Coal India Warns of Production Cuts Without Price Hike

Price hike of coal should take place immediately. It has become very urgent for Coal India. Otherwise, coal production in the country will suffer, according to Coal India chairman

Coal India expects to supply 670 million tonnes in the financial year ending March, almost 17 per cent higher than a year earlier. Image: Getty

New Delhi: Coal India, the world’s largest coal producer, has issued a warning that its production may decline, risking new threats to the country’s energy supply, if the company isn’t able to raise prices.

According to a report by Bloomberg, the state-run miner is witnessing cost pressures from a looming rise in salaries and on higher prices of diesel used to power mine equipment. Some of the company’s units are finding it “difficult to survive without a price hike,” said Chairman Pramod Agrawal on a call with analysts.

Hiking prices of coal which included in long-term supply agreements would require backing of the government. The price rise of the fossil fuel could also impact higher rates on inflation and broader economy.

The chairman’s warning came at a time when the country relies on for around 70 per cent of its electricity generation through coal. Coal inventories at power plants tumbled late last year as mine output fell, triggering power outages and supply curbs.

As India approaches summer in a few weeks, power demand in India will increase.

Coal reserves at power plants have risen from a low in September, however, they are still only about a third of an April 2020 high, the report said.

The chairman said, “Price hike of coal should take place immediately. It has become very urgent for Coal India. Otherwise, coal production in the country will suffer.”

Coal India expects to supply 670 million tonnes in the financial year ending March, almost 17 per cent higher than a year earlier.

For the following 12 months, the state miner has set a shipment and production target of about 700 million tonnes.

With efforts to replenish stockpiles for electricity generators being prioritised, other industries are complaining of supply shortfalls.

Aluminium Association of India said that coal reserves at power plants used by aluminum producers are at an average of three to four days, down from an average level of 15 days.