After ditching a billion-ton target, Coal India reviews demand and diversification afresh

India’s largest coal miner will take a fresh view of domestic demand and CIL’s ventures into renewable energy to determine its capital expenditure (capex) beyond 2018/19, during which the miner has committed to invest $1.4-billion.
According to an official at CIL, the production target had to be shifted in view of the Paris climate change accord and a change in India’s energy mix, with a greater emphasis on renewable energy. The official said that the company’s capex programme beyond the current financial year should also reflect this change in business and demand scenarios.

In view of the changed environment, CIL will prepare a ‘Vision Document 2030’ to develop a new roadmap, factoring in new demand forecast for coal and higher investment markers for diversified business verticals on clean energy and solar power, the official said.
However, industry analysts pointed out that the Paris Agreement had been signed in 2015, and the official ‘re-look’ at the one-billion-ton target had much to do with the miner not being in a position to achieve such production levels, having only produced 567-million tons during 2017/18 and chasing a target of 630-million tons in 2018/19.

In absolute terms, the total increase in Indian coal production between 2013/14 and 2017/18 has been recorded at 110-million tons a year and an indication of the unfeasibility of CIL ratcheting up its production to one-billion tons over the next two financial years, the analysts added.

CIL’s relook at demand forecasting has also been triggered by the fact that a domestic shortage of coal was not so much a factor of production, but severe bottlenecks in distribution, logistics and transportation. This is borne by the present shortage of dry fuel faced by non-pithead thermal power plants located at distances from coal mines and despite the miner carrying inventories estimated at 54-million tons.

Company insiders said that in view of this, CIL’s capex will have to show greater bias towards creating transportation infrastructure, including increasing the number of projects to construct its own railways lines, to support national transporter Indian Railways` carrying capacity.