Coal India allows exports to trim high stocks

State-controlled producer Coal India (CIL) is permitting exports of coal sold through its electronic or e-auctions in a move aiming to trim its high inventories.

CIL, which meets more than 80pc of India's coal needs, removed the embargo on coal exports purchased through e-auctions, the company said. India has historically been a coal importer, exports of which have largely been restricted.

The company amended the rules earlier this week to allow exports of coal sold under future auctions. Buyers that intend to export coal must comply with standard regulatory requirements and guidelines for exports. CIL will not be responsible for these.

CIL sold 124mn t of coal through e-auctions in the 2020-21 fiscal year that ended 31 March, up by 88pc from a year earlier. Out of the e-auctioned volume, power and non-power sector consumers took the majority. Some of these auctions were also open for trading firms, which primarily may evaluate export opportunities that are likely to be to nearby destinations such as Bangladesh, said a market participant.

CIL's inventories fell to 74.3mn t as of 31 May from 87.12mn t at the end of April but are still historically high. Utilities across the country held total inventories of 28.66mn t as of 30 May, up from 23.87mn t at the end of April, according to Central Electricity Authority data.

The country's coal-fired generation rose from a year earlier for eight straight months until April. But a surge in Covid-19 cases and resulting restriction across the country has weighed on power demand and prompted the build in coal inventories.

CIL, which raised its May output by 700,000t or 1.7pc to 42.1mn t from a year earlier, has been holding regular auctions to bring down inventories and discourage imports.

India is a net importer of coal, although it exports small quantities to nearby markets like Nepal and Bhutan. Of the 731mn t coal produced in 2019-20, just 139,000t of thermal coal was exported to Nepal and Bhutan, according to India's commerce ministry. The two countries imported about 68,000t of Indian thermal coal in the first 11 months of 2020-21.

India's thermal coal imports rose by 2.88mn t from a year earlier to 14.04mn t in April, according to data from shipbroker Interocean. But the increase in April was from a low base a year earlier when the country's Covid-19 lockdown restrictions significantly reduced the country's import demand.

By Ajay Modi