‘Stop supply’ notices deal a blow to Coal India’s stock liquidation

KOLKATA (miningweekly.com) – Coal miner Coal India Limited’s (CIL’s) efforts to deal with rising pithead stocks have been dealt another blow as an increasing number of thermal power plants have issued ‘stop supply’ notices to the miner.

Several thermal power plants across India have asked CIL not to make any further coal supplies, citing reasons ranging from high stocks at the plant level to falling electricity demand forcing power generation companies to reduce their plant load factor and, hence, the rate of coal consumption.

A CIL official pointed out that the current trend of high stocks at pitheads and falling offtake by thermal power plants was unusual for this time of year when monsoon rains and problems of wet coal usually forced the miner to ramp up supplies.

According to official data, CIL’s pithead stocks on May 31 were estimated at 49-million tons, 13% higher than levels in the corresponding month of the previous year.

CIL had been taking aggressive measures to increase offtake by offering incentives to large consumers for higher volumes, which was beginning to show results with stock coming down marginally from 53-million tons on March 31, the official said.

However, with thermal power plants seeking to stop supplies, such stock liquidation efforts by the miner would receive a major setback, the official added.

Thermal power plants that had issued so-called ‘stop supply’ notices include the country’s largest thermal power producer, NTPC Limited, as well as GMR, Haryana Power Generation Company, Uttar Pradesh Rajya Vidyut and Damodar Valley Corporation.

According to government policy advisory body, Central Electricity Authority, India’s peak time power deficit had decreased to 2% from 10% earlier, and by next year, there would be an energy surplus of 1.1% and peak time surplus of 2.6%.

Certain officials in the Coal Ministry said that curtailment of supplies to thermal power plants coupled with rising pithead stocks would hasten the downward revision of CIL's production target.

Though not officially announced, the Coal Ministry had already been mulling pruning CIL's production target for 2016/17 from 605-million tons to 550-million tons.

Officials said that with pithead stocks forecast to mount to 90-million tons by the end of current year, CIL would have to ensure a minimum sales offtake of 660-million tons during the current year, which in the current market situation was not considered feasible.