Cash realisation has come up as a major challenge to Coal India (CIL) with net cash flows from operations drastically falling. The company is in a bid to recast its e-auction sales since it has the widest possibility to bring in some immediate cash, the company badly needs.
The CIL board has decided to put the reserve price for October auctions higher by 10% of the notified price, changing the last six month’s practice of setting the reserve price at the notified price. This would bring the floor or the reserve price to a level of the average premium price that the e-auctions fetched in the last six months. The average premium fetched was 10% from the e-auctions for the six months this fiscal against an average 48%, it fetched during the corresponding period last fiscal.
Changing the reserve price has been for more of a dipstick survey on the market response, seeing which the company would further decide on the reserve price for the November auctions, a highly placed CIL official on the condition of anonymity said.
The PSU miner has been confronting the low cash flows since the last fiscal. At the 2020 fiscal end, the PSU miner’s net cash flow from operations stood at Rs 4,146 crore, a dip by Rs 12,209 crore from the previous fiscal’s net cash flow from operations.
Immediately after the fiscal end, Covid-19 and the lockdown had hit the economy further estranging CIL’s cash realisation. The power sector dues climbed up from Rs 17,000 crore in April this fiscal to Rs 20,000 crore by June end. By July end the dues reached Rs 22,000 crore.
The dues are essentially from the power sector, especially from the state gencos of Andhra Pradesh, Telangana and West Bengal. But there are dues from more or less all discoms with dues increasing by Rs 2,000 crore in a gap of every 15 days, an official said.
Considering the cash crunch situation of the power sector, CIL has eyed on the e-auctions, in which mostly the traders and the non-power sector players participate. Such players may give a higher premium. This has been drawn because of the total coal imports of 242.97 million tonne in FY 20, traders made 40% of the imports. Moreover, lifting coal from exclusive non-power e-auction witnessed a whopping 428% increase with the auction bookings at 13.4 mt for the six months in the ongoing fiscal against 2.3 mt the sector booked during the same period last fiscal.
The company’s e-auction allocation was 65% higher in the first half of the ongoing fiscal over last year’s same period with bookings at 41.4 mt compared to 25.1 mt booked during the six months last fiscal.
The booked quantity under spot e-auction, both for regulated and non-regulated consumers was highest at 16 mt during the first half of FY’21 compared to 11.2 mt booked in April-September in FY 20. It was followed by 13.4 mt booked in an exclusive auction for non-power consumers. The special forward auction for power producers booked 10 mt, while special spot auction yielded 2 mts during the period.
Even as e-auctions bookings were high, that didn’t fetch the desired premium, affecting cash flows. “We anticipated the liquidity crunch that Covid would bring to our customers. So we brought down the reserve price to zero ( notified price level) to help them lift more coal during the lockdown phase,” the official said.
