease, the threat of overburden removal, however, haunts Coal India which is already down by over five per cent. Overburden removal refers to the process of removing the topsoil to expose the coal seams for extraction in an opencast mine. 

The process becomes more cumbersome during the monsoons. In case Coal India is not ready with exposed coal seams, it cannot step-up production dramatically like it did in the previous year when shortage from renewable power sources, particularly hydel, suddenly led to a power crisis in the country.

So long, although coal stocks remain dismal in the thermal power plants, the country hasn’t yet faced a crisis.

Furthermore, company officials suggested that law and order problems, particularly in the Mahanadi Coalfields, Eastern Coalfields, Central Coalfields and Bharat Coking Coal mining areas are affecting production. 

Sector analysts expect the power demand from coal based generators to increase by around five per cent this fiscal year, which wouldn’t be a problem for Coal India to cater to.

However, sources in the company view the targeted production of 610 mt to be “high” and “aspirational” and are of the view that the production growth registered in the first quarter is good and in line with its growth strategy.

In April this year, the coal ministry had appointed KPMG to conduct a study on coal requirements for 2020. Coal India officials expect that 1 billion tonne of the previously targeted production may not be relevant anymore and a revision of target is likely.

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