Coal India keeps raising output targets

State-controlled Coal India (CIL) is set to miss its production target for the 2019-20 fiscal year ending 31 March, its 14th consecutive miss. But it has still raised its target for 2020-21 to meet India's rising coal requirements.

CIL's 2019-20 coal output is forecast at around 610mn t against a targeted 660mn t, a senior company executive told Argus after the release of the company's latest quarterly financial results yesterday. Despite the looming miss for 2019-20, CIL will aim for output of 710mn t in 2020-21.

The company produced 606.89mn t in 2018-19 against a target of 610mn t. The miss in 2019-20 weighs on India's overall coal production as CIL meets more than 80pc of India's coal production. The last time CIL beat its target was in 2005-06.

But heavy rainfall, especially from July to October last year, hurt its mining operations and weighed on output and supplies. This led to a drop in national coal production, as well as a rise in imports. But CIL's monthly production falls compared with a year earlier have been turned around since December, led by growth at two of its largest affiliates Mahanadi Coalfields and South Eastern Coalfields.

The company is betting on the use of sophisticated equipment, including heavy earth moving machines, to raise production from its existing mines while working on processes to open new coal blocks. CIL has already placed equipment orders worth around 70bn rupees ($982mn) and expects the deliveries in 2020-21, the executive said.

His comments follow CIL's 8.47mn t drop in production from a year earlier in the October-December quarter to 147.5mn t, weighing on the company's overall sales and profitability. Profit for the quarter was Rs39.24bn, down by 14.1pc. Sales for the quarter fell by 7.8pc to Rs215.66bn.

More than half of India's power generation capacity is coal based. Coal will continue to play a dominant role in its energy mix, even though the country is looking to reduce its dependence in the next 5-10 years.

The government is finalising plans to auction coal blocks for competitive mining to boost domestic output and supplies. Some of CIL's mining projects have received environment ministry approval, a development that will partly help the company reach its 1bn t production goal by 2024.

The company is also "exploring opportunities" to invest in coking and non-coking mines in Canada, Russia and Australia, the CIL executive said, although he declined to elaborate.

By Saurabh Chaturvedi