When global thermal coal prices crossed $450 a tonne in September, reflecting a surge in demand for the fuel in Europe, Coal India, the world's biggest producer, was charging less than a tenth of international rates for a similar grade of fuel. A portion of the miner's produce is auctioned, which last fiscal fetched an average premium of 88 per cent over the company's notified prices, according to ratings agency CRISIL data. The premium on such auction sales surged last quarter but the quantity of coal sold at market rates declined from last year's levels.
Successive Indian governments have shackled Coal India, preventing the miner from profiteering when coal prices rise. In 2012, two years after the miner went public, the government issued a rare presidential decree ordering the company to supply fuel to private sector generators on longterm contracts at notified prices, leading to protests by minority shareholders that the order will hurt profits. New Delhi still wields a tight control, a disservice not only to the company but to its minority shareholders. Slicing away Coal India's creamy layers also puts off global investors from participating in New Delhi's plans to divest additional stakes in the company.
Most of Coal India's 623 million tonnes (MT) of production in 2021-22 was sold at artificially low prices to power plants. For instance, this March, the price of Indonesia's Kalimantan 4,200 kilocalories a kilogram (kcal/kg) averaged $111 a tonne, excluding delivery and insurance, while Coal India's state-set price of a similar grade was between $12 and $14 a tonne. Indonesia is India's biggest supplier of imported coal.
"Coal India's mandate is to meet the country's energy security and keep power tariffs low," said Ritabrata Ghosh, vice-president at Mumbai-based ratings agency ICRA, a Moody's affiliate.
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