Coal India's billion tonne by 2020 target may hit demand roadblock

Coal ministry may force Coal India Ltd (CIL) to slow down production rate and may even cut prices to clear mounting stock as store space is running out fast, minister Piyush Goyal said.

It is problem of plenty for Coal India now, and far cry from days when the government in its zeal to secure supply security for upcoming power plants talked about 1-billion tonne production by the public sector behemoth by 2020.

With power plants not finding enough buyers for their production and with stockyards overflowing with coal, not to mention the infrastructural bottlenecks in connecting all mines to rail network, petering production and even reducing prices are some of the possibilities that coal and power minister Goyal discussed with CIL chairman Sutirtha Bhattacharya on Thursday.

"We are struggling to see how we can sell more coal quickly so that we can liquidate some of the stock and bump up production because we have come to a situation where we don't have any more ability to stock coal. And I actually see before my eyes a situation where we actually peter down the coal production because of our inability to be able to market that coal in greater number," Goyal said.

Goyal also spoke to the chairmen of other subsidiaries like Central Coalfields Ltd, who requested the minister to generate demand for their rising stocks.

"During our conference call to CCL chairman, I was requested to create market for its coal and get the coal evacuated from the stockyards," Goyal said while addressing a meeting of Indian Chamber of Commerce.

Till December, Coal India has produced 373.45 million tonne, a growth of 9.6% year on year.

Coal and power minister's comments come at a time when there is growing demand to revise coal prices downwards in light of realities in the global market where price of the fossil fuel is on a secular downswing.

Government even directed Coal India some months back to bring down prices of some grades following pressure from discoms (distribution companies) and consumer groups.

As per Central Electricity Authority Data, coal stocks with power plants have doubled to 30 million tonne on year on the back of lower production.

"We are being criticised for power plants running at 60% of generating capacity. But this has happened because 30,000 mega watt of power capacity has come into operation in the last 20 months," Goyal said.

This, he said, is better than power projects remaining stuck and stranded, and then turning up as potential non-performing assets for the banking sector.

"Unless we demonstrate to investors across the world that we have sufficient power capacity, they won't come and invest in India," Goyal said, justifying excess thermal power capacities at a time of low demand.