COAL – BLACK GOLD ALWAYS IN RED

Suppose you are holding a birthday party and you want to order an eggless cake. There are bakers around you but none of them are willing to bake what you want. You go to the neigbouring state and there, you are flooded with a choice that too of a much better quality; its expensive and will make a dent in your entire month’s budget but yet, you decide to buy. So, the bakers in your area, if they had been enterprising enough or not this lazy, you could have given them a new line of business – they would have made money and you would not have punched a hole in your pockets – all would have been happy. Instead, you do have what you want because you have no other alternative and paid a big price for it too.

That in short is the situation of coal in our country. Given the need for power/electricity, its literally a party for the power companies if they are run and allowed to run efficiently. But to power the power units, the main fuel, coal is always in short supply. It’s not as though we don’t have coal – PSU Coal India, which supplies over 82% of the coal needed in the country is the largest coal producing company in the world! And yet, because Coal India is simply not efficient enough, never bothered to fix the supply glitches, India continues to import coal.

Coal India’s January production declined 4% (YoY) to 60.5 mt. This was mainly on account of a 3% drop in production from South Eastern Coalfields, which contributes to 25% of Coal India’s total  production.

And for FY21, it has set the target of 650 mt production while it had produced 463 mt till end of Jan’21.

On the other hand, there is the news that India’s coal import rose 15% (YoY) to 23.63mt.

This does not come as a surprise at all given that the economy is trying to jump back to pre-Covid levels as the pandemic numbers decrease. This is something which even Coal India could sense would happen, yet, there was no move made to improve the production.

Yet, what we have to admit is that over the years, Coal India has pulled up its socks and tried to buckle up. Its better but not yet good. But what many in the industry say is that the dependence or the fiefdom of the Govt on Coal India, hoovering into the cash piles of the company, leaving very for its own modernization and expansion is at the root cause of the inefficiency.

Also, the other problem is that the coal produced within the country is low grade and companies need higher or different grades of coal, which is what gets imported.

Coal is extremely detrimental for the environment but given the demand from India, there is now way that we going to be able to replace coal with renewables.  But unless the miners, politicians and consumers do not come together, with the single-minded objective of reducing imports and improving efficiency within, there is no dawn in sight.

The demand for coal is there, it’s infact huge, but its all up to Coal India to rise up and hope that the politicians will allow it to grow.  If we want to achieve the $5 trillion economy target, coal needs to be fired up.