Coal India supplies to utilities slip again in October

Supplies from state-controlled Coal India (CIL) to the country's coal-fired power plants continued to decline in October, albeit at a slower pace than a month earlier.

CIL, India's dominant producer, dispatched 33.8mn t to the power sector in October, down by 19.4pc from a year earlier, the country's coal ministry said. But the pace of the decline moderated from September's 21.2pc year-on-year drop to 28.3mn t, and CIL is hopeful of an increase in production, which has been hampered in the past few months mainly by heavy rainfall.

CIL's supplies to utilities fell by 8.6pc year on year to 253mn t in April-October, the first seven months of India's 2019-20 fiscal year.

Supplies from smaller state-controlled coal firm Singareni Colleries (SCCL) to the power sector dropped by 12.1pc from a year earlier to 4.2mn t in October. This compared with a 10.5pc decline to 3.8mn t in September, the coal ministry said.

The data indicate continued challenges for India's power sector, given more than half of the country's electricity generation capacity is coal based. Dozens of power stations are running with coal stocks of fewer than six days, hurting their generation capabilities.

Indian imports are on course to rise this year, with CIL facing a decline in production after eight consecutive years of output expansions. CIL, which produced 83pc of India's coal last year, mined 280.36mn t during April-October, down by 8.5pc from the year-earlier period.

India has drawn up plans to start the auction process for 15 coal blocks by the end of this year. The government is seeking interest from large global mining firms to help expand local production and reduce its reliance on imports. Delhi in September allowed 100pc foreign direct investment in the coal mining sector and is aiming to put in place rules that will govern proposed commercial mining and pricing for the auctions.

A government-appointed panel has proposed the formulation of a domestic coal price index. The index may factor in a weighted average of all domestic coal transactions, including the landed cost of imported coal, in a bid to make pricing attractive compared with prevailing local rates.

The Indian coal ministry plans to set up a dedicated unit with external consultants to help expedite approvals to develop coal blocks and bring them into production. All these initiatives are aimed at expanding participation in the coal mining sector and gaining access to new production technologies to increase coal output and reduce imports.

By Saurabh Chaturvedi