Coal of India’s stockpile expands further forcing cutbacks

KOLKATA (miningweekly.com) – Coal of India Limited (CIL) has started cutting back production and closing mines after another eight-million tons of coal were added to its stockpiles in the past month.

The Indian mining behemoth has a stockpile of 48-million tons at a time when coal stocks at thermal power plants were standing at 36-million tons – the highest in three years.

As reported by Mining Weekly Online last month, the Coal Ministry had directed CIL to take urgent steps to liquidate its 40-million pithead stocks, but officials said that since then stocks had continued to rise and the miner was facing severe constraints in managing inventories, entailing high costs and risks of stocks catching fire.

Although the officials declined to divulge specifics about which mines were closed or where production had been cut, they said that these were all opencast mines that fell under CIL’s wholly-owned subsidiary, South Eastern Coalfields Limited.

The officials acknowledged that the attempt to push up sales through higher volume offerings at e-auctions was not a getting favourable response, owing to the base price at e-auctions being about 20% to 30% higher than the ‘notified’ price of CIL’s supplies to thermal power plants under fuel supply agreements (FSAs).

The miner had requested that thermal power companies increase the minimum 65% yearly coal requirements from CIL under existing FSAs. However, with most thermal power plants already carrying large stocks, depressed demand for electricity from distribution companies was preventing the power generators committing to higher volumes, the official added.

Several of the thermal power companies had demanded that the base price of coal offered by CIL at the e-auctions should be equivalent to the notified price to enable greater participation. However, CIL officials ruled out such a possibility on the plea that e-auctions enabled the miner to maximise sales realisations and any reduction in the base price would negatively impact the bottom line of CIL.