Coal news and updates

Are Coal India’s stocks saleable at all?

November 13: Coal India Ltd (CIL) has reported a sharp decline in its pithead vendible stocks over the past around 14 months beginning March 2013, but the pace of decline appears to have stagnated from August this year raising speculations that all the stocks that the company is showing on its books may not be actually saleable.

According to data available with ICMW, the pithead vendible stocks of CIL stood at 53.72 million tons (mt) as on April 30, 2013, but fell steadily to 32.47 mt as on July 31, 2014.

The stocks fell further to 29.69 mt as on August 30, 2014.

However, after that the company could not bring down the stocks further and these was languishing at 29.32 mt as on September 30, 2014 despite alarmingly low levels of coal stocks at power plants in the country.

“Why is it that CIL could not despatch coal from its stocks when power plants or for that matter most of the other consuming sectors were starving of coal,” an official from a leading cement company wondered.

Incidentally, CIL had been reducing its vendible coal stocks on an average of 3-6 mt per month since April 2013 and had managed to reduce the stocks by 2.60 mt between August 2013 and September 2013 from 35.59 mt to 33.99 mt.

However, it could reduce the stocks only by 0.37 mt between August 2014 and September 2014.

“Why was CIL not able to reduce the stocks this year when there was huge demand for coal and also when there was almost decent availability of rakes,” asked another official from another coal consuming company.

Some officials even went to the extent of raising doubts over actual availability of coal stocks with CIL subsidiaries.

An official from CIL had told ICMW in August that the entire stock is vendible when asked if the 31.20 mt (as on that day) lying at its pithead was practically vendible.

“Note how much stock we are left with -- only about 31.20 million tons as on August 7, 2014 compared to around 67 mt around two years back. Even after this, if people wonder whether the stocks are vendible or not, is difficult to answer!” the official said.

“Earlier, when the stocks were at 67 mt, people used to say these were useless, cannot be burnt. But now people doubt the 31 mt figure. Had the stocks not been vendible, how could we reduce the figure to 31 mt?” the official asked.

Meanwhile, industry sources believe, because of the introduction of third-party sampling, CIL is now finding it difficult or is unable to despatch low-grade coal or boulders to power sector consumers.

“I think there are indeed physical stocks at the mines, but these are not saleable,” said a second industry source.

“There is a huge stock-pile of low grade coal at BCCL, which no one wants to buy. Of the total vendible stocks of around 30 mt at all the mines of CIL, around 15 mt are not saleable because of poor quality,” the source feels.

One should ask CIL why its stocks did not go below 29 mt and why there is no improvement in off-take despite the high inventory and higher production volumes, a third source added.

Another source pointed out that the vendible stocks at BCCL had not declined below 3 mt for the last three months. “Stocks are definitely there, but whether these are coal, stone or shells, have to be determined. Basically, CIL keeps stocks of material in totality and does not break-up these into grades, as this is not physically possible,” he added.

Asked if the stocks are not saleable, what should CIL do with these, the fourth source suggested that “CIL should declare these as zero-value stocks and that at least 15 mt fall in this category.”

A fifth source said CIL blames the railways for lack of rake availability that affects evacuation, but the fact is there are some subsidiaries which are unable to load rakes despite these being provided.

“Evacuation is an issue, but one has to ask the company about the status of rakes left behind (LB) with CIL subsidiaries on which demurrages are paid to Railways,” a source said.

According to information available with ICMW, the average availability of rakes by CIL in October was at 192 per day, but left behind (LB) rakes were at 11, ie, the number of rakes available but could not be loaded in the absence of coal.

The number of rakes left behind has come down marginally in October because there was a spurt in production. But even the 11 LB per day is an issue because as much as 40,000 tons of coal could not be loaded or these were not there.