By Our Correspondent
NEW DELHI/BHUBANESWAR: Coal India plans to use mine developers and operators to reopen mines it abandoned because of safety and viability concerns. The company may offer these mines, many of which hold good quality reserves, to MDOs on contract.
It will earn additional revenue without fresh investment even if the MDOs operate relatively small quantities ranging between 250,000 tonnes and 300,000 tonnes of quality coal a year profitably. Sources said “These are sunk investments as these mines don’t yield returns any more. CIL has been looking for ways to earn some revenue from them as large number of these pits, mostly underground, hold premium grade coal.”
Initially, 15-20 such mines would be offered, and the number would increase if the response is good. Coal India Ltd on Saturday will hold deliberations with the consumers of the cement sector and captive power producers on substituting imports with domestic coal, amid the tepid demand for coal. It said “Consumers are requested to join the meeting to discuss & deliberate on the issue related to the substitution of coal import.”
CIL is primarily tapping domestic coal based power plants and non-power sector consumers who are importing coal. They imported around 150 million tonnes of coal in 2019-20. The PSU is looking to substitute their supplies with domestic coal. The move would result in curtailing forex outgo arising out of coal imports and help CIL expand its supply volumes.
Care Rating in latest report said that India’s coal production picked up marginally by 3% in May 2020 over the previous month as India slowly opened up for the businesses but it was still down sharply from year-ago levels. On a y-o-y basis, coal output fell by 15% in May 2020. The nationwide-wide lockdown which came into effect on 25 March brought economic activities to a sudden standstill as many factories and offices were shut and operations suspended.
This slashed electricity demand, thus affecting the demand for coal and causing inventories to swell to record levels. The combined inventories of coal with power plants and at pit-heads and non-pit-heads of commercial coal mining companies in India have risen to three-months of average coal production seen in last fiscal year.
The lockdown measures were gradually eased in May in several states and large cities, including Delhi, Bengaluru and Hyderabad that decided to reopen some businesses and limited public transport. However demand for coal did not see any significant pick up. Several manufacturing companies were unable to restart operations mainly due to shortage of labour and liquidity constraints.
Power plants were not very keen to lift coal due to muted demand and high inventories and dispatch of coal fell by a sharp 26.5% y-o-y in May. Thermal power generation has seen a near 20% month-on-month decline in April 2020. Thermal plant load factor declined to 42.4% in April 2020 from 60.3% in February 2020 on account of lower demand.
