Coal India Ltd (CIL), which contributes 84 per cent of the country's production, is likely to end the current fiscal with a shortfall against its annual production target for 2016-17, analysts and industry stakeholders say.
They, however, predicted that the production and sales are expected to achieve "marginal growth" over the last fiscal.
During 2016-17, the miner set a target of producing 598.61 million tonnes (mt) of coal with an 11.11 per cent growth over the 538.75 mt produced in 2015-16. Its sales were at 534.50 mt in the last fiscal.
"Coal India is expected to end the year with an around 550 million tonnes of production, thereby missing the annual target by 40-50 million tonnes. The miner needs to produce about 90 million tonnes in March to touch even 570-578 million tonnes as envisaged by the Coal Ministry. This is quiet unlikely," Emkay Global's Research Analyst Gautam Chakraborty said.
So far, the average monthly production in the current fiscal is around 45 million tonnes, he said.
"Production has been impacted due to lower dispatch. Higher production without growing dispatch will add more to inventories."
"Off-take growth till February was around 1.6 per cent and I don't think it would change significantly in March," he said.
According to provisional data, the miner's off-take, from April 2016 to February 2017, was at 490.86 mt as against a target of 540.31 mt.
"CIL's off-take for the entire year is expected to be around 540-545 million tonnes, which will be marginally higher than last year. Previously, we found the miner's internal issues, along with scarcity of railway rakes, were the main constraints for flattish off-take. But, this year, subdued coal demand has largely impacted its dispatch," a Mumbai-based analyst said.
The miner's provisional data also showed its production during the first 11 months (April to February) of the current fiscal grew by 2.3 percent to 488.06 mt against a target of 535.38 mt set for the period.
"Going by the trend this year, I expect whatever has been achieved so far in terms of production growth will continue in the same line for the last few days of the current fiscal. No dramatic change is expected," former Coal India Chairman Sashi Kumar said.
"Never ever has Coal India had any reason to be concerned about its off-take. But now it is unsure of its off-take," he said, adding the miner should explore alternative market apart from India to boost its sales and thereby production.
Moreover, stocks at CIL's pit head were at 56.33 mt as on March 5, while 26.48 mt was at thermal power plants.
However, Coal India Chairman Sutirtha Bhattacharya, in the last Annual General Meeting, said going forward, the miner needs to move to a double digit growth rate in order to meet the production target.
When told the production and off-take are not moving on expected lines, he said: "We look at the target for meeting the need of the people (consumers)."
"CIL's trend of growth was affected by introduction of blanket ban by the Environment Ministry in 2010. But after the ban was lifted, the growth restored to seven per cent in 2014-15. In the last year, we had the highest ever growth of 8.9 per cent," a company official said.
"As many as 121 ongoing projects are under implementation and are expected to contribute 400 mt in 2016-17," he said.
The miner's projected production volume is 660.7 mt in 2017-18 and it envisaged production of 908.10 mt in 2019-20 with a CAGR (Compound Annual Growth Rate) of 12.98 per cent, with respect to 2014-15.
"If the miner has the target to produce such amount, everything should fall in line. Otherwise, it will always be below the target," Kumar added.
According to a company official, the improved dispatch and production, as compared to the past, has resulted in a downward trend of coal imports.
As of last December, coal imports reduced to 144.87 mt as compared to 146.12 MT for the same period in 2015-16. Further, the total coal imports in the last fiscal were 199.9 mt as compared to 217.8 mt in 2014-15.
In 2016-17, up to January 31, the power utilities imported 16.6 mt coal as against import of 31.6 mt during the same period in 2015-16.
