State-run monopoly Coal India is under severe stress due to Rs 17,000 crore dues due to non-payment by power plants and could go to its first ever bond issue to collect working capital, coal secretary Anil Jain said, excluding the possibility of giving credit to suppliers to consumers or lowering coal prices.
Private power plants have asked CIL to waive an advance payment obligation, while all other consumers are seeking a reduction in coal prices because their stocks have reached a record 75 million tons. The non-power sector has been demanding CIL's relief in the form of an equal price similar to that of the power industry.
ET announced on 30 March that R K Singh, Minister of Energy and Renewable Energy, had written to Pralhad Joshi, Minister of Gas, requesting exemption from advance payment for fuel.
Jain, however, said that there was no connection between coal prices and demand, citing recent lower-price auctions that did not attract a significant number of participants.
“The power demand has died. We gave a lot of coal for auctions but hardly 20-22% got booked and lifting was after 3-6 months. Coal auctioned in the past is not getting lifted. When demand is not there, reducing the price means wastage of public money. At the end of the year, we give a dividend to the government and pension funds. The present prevailing prices have been constant since January 2018 despite 6-7% annual inflation,” Jain told ET.
He said many CIL subsidiaries were going to run out of cash. “Coal India, for the first time, is going to raise a loan to finance its working. It is thinking of raising money in the bond market,” he said.
In response to ET 's question, CIL said that its subsidiaries — Bharat Coking Coal Ltd, Central Coalfields Ltd and CIL 's flagship company South Eastern Coalfields — are stuck in cash and forced to early withdraw fixed deposits and borrow to pay off salaries and wages and fund their working capital.
The statement indicated that steps to de-stress power utilities may have a financial effect on coal companies.
The nationwide shutdown and the resulting 30% fall in power demand has contributed to an rise in the location of coal stocks.
CIL said it anticipated liquidation of its fees with the Center announcing the Rs 90,000 Crore Liquidity Infusion Package to the power sector on Wednesday to help the sector tide over the cash crunch.
CIL 's outstanding power utilities receivables have risen to an all-time high of Rs 17,000 crore by the end of April 2020 to set alarm bells ringing in the Maharatna coal miner. The power sector dues have already gone up as high as 75 days of supply, encumbering the financial inflow of the company. The pending payments from PSU and private generating companies spiked up close to 37% in a three-month span from Rs 12,423 crore in January 2020.
Jain said CIL will be able to ramp up coal production as soon as demand picks up. “We have diverted our machines to remove overburden or top soil. We can ramp up coal production power demand increases,” he said adding in longer term Indian coal will be cheaper than imported coal barring some aberration in imported coal due to some distress sale.
In the middle of the lockdown, CIL announced steps such as the offer of Usance LC - payment security system, continued supply of power plants amid defaults of payment, extension of the period of validity for coal removal under the FSAs, and auctions without penalty.
