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Business News/ Market / Mark-to-market/  Coal India starts off fiscal year with production spurt
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Coal India starts off fiscal year with production spurt

Coal India's production for April increased by 11% from a year ago while offtake or sales volume increased by 7.4%

The government’s efforts on easing clearances have helped boost the company’s production. For 2014-15 as a whole production rose 7% compared with the previous year. Photo: BloombergPremium
The government’s efforts on easing clearances have helped boost the company’s production. For 2014-15 as a whole production rose 7% compared with the previous year. Photo: Bloomberg

Coal production is improving in the country. It was one of the brighter spots in the recently released core sector performance data, with coal production increasing 6% in March from a year earlier.

April, too, should be better. That’s because Coal India Ltd (CIL), the country’s largest coal producer, has performed well. Its production for April increased by 11% from a year ago while offtake or sales volume increased by 7.4%. For 2014-15 as a whole production rose 7% compared with the previous year.

The government’s efforts on easing clearances have helped boost the company’s production. CIL’s production target for this fiscal year is 550 million tonne (mt). That translates into an 11% annual growth. According to Nomura Research, the implied run-rate to achieve CIL’s 2015-16 production target is 1.52 mt per day. But considering the company’s disappointing past record with meeting targets, analysts are relatively conservative in their production estimates. For instance, JM Financial is factoring 6% year-on-year growth in production this fiscal year and Nomura expects 6.8%.

However, while production has improved, evacuation bottlenecks make meaningful offtake improvement difficult. As JM Financial pointed out in a note, project approvals have seen delays and land acquisition remains a problem. “While the Central government has shown willingness to address these issues, State onboarding in the reform process is a necessity for success of any policy announced by GoI," added JM Financial.

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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
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Published: 05 May 2015, 04:20 PM IST
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