Coal India may raise prices, revise production targets

Coal Insights Bureau

Coal India is seriously looking at raising prices and a decision would be taken soon.

“This is the right time to raise prices, we are discussing it seriously. Unfortunately, the Covid pandemic was there. Perhaps we will take some decision soon,” Pramod Agrawal, CMD, Coal India told financial analysts but added that it is difficult to say now when the price rise will happen.

The CMD’s reaction was in response to questions from analysts who pointed out that rise in costs, muted growth in e-auction prices, aggressive capex plans and expected rise in wage costs effective July of about 5-7 percent as per their expectations call for a revision in prices.

Likely to revise 1-billion ton target for FY24

Covid pandemic and its impact on the economy over 2020 and 2021 might force Coal India to revisit its production targets both for the current year as well as the 1-billion ton mark set for FY24.

The 1-billion ton target was set in 2019, before the pandemic unfolded, following which the economy has lost two years - 20202021 - which might force Coal India to push back the target by two years to FY26, Agrawal told analysts during a conference call post the announcements of the results of the company.

FY22 target may be revisited

Coal India might also revise its production target of 670 million tons (mt) for FY22 and dispatch target of 740 mt.

“For FY22, we have kept an ambitious target. While fixing the target we never thought that in April, May and June there will be the second wave or there could be a third wave in the later part of the year. Considering that in the last three months we have suffered a lot, perhaps it would be a difficult target and we have to revise it as the months go by,” CIL CMD said.

FY21 coal production was 596 mt while offtake was 574 mt.

Assuming that power demand will revive significantly and that there will also be import substitution, CIL had fixed the FY22 targets for production and despatches.

Dispatches would depend on how power demand and a likely third Covid wave pans out.

On a normalised level, CIL expects its dispatches to increase by 40-50 mt annually.

Ongoing projects

CIL has 114 major ongoing projects with peak capacity of 836.48 mtpa. Operating large projects include Kusmunda Opencast (50 mtpa), Gevra Expansion Project (70 mtpa), Dipka OC (40 mtpa), Bhubaneswari OC (40 mtpa), Jayant (20 mtpa), Dhadhichua (20 mtpa).

Future projects

CIL has 36 mining cleared by its board and its subsidiaries in FY21 with a rated capacity of 332 mtpa and sanctioned capital of Rs 59227 crore.

In addition to this, 5 non-mining projects having a capital of Rs 6843 crores have also been cleared by CIL.

Operational highlights of FY21

Operations

Coal demand has been improving, with 38 percent year-on-year increase in dispatches for the first two months of FY22.

During 2020-21, the total income was Rs 93,818 crore. Its revenue from operations also saw a decline of 6.3 percent year-on-year and was Rs 90,026 crore during FY21.

Revenue in Q4 came in 3.1 percent lower y-o-y at Rs 26,700 crore, supported by higher offtake but affected by decline in average realisation by 4.9 percent y-o-y to Rs 1,484/ ton, according to a ICICI Securities report.

“EBITDA at Rs 6,380 crore was better than estimates due to lower OBR adjustment (-43 percent y-o-y),” the report said.

FSA realisation (Rs 1,392/ton) was lower due to higher sale of low grade coal.

E-auction premiums increased by 20 percent quarter-on-quarter (q-o-q) to Rs 1,752/ton.