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Coal India misses output, sales targets as monsoon hampers mining

Shortage of rail wagons to haul the fuel also hurts state-run company

The shortage at power plants augurs well for Coal India as the company is likely to step up its output to cater to the demand.   © Reuters

MUMBAI (NewsRise) -- State-owned Coal India missed its output and sales targets for June as the world's largest supplier of the fuel grappled with incessant rains and shortage of rail wagons.

Production rose more than 13% to 44.88 million tons, while shipments expanded 8.6% to 49.59 million tons last month, the company said in a statement on Monday. Coal production achieved 85% of the target, while sales reached 90%. In the first quarter ended last month, Coal India's production grew 15%, while dispatches grew 12%.

India has been contending with a shortage of rail wagons due to non-availability from private suppliers. According to Railway Minister Piyush Goyal, Coal India would require 50,000 wagons in future to transport the fuel from its mines. The company has also been struggling to transport coal from its sidings into the wagons due to the onset of monsoon.

The miner's shortfall in production and sales comes at a time when some of the country's major cities are staring at a blackout due to non-availability of coal needed to fire power plants. Last month, New Delhi saw the average coal stock at one of its power plants come down to 22,000 tons, compared with 59,000 tons a year earlier.

"The current supply shortage was triggered by a steady fall in power plant coal stocks since April 2017 as states delayed coal procurement," brokerage J.M. Financial said in a report on Tuesday. Hence, coal stocks fell to a critically low level of 6 days, it added. "This, coupled with lower generation by hydro and wind power in the second quarter led to the resurgence of demand from thermal power plants, all of which were sitting on low coal stocks."

The shortage at power plants augurs well for Coal India as the company is likely to step up its output to cater to the demand. The company had previously set a target to produce 610 million tons of coal and dispatch 630 million ton this fiscal year.

In an interview to television channel CNBC TV18, Coal India's Chairman and Managing Director Anil Kumar Jha said the company is now looking to increase the output to 652 million ton and dispatch 680 million tons, if the monsoon remains normal. In the fiscal year ended in March, it produced 567 million tons, a 2.4% increase from the previous year.

The company, which controls more than three-fourth of the country's total output, is aiming to double its production to 1 billion tons by 2020, as India is seen as the largest user of thermal fuel in the coming decade.

Globally, demand for the fuel has been suffering amid increasing concerns about the environment and competition from natural gas and renewable energy. Slowing demand from China, the world's biggest buyer, has also caused prices to slump to multi-year lows.

J.M. Financial said Coal India is facing logistical constraints with railway rake availability being 285 to 290 rakes, compared with a requirement of more than 309 rakes a day. Two new railway corridors that are set to be commissioned this year are likely to add up to 40 million tons coal evacuation capacity a year. "Hence off-take growth can easily follow production once these lines commission."

Coal India shares lost 0.2% in Mumbai trading on Tuesday, while the benchmark S&P BSE Sensex gained 0.3%.

--Dhanya Ann Thoppil

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