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Coal India missing production target barely creates a ripple

10th April 2017

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) - Unlike in previous years, producer Coal India Limited (CIL) missing its production target for 2016/17 has barely created a flutter in related industries.

According to government officials, this indicates "the problem" that annual production targets set for the miner have been made "largely irrelevant" by the rapidly changing dynamics in thermal power generation, demand in the domestic market, increasing coal production and that meeting current demand was more important than "achieving targets and being left carrying pit head stocks".

India entering a phase of surplus electricity in 2017, a scrapping or slowdown in the construction of coal-based ultra mega power plants (UMPPs) and a downward curve in coal imports have been the major contributors towards "less furrowed brows" over CIL missing its production target, say sources.

For the year ended March, CIL will miss its production target of 570-million tonnes set by the Coal Ministry by about 20-million tonnes.

It has been pointed out that given that the country is out of the ‘scarcity zone’ and the fact that CIL has been able to ratchet up production by 120-million tonnes over the past five years is more important than whether targets are achieved or not.

The compulsion to rapidly ramp up coal production has also been eased by the government putting on the back-burner plans to construct five UMPPs with an aggregate capacity of 16 GW and by the scaling back of the creation of additional coal-based power plant capacity by 40 GW, both of which are expected to further temper domestic coal demand.

According to published data, domestic power companies also imported 60.38-million tonnes of thermal coal during April 2016 to February 2017, down 20% over the corresponding previous period, with as many as 11 power utilities not resorting to any shipment of the fuel from overseas.

The fall in demand for coal directly correlates with fall in plant load factor (PLF) of thermal power plants, which in 2016/17 was on average down 60%, compared with 65% during the previous corresponding period.

Even with thermal power companies operating at a lower PLF, the country was faced with surplus electricity generation - as indicated by the fact that India for the first time became a net exporter of electricity, supplying around 5 798-million units to its neighbours.

However, according to CIL officials, demand for coal was expected to pick up as the Indian summer gains momentum from the current month and demand for electricity peaks.

It has been estimated that total peak demand for electricity will touch 165 GW during this summer from around 142 GW a few months ago.

While this was expected to result in higher offtake of coal by thermal power companies, CIL for its part has taken measures to reduce the reserve price and earnest money deposit for participation in e-auction of coal, and by doing away with past offtake as a criteria for making fresh bookings for coal, CIL officials add.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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