Coal is piling up at pitheads even as the country is scrambling for the fuel. As much as 70 million tonnes of it in 2011-12. Because of a lopsided focus on production, without much attention on improving evacuation logistics, there was a steep increase in Coal India’s pithead stock throughout the last decade.

In 2010-11, Coal India did not post any growth in production. Yet its inventory moved up by close to 6 million tonne or 8.8% implying the economy could not even use all the coal produced during the year.

From 21.33 million tonne or 7% of the annual production in 2003-04, pithead stocks have grown to 70.88 million tonne (16.26%) in 2011-12.

Between 2003-04 and 2011-12, while production increased by 129 million tonne pithead stocks were up by 50 million tonne.

In 2009-10, when coal production increased by a peak rate of nearly seven per cent, well over half of the incremental production remained unsold. CIL simply lost the opportunity to realise cash and was happy with a book turnover, at cost price.

At an average of INR 300 a tonne pithead taxes and duties, the Centre and the coal bearing States lost an opportunity to earn approximately INR 2,100 crore. A cash-strapped Railways has lost INR 2,000 crore in freight revenue.

Actual loss to the exchequer is much higher as every value addition fetches tax revenue.

While a long term remedy of this problem lies with Government initiatives, CIL is reportedly considering a shift in its focus on offtake in the annual plan. If implemented, the mine manager will be responsible for growing inventories.

The move, sources said, began in 2011-12, when the coal major reported the lowest inventory growth of 2.4 per cent in a decade.

Source - Business Line

(www.coalguru.com)