Coal India’s dispatches drop, output increases

India’s largest coal producer Coal India Ltd. (CIL) has seen a 10% fall in dispatches in March 2020 due to a sharp fall in demand from the power sector, leading to an increase in inventories both at power plants and coal mines. This comes amid production rising up 6.5% to 84.4 million tonnes (MT). CIL’s dispatches declined 10.3% year-on-year (YoY) to 53.5 MT in March 2020 as demand for power plummeted.

Production declines
For FY20, CIL’s dispatches dropped 4% YoY to 582 MT, while production declined about 1% YoY to 602 MT.

India’s nationwide lockdown came at a time when power demand had largely remained muted and production at Coal India’s mines ramped up following a heavy monsoon season.

Hence, inventories at coal mines and power plants have risen, a general trend seen at the onset of summer but now higher than usual.

Commercial consumers
On the other hand, with industrial and commercial consumers accounting for almost 50% of India’s power demand, generation has been severely dented over the past one week.

In March, after the lockdown was announced, the power demand fell about 25% compared to daily three-year averages (2017–19). In contrast, for the first 21 days in March, demand was up 2.5%.

“On account of such a sharp demand drop and higher coal inventories at power plants, we built-in lower dispatches for CIL in FY21 (-5.5% YoY versus earlier +6.5% YoY).

“While we also anticipate a decline in coal imports (especially from the non-power sector), a subsequent fall in global coal prices may pose a risk and eventually impact CIL’s e-auction realisations,” wrote Motilal Oswal in note to its clients.

Also, given the must-run status for renewables in the country, the brunt of the demand decline is being borne by coal-based plants.
Source: The Hindu