Coal India Ltd.’s shipments in April slumped 25.5% when compared to the year earlier. Industry officials are saying that this marks the steepest rate of decline in at least six years. After more than a month-long nationwide lockdown halted economic activity, eroding demand for India’s most dominant energy source.
More than 75% of the electricity generated in India is coal-fired. Coal India accounts for more than 80% of India’s domestic production. Nonetheless, shipments fell 25.5% to 3.91 Crore tons last month, the Kolkata-based miner said in a filing late Friday. In line with that, production also fell 10.9% to 4.03 Crore tonnes.
For context, India is currently going through a nationwide lockdown that is meant to curb the spread of coronavirus. PM Modi had announced its enforcement on March 25 and later extended it to May 3, on April 14.
India’s power usage has fallen by more than a quarter since March 25. According to ratings agency Moody’s unit ICRA, the demand for coal in FY20, is falling for the first time in at least 36 years.
“Coal India’s output is expected to remain muted until demand starts picking up,” Rupesh Sankhe, an analyst at Mumbai-based Elara Capital India Pvt., said. “It will probably look at new customers, especially those that depend on imported coal, to shore up shipments.”
Analysts say that the global coal demand is heading for its biggest annual drop since World War II . Several countries have been opining that burning the fuel to make electricity is becoming unprofitable and socially untenable. The pandemic has only served to hasten its demise. The lockdown in India has shut factories and offices slashing electricity demand by about a quarter, affecting the use of coal and causing inventories to swell to record levels.
Even so, it seems that the miner has set a higher output and shipments target for the fiscal year that began April 1. Coal India officials are saying that the company has been working on overburden removal – the process of removing top soil to expose coal seams underneath so mining can resume at full pace when the lockdown restrictions are lifted.
Several Indian private power producers are debt-laden. Claiming that they are facing a liquidity crunch, they have been lobbying the central government to postpone coal linkage auctions. Power producers bid for supplies during these auctions. Furthermore, they are asking centre to return deposits they made to participate in them.
“It is inexplicable as to why auctions are being conducted so hastily, especially when the unprecedented situation due to the COVID-19 pandemic has created stress for the power producers,” Ashok Khurana, Director General at the Association of Power Producers said in a letter, seen by Reuters, to the Prime Minister’s office on Friday.
Indian Government is saying that this lockdown is set to extend well into the middle of May. Even so, the Ministry of Home Affairs just came out with zonal demarcations based on how affected by coronavirus, an area is. Along with that, a list of “essential services” were announced. Businesses that provide these “essential services” can progressively operate more in the safer zones. So, coal demands just might rise again. Last week Coal Minister Prallhad Joshi said echoed these post-lockdown expectations as well.