CIL well positioned to meet any increase in coal demand from power sector in FY25: CMD

New Delhi: If demand for coal by the power sector in the next financial year exceeds the projection given to Coal India Limited (CIL) by the government, the PSU will be in a position to meet that rise in demand, said Chairman and Managing Director (CMD) PM Prasad. During a recent investors’ conference call, the Coal India CMD exuded confidence about closing the current financial year with at least 85 Million Tonnes (MT) of coal stock and ramping up coal production in the next financial year enough to not only meet the rising demand from the power sector but also divert more coal towards the non-regulated sector (NRS) to give a fillip to its declining e-auction premium.

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Coal India has been given a coal production target of 838 MT for FY25. Out of this, it has been asked to supply at least 661 MT to the power sector, and the company has reserved 167 MT for the NRS sector. According to projections by the Central Electricity Authority, India’s peak power demand is expected to touch an all-time high of 256.53 GW in FY 2024-25, which will drive the demand for coal.

Coal India facing drop in premium in e-auction segment

Coal India offers coal to the NRS under e-auction regime at a premium. In Q3 of FY24, Coal India had clocked good premium in e-auction at around 117 percent, which has now dropped to 40-50 percent. Since CIL offers coal to the power sector at notified prices, it earns profit on coal that it offers to the NRS via e-auction regime. A drop in premium will impact Coal India’s earnings.

“Actually, the premiums, they are linked -- they were earlier being linked with the imported coal prices. So when the imports coal prices for this band of 4,200 went up and down, the premiums also moved in tandem with them. Now with increased availability of domestic coal, the premiums have started now actually getting away from the linkage with the imported coal prices,” Prasad told investors.

“And 48 percent (premium) was from 1st January to 15th February, we have received. So maybe in the month of January, somewhere it was around 60 percent or so. And going ahead, we think this is going to be the order of the day, somewhere around 40 percent to 50 percent. So that’s why we have actually started the non-regulated sector linkages once again, which we used to do every year,” said the CIL CMD.

Prasad added that increasing the volumes offered under e-auction window will help CIL in increasing its premium yield. “So in order to look for more non-power consumers, we are offering more rounds of NRS linkages, and we are conducting them even more frequently. The overall realisation means we have to offer more coal to the non-regulated sector where the premiums are very high… Volumes are going to help us,” he said.

Coal India eying 3 critical mineral blocks

Commenting on the company’s plans for expanding its footprint in the critical mineral mining sector, the CIL CMD said that Coal India will bid for three critical mineral blocks in the upcoming auction. “In three blocks, we are going to participate for auction, for exploration first. Ministry of Mines is conducting a e-auction, so we are participating in three blocks,” he said.

He also added that a Coal India team has also visited Australia and seen one or two areas, and are in talks to acquire critical mineral assets abroad.

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