Coal India Ltd. cut production in May by almost 12%, a sign that demand for the fuel hasn’t kept pace with supplies and that high stockpiles continue to worry the state-run miner.
Output since April, a period when searing heat waves pushed India’s electricity demand to new highs, declined nearly 11% from a year earlier, while shipments grew by a mere 1%, the company said in a filing on Monday. As a result, unsold inventories have consistently remained above 100 million tons over the past year, taming production.
Falling output during the months of strongest demand underscores the diverse challenges Coal India is encountering as the energy market diversifies. The near-monopoly status it enjoyed in the past has been eroded by a range of captive and private producers that are beginning to nibble into its market share.
“Power plants had stocked up coal ahead of the summer, and for a large part of the high demand period, they used their own stockpiles, limiting new sales from Coal India,” said Rupesh Sankhe, senior vice president for research at Elara Capital India Pvt Ltd. “Also, renewables accounted for a much higher share of the incremental power demand than coal, forcing Coal India to cut production.”
In May, when heat pushed peak electricity demand to new records for four straight days, renewables output grew 29%, while coal-fired generation rose about 10%, Sankhe estimates.
Coal India had nearly 114 million tons of stockpiles at its mines as on May 24, a 10% growth from a year earlier, it said last week.
(By Rajesh Kumar Singh)
