UPDATE 2-Coal India to meet supply target despite output slip

Thu Feb 14, 2013 9:36am EST

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By Malini Menon

NEW DELHI, Feb 14 (Reuters) - Coal India Ltd (CIL) will miss its production target for the current year by up to 6 million tonnes and will meet its supply target by drawing on stocks, its chairman said on Thursday.

The world's biggest coal miner, which has a production target of 464 million tonnes for the current fiscal year through March, has a supply aim of 470 million tonnes.

The state-run miner, which produces about 80 percent of India's coal output, has a stockpile of 47 million tonnes, Chairman S. Narsing Rao said, nearly 24 million tonnes lower than its stocks at the beginning of this financial year.

"Some shortfall (in production) will be there. It is a little tough to predict. I expect a shortfall of maybe 5 to 6 million tonnes," he told Reuters by phone.

Coal India produced 355.31 million tonnes of coal during April to January 2013, up 5.8 percent from a year earlier, according to the coal ministry.

"The 470 million tonnes (supply aim) is really more sacrosanct (than the production target)," Rao said.

Rakesh Arora, managing director and India head of research at Macquarie Capital Securities (India) Private Ltd, said: "The production is immaterial, what matters is the offtake (supply) and that is the number to focus on.

"CIL remains on track to meet the offtake target of 470 million tonnes or so. Production is purposely limited to reduce the inventory," Arora said.

Even though the miner's output has grown 10.8 percent so far in this fiscal year, Rao said it was inadequate to meet burgeoning demand from the power sector.

More than half of power generated in India is through burning coal. The country has an installed power capacity of nearly 211,000 megawatts (MW), nearly 48 percent more than it had five years ago.

CAPACITY GROWTH

Coal production has failed to keep pace with capacity growth in the power sector in India, where energy production falls far short of the demands of a fast-growing economy, Asia's third largest, and an increasingly affluent population.

Last August, India faced one of the world's worst-ever blackouts, when three of its five transmission grids collapsed, cutting power to states which are home to some 670 million people or more than half of the country's population.

India, which has about 118 billion tonnes of coal that could be mined, ekes out only about 600 million tonnes annually, due to delays in obtaining regulatory and environmental approvals.

Rao said there was "no way" the coal shortage in India could be met in the five years through March 2017, adding the country's reliance on coal imports would remain.

India imported 102.7 million tonnes of thermal and coking coal between April and December, up 28.2 percent from a year earlier, provisional figures showed.

"We may be able to reduce imports possibly in the 13th five-year plan," he said, referring to the period 2018 through 2022.

Rao also said he could not rule out higher coal prices, possibly in the next fiscal year. The miner saw its power and fuel costs rise 35 percent year-on-year to 59 rupees ($1.10) per tonne, mainly due to higher diesel prices, in the third quarter of this fiscal year.

"We cannot rule out (price increases). We've seen the diesel price rise. It is a sensitive matter. At what time, I can't say right now." ($1 = 53.7850 Indian rupees) (Editing by David Holmes)

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