CIL likely to face higher production target next year

KOLKATA (miningweekly.com) - Buoyed by coal production of over half-a-billion tonnes in the current financial year, India’s Coal Ministry was likely to set a target of 610-million tonnes for 2016/17 for producer Coal India Limited (CIL).

According to a Ministry official, with still a fortnight to go before the end of the financial year 2015/16, CIL had already crossed the 500-million tonnes production target, and a higher target would now be set for the miner in an effort to reach the ultimate target of one-billion tonnes by 2020.

Production during the current financial year would still likely be below the 550-million-tonnes target, with just two weeks of the financial year remaining, the official said.

However, in Ministry circles, the missed target had been overshadowed by the miner achieving a production growth of 9.3% in 2015/16, the highest in the last five years.

During 2014/15 CIL production growth was recorded at 7%. According to Ministry data, between period 2009/10 and 2013/14, production growth averaged between 1% and 3%.

However, the higher production rate had also highlighted a number of problems faced by CIL, including a slow-down in offtake by consuming industries, particularly thermal power plants, which was proving to be a hindrance to rising production.

Currently, stocks with CIL had climbed to 53-million tonnes from 47-million tonnes as reported by Mining Weekly Online earlier in the month.

An official with CIL conceded that rising production and continuous piling up of stocks would not be "such a challenge" during the first quarter of April to June, as demand and offtake by thermal power plants was expected to rise on higher electricity demand during the summer months.

But the problem would come during the second quarter of July to September, during the monsoon rainy season, when rains and flooding generally impacted offtake and transportation from pitheads, as did water logged stockyards across the country.

Though early days yet, CIL had started working on contingency plans for the rainy season, including getting Indian Railways on board by way of a larger deployment of wagons and even framing a pricing strategy to incentivise higher volume offtake during this time.

While the pricing strategy could include discounts and lowering of notified prices to thermal power plant, the official declined to provide details as the strategy was still being drafted.