Coal India faces growth plan review

State-controlled mining firm Coal India's (CIL) ambitious output growth plans face a review after recording its first fiscal year-on-year drop in output in around 20 years, with the demand outlook equally clouded because of the impact of the coronavirus pandemic.

CIL lifted March production by 6.5pc from a year earlier to 84.36mn t. While it was the fourth straight month of year-on-year increases, the company's output for the 2019-20 fiscal year that ended on 31 March fell by 0.8pc to 602.14mn t, after heavy rainfall affected output during the second half of the 2019 calendar year. CIL also missed its 2019-20 production target of 660mn t, its 15th consecutive failure to meet such goals.

The company last reported a contraction in yearly output in 1998-99, when production fell by 1.7pc from the previous year to 256.49mn t.

CIL's focus has now shifted to its production and offtake target of 710mn t for 2020-21, a key goal towards hitting a 1bn t/yr target by 2023-24. But record coal stocks in the country are further weighing on its production growth plans.

"There are huge stocks, both at our pit heads and power stations, and off-take will be a huge task given the slowdown in economic activities," a senior CIL executive said. CIL currently has 74mn t of coal stocks, while inventories at power plants were at 45mn t as of 31 March. A 21-day national lockdown in the country from 25 March to curb the coronavirus outbreak will possibly push stocks higher, as several coal-consuming industries are closed.

The company, which meets more than 80pc of India's coal requirements, plans to discuss internally and with the coal ministry a proposal to cut its target for next year, citing the downturn induced by the coronavirus outbreak. India's coal ministry gives a final approval on CIL's production targets at the start of each fiscal year. Resistance is expected from the coal ministry, as the target is part of a broader plan to boost domestic production and reduce imports.

CIL is looking at ways to raise production from its existing mines, while working on processes to open new coal blocks involving more contractors.

CIL's overall supplies in March to consumers such as utilities and industrial users fell by 10.3pc from a year earlier to 53.45mn t, with 2019-20 supplies down by 4.3pc to 581.73mn t.

The fall in domestic output has supported Indian imports, which rose for a fourth consecutive month in February, according to shipbroker Interocean.

By Saurabh Chaturvedi