Coal India Ltd, the monopoly miner of the resource, may go for a price hike by end of the current fiscal following a fall in its earnings due to drop in the average quality of coal mined.
A better understanding of the actual need to raise prices would happen by the end of third quarter as by then old stocks would be fully cleared and supplies would consist only of freshly mined coal, chairman Narsing Rao has told analysts.
“We would like to observe for some more time what kind of grade decline would be happening with fresh coal (coming in). Some possibility (of price hike) is there, but when and how much we don’t want to speculate,” Rao said when an analyst asked would Coal India raise prices in order to safeguard its earnings.
State-owned Coal India’s profits saw marginal drop for the July-September quarter to Rs 3,052 crore against Rs 3,078 crore year ago even as sales were up 6% to Rs 15,411.5 crore from Rs 14,572.5 crore.
Profitability also suffered because of lower realisation from e-auction as power producers, burdened with excess stocks, stayed away.
“Our deliveries to the IPPs (independent power producers) have been better over the last year.
Stocks at the power stations have been at 22 million tonne (mt) consistently for the last 7-8 months. So purchase of IPPs buying coal from e-auction has come down,” Rao said. Apart from falling realisation, Coal India is also staring at the prospect of missing its production target for 2013-14 set at 492 mt.
“We had a jolt in October losing about 5-6 mt of production. But we are not revising our targets (of producing 492 mt in fiscal 2014). I won’t say we are very confident but we are (reasonably) confident of facing this challenge and go as close as possible to 492 mt,” Rao said.
Also, it has outstanding dues with NTPC, its key customer, some of which may turn bad debt.
“Our receivables from NTPC now are about Rs 3,400 crore. At the beginning of October, receivables from NTPC were Rs 4,700 crore, and since then a portion of it was liquidated including some adhoc payments. I don’t want to comment on the likely write-downs that may or may not happen but we are taking this up seriously with NTPC. Our intention is to get back as much money as possible,” he said.
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