It is one of the many attempts of the coal behemoth to raise sales in the light of increasing concern over the decline in coal prices due to Covid-19’s slump in demand.
CIL mainly taps domestic coal-fired power plants and non-energy consumers who import coal. They imported around 150 million tons in 2019-20. CIL plans to replace its supplies with domestic coal, which would help a major increase in sales of coal.
The move would result in curtailing forex outgo arising out of coal imports and help CIL expand its supply volumes.
“CIL continues to be beset with tepid demand for coal with most of the customers shying away from lifting adequate quantities. Power sector, which makes up close to 80% of CIL’s total supplies, is stacked with nearly 50 million tonnes of coal sufficient for 29 days of consumption. Many plants have already started restricting supplies from CIL further shrinking the sales,” a CIL executive said.
In May, the power sector lifted about 75 percent of coal from CIL to 30.15 million tonnes, down 10.23 million tons from May 2019 to 40.38 million tonnes.
“The company can work on supply side improving facilities to its customers including reduction in reserve prices for auctions and liaising with railways on their behalf. We can cater to the demand but cannot create it” said the executive. “Demand is based on many factors including logistics, freight movement, fluctuation in international prices affecting landed cost and working capital liquidity of the consumers.”
To find ways to expand its supply, CIL focuses on non-power consumers from sectors such as sponge iron, cement, captive power plants, fertilizers and steel, persuading them to replace their imported coal with domestic coal.
Dialog is ongoing with customers who opted to import coal substitution in 2019-20. The supply of dry fuel from these sectors may be low until the demand for dry fuel picks up.
CIL has also established a platform through which customers can register information of their demand for domestic coal for import substitution and the secure allocation of coal.
