Indian coal industry going cold

July 17, 2012 - PRLog -- This slowdown in growth was primarily a result of high inflation, high interest rates and policy paralysis. Indian mining industry also suffered a slowdown as index of industrial production for mining contracted by 2 percent YoY in FY12. However, Indian coal mining industry witnessed a growth in both production as well as sales. The annual production of coal grew by 1.3 percent to reach 539 million tons. The size of Indian coal industry was estimated at INR 800 billion by the end of fiscal year 2012. Ministry of Coal has planned to increase the coal production by an average of 36 million tons per annum in the 12th five year plan.

The proven coal resources in India were recorded at around 114 billion tons as on April 1, 2011.  Despite the availability of vast coal assets, the country was a net importer of coal in FY12 due to domestic supply side constraints and burgeoning demand for coal. The demand supply gap estimated at 161.5 million tons at the end of fiscal year. Coal imports touched a figure of 99 million tons recording a YoY growth of around 43 percent. The government of India waived-off the customs duty on non-coking coal to ease the import of the same to meet domestic requirements.

In January 2012, Coal India Limited decided to increase prices and benchmark them according to Gross Calorific Value (GCV).The move, however, attracted a lot of opposition. Eventually, Coal India Limited had to roll back prices as a result of increasing pressure from power sector companies. The last quarter of the fiscal year also witnessed a controversy surrounding allocation of coal blocks to private and public sector companies without auction during the period 2004-09. The basis for this controversy was a report from Comptroller and Auditor General of India (CAG), which estimated a notional loss of INR10.6 trillion to the exchequer for not following a competitive bidding process in allocation of coal blocks. Central Bureau of Investigation entrusted with the responsibility of investigations in this case. Meanwhile, the Ministry of Coal allocated 81 coal blocks to power sector companies in May 2012 in pursuance of its policy to give preference to power sector. The Ministry also directed Coal India Limited to sign Fuel Supply Agreements (FSAs) covering total quantity of 438.29 million tons in May 2012 to thermal power plants.

In FY12, Coal India Limited continued to lead the industry by recording net sales of around INR 624 billion, a YOY growth of 24 percent. However, its total expenses increased by 26 percent during the same period due to increase in wage costs. The employee benefits expense of CIL spurted by 61.3 percent QoQ in fourth quarter after finalization of National Coal Wage Agreement (NCWA IX) on January 31, 2012. Neyveli Lignite Corporation recorded net sales growth of 13 percent and net profit growth of 9 percent YoY in FY12. Gujarat NRE Coke Limited registered a net loss of around INR 400 million in the fourth quarter due to foreign exchange losses. Adani Enterprises Limited also recorded a 26 percent decline in profits YoY in the fiscal year 2012.

Salient Points
•The Index of Industrial production recorded a 0.1 percent increase in the month of April 2012 as against April 2011. In fiscal year 2012, on an annual average basis, mining industry contracted by 2 percent compared to fiscal year 2011.
•Total production of coal was around 539 million tons in FY12 which was 14 million tons less than the targeted production. Coal India Limited recorded coal production of 435 million tons which was 81 percent of the total production.
•The demand supply gap for coal was estimated at 161.5 million tons for FY12 by Ministry of Coal which was 22 percent higher than the FY11 figure.
•Total coal imports touched a figure of 99 million tons in FY12 as against 69 million tons in FY11, a YoY growth of 43.5 percent. Coking coal imports recorded a growth of 29.6 percent while non-coking coal recorded a growth of 28.6 percent.


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