Coal offtake under watch as industry builds stocks

New Delhi: The coal ministry is closely monitoring fuel offtake by state nodal agencies amid reports of an increase in buffer stock by the informal industrial sector, people close to the matter said.

Coal India Ltd supplies coal to state nodal agencies which mainly cater to small and medium-sector consumers, such as brick kilns and other small industrial units that do not have fuel supply agreements. The ministry has reached out to states to gauge their requirements and ensure adequate supplies at Coal India-notified prices.

The ministry is ensuring adequate supply of coal, a government official said, with overall stock in the country at 224 million tonnes, up from 201 million tonnes last year. The Centre has already written to states to ensure that coal prices are not increased and there is ample availability to meet any increasing demand.


However, offtake by the state agencies has only risen marginally in recent times, one of the people said. A major reason for the lower offtake is the limited storing capacity of these industries as well as the locking of working capital, an industry executive said.

The ministry had allocated 1.26 million tonnes of coal in the last fiscal year ended March 31 for these state agencies. Only around 15% of this was used.

The last e-auction by Coal India had offered 32.5 million tonnes, of which the offtake was 13.3 million tonnes.

Meanwhile, coal prices have risen internationally and percolated to the free market rates, driving a 10-15% premium over the usual rates during this time of the season.

A news report from S&P Global Energy on March 23 said the Platts CFR India 4,200 kcal/kg GAR rose from $67 metric tonne on February 27 to $77.40 on March 20, supported by strong buying interest in parts of Asia, firm energy market sentiment and higher freight rates.

The rise has led to an anticipation of prices going up further in the domestic free market as well, and is one of the reasons why small industrial units have raised their fuel stock in the high-demand period.