Coal India, the world’s largest coal miner, has upped output prices
as many as three times in the current financial year so far – a record
of sorts. This, coupled with 5 per cent higher production, should have
expanded margins and boosted profits like never before. On the contrary,
the company posted a 10 per cent dip in net profit at Rs 6,783 crore in
the first half of the current fiscal (Apr-Sep 2013) – its first loss in
several years. Net profit had jumped 12 per cent during the same period
previous year (Apr-Sep 2012). So, what went wrong?
An analysis of the company’s month-wise performance reveals how the
electronic spot sales, which have acted as the company’s safeguard
against declining margins and stagnant efficiency levels for years,
ditched the miner this year. Data shows that while Coal India is selling
significantly higher volume of coal through e-auctions this year, its
price has remained stagnant despite a jump in notified prices, pulling
down the net realisations on the back of rising fuel and employee costs.
Around a tenth of Coal India’s annual 452 million tonne (MT) output
is sold through e-auction at market rates largely to non-core consumers.
These prices have historically been 50-80 per cent higher than the
notified price at which the rest of the produce is sold. Between April
and November this year, e-auction volumes grew 32 per cent to 34.8
million tonne. However, the price remained stagnant at around Rs 2,220
per tonne. To add to the problem, Coal India’s premium in e-auction over
the notified price has dropped significantly both on a sequential and
year-on-year basis (see table). In other words, consumers are buying
more e-auction coal but paying less. This naturally impacts the
company’s bottom line.
Source:-Business Standards
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