Coal India warns that without a price hike, it may reduce output

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Coal India Ltd., a state-owned miner, has warned that unless prices are raised, production of the fuel will decline, posing significant challenges to the country’s energy supply.

An anticipated increase in salary, as well as increasing fuel prices required to power mine equipment, are putting pressure on the world’s largest coal producer. On a conference call with analysts, Chairman Pramod Agrawal said that some of the company’s units are finding it “impossible to exist without a price hike.”

Raising coal pricing under long-term supply agreements would require government approval, as higher rates would harm the country’s inflation and the broader economy.

Agrawal’s warning comes as the government continues to put pressure on Coal India to maintain the supply of fossil fuel, which accounts for roughly 70% of the country’s energy generation. Late last year, when mine output declined, coal inventories at power plants plummeted, resulting in power disruptions and supply restrictions.

On the Thursday conversation, Agrawal emphasized that a “price raise should take place quickly; it has become very urgent for Coal India.” “Otherwise, the country’s coal production will suffer.”

Coal India intends to deliver 670 million tonnes in the fiscal year ending in March, rising about 17% from the previous year. The corporation has set a shipment and production target of around 700 million tonnes for the next 12 months.

Other industries are complaining about supply shortages while efforts to replenish inventories for electricity producers are the priority. According to the Aluminium Association of India, coal stockpiles at power plants used by aluminium companies are at an average of three to four days, down from a typical level of 15 days.

CIL, the state-owned coal company, has delivered 575 million tonnes (MT) of coal so far this fiscal year, surpassing the entire dry fuel dispatch in 2020-21. Coal India Ltd (CIL) announced in a statement that it dispatched 574.5 MT of coal in FY21.

The 9.4% increase in power generation from January to December FY22 was the largest in a decade, owing to a robust post-Covid economic recovery. In contrast, due to a substantial increase in international coal prices, coal imports have dropped to a nine-year low.

This put the onus on CIL to step in with enhanced supply to ensure that power was generated without interruption, which it accomplished.

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