Govt aims to boost low-grade coal sales while global prices high

Govt looks to offer more of the fuel at home and initiating steps to lower freight costs as it aims to cut coal imports


Coal India Ltd has sharply boosted output in the past two years but has struggled to sell all of that due to softer domestic demand and the availability of superior-grade foreign coal at competitive rates, until recently. Photo: Indranil Bhoumik/Mint
Coal India Ltd has sharply boosted output in the past two years but has struggled to sell all of that due to softer domestic demand and the availability of superior-grade foreign coal at competitive rates, until recently. Photo: Indranil Bhoumik/Mint

New Delhi: India is trying to boost sales of its low-quality coal by offering more of the fuel at home and initiating steps to lower freight costs, while global prices are high, with the government hoping the moves will help cut imports.

State-controlled Coal India Ltd, the world’s largest miner of the fuel, has sharply boosted output in the past two years but has struggled to sell all of that due to softer domestic demand and the availability of superior-grade foreign coal at competitive rates, until recently.

Benchmark Australian coal prices have more than doubled this year, helped by reduced Chinese mining and strong demand across Asia and Europe just when exporters cut output. But prices have begun to recoil this month as China eased restrictions on domestic mining.

“Our prices are already very competitive,” India’s coal secretary Anil Swarup told Reuters. “If transportation costs can be brought down, more and more private companies will bid to buy from Coal India.”

Swarup met railways minister Suresh Prabhu late last month to discuss lowering the charges to move coal in some routes to lure private firms away from foreign coal, according to a government source with knowledge of the matter.

Swarup declined to comment on the meeting. Railways spokesman, Anil Kumar Saxena, did not respond to calls seeking comment.

A senior Coal India official said cutting freight charges has been a long-standing demand of the company’s clients and should help boost sales if the government moved ahead.

Daily dispatches of coal had already jumped by a fifth this month to around 1.6 million tonnes, he said, and the company is set to make a record amount of coal available to be sold through auctions. The company typically sells only 10% of total output through auctions to private companies but the government has relaxed that limit.

“We are offering more and more in auctions,” Swarup said. “We can scale up production as and when needed; exposed coal is available.”

Higher international prices and the rise in local output are expected to cut India’s imports by around 20 million tonnes this fiscal year from the 181 million tonnes brought in for the year ended 31 March 2016, said the Coal India official, who declined to be named because he was not authorised to speak to media.

Coal imports fell 16% to around 10 million tonnes in September, the lowest level since April 2013, according to brokerage Motilal Oswal. Reuters

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