KOLKATA (miningweekly.com) - Faced with mounting stocks currently estimated at 58-million tonnes, producer Coal India Limited (CIL) has slashed the prices of high-grade coal by around 40%.
A senior CIL official said that the reduction in prices had been put into effect from April on an experimental basis, but could be continued through the current 2016/17 fiscal year if lower prices proved successful in reducing existing stockpile and ensured higher offtake, particularly from the thermal power generation sector.
CIL had also scrapped the premium charged based on volumes delivered to incentivise large volume buyers to commit to higher offtake.
For example, CIL used to charge a premium of 10% of the price for all deliveries above 90% of the contract with the buyer and the premium would increase to 20% of the price if deliveries ranged between 95% and 100% of the contract.
The reduction in base price and the waiver of premium deliveries, a remnant from days of supply shortage, were largely CIL’s reaction to rising production, high stocks at power plants and fall in offtake from the latter.
On April 1, coal stocks at power plants were reported at 38-million tonnes.
During 2015/16, CIL notched a production growth of 8.5% at 536-million tonnes and this enabled a reduction in imports of 34.26-million tonnes. The production target for the current year had been fixed at 540-million tonnes but it was implementing a phased lowering of production levels across some mines in response to a slowdown in offtake from the power sector.