Coal India Ltd (CIL) has called for the government’s consideration for a lower or discounted railway tariff for transportation of domestic coal booked by consumers. The move would help facilitate import substitution to some extent, it said.
The move comes in the wake of mounting concern over fall in coal despatches due to a Covid-19-led demand slump. The company primarily taps domestic coal-based power plants and non-power sector consumers who import coal. Put together, they imported around 150 million tonnes in 2019-20.
Supply changes
CIL is planning to substitute its supplies with domestic coal, which would help the coal major step up its sales. The move would result in curtailing forex outgo arising out of coal imports and help the company 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. The power sector, which makes up close to 80 per cent of CIL’s total supplies, is brimming over with nearly 50 million tonnes of coal sufficient for 29 days of consumption, as of May 2020. Already, many plants have started restricting supplies from CIL, further shrinking the despatches of coal companies,” said a press statement issued by the company.
The power sector lifted only around 75 per cent of coal at around 30.15 million tonnes from CIL sources in May this year, compared to what it did same month during last year, resulting in a 10.23 million tonnes slide in supplies.
“The company can work on the supply side, improving facilities to our customers like reduction in reserve prices in auctions and liaising with the Railways on their behalf. We can cater to the demand but cannot create it, as demand is based on many factors such as logistics, freight movement, fluctuation in international prices affecting landed cost, and most importantly, the working capital liquidity of the consumers,” the release said.
Promoting domestic coal
CIL is also focussing on non-power sector consumers such as sponge iron, cement, fertilisers and steel, among others, and persuading them to replace their imported coal with domestic coal so as to find avenues for expanding its supplies.
“Dialogue is on with customers who opted for import substitution of coal in FY20. Until demand for dry fuel picks up from these sectors, supplies may be on low key,” the release said.
A portal has also been developed by CIL through which the consumers can register details of their demand of domestic coal towards import substitution and secure allocation of coal.