India Ratings expects muted demand for domestic coal in Q2FY21

India Ratings & Research (Ind-Ra) in its latest report has said that the demand for domestic coal is likely to be subdued in the second quarter of the fiscal year 2020-21, on the back of lower demand from end-user industries amid the COVID-19 pandemic along with high inventory at power stations.

The credit rating agency noted that the domestic coal production remained subdued for the third consecutive month in June 2020 on YoY as well as on a month-on-month basis. Accordingly, it said that the coal offtake reduced in June 2020 YoY but improved on a month-on-month basis with the gradual relaxation in lockdown norms. As per the report, the share of imports in the total domestic consumption reduced to 22 per cent in June 2020 from 28 per cent in FY20. 

While the non-coking coal imports reduced 34 per cent YoY, coking coal imports declined 41 per cent YoY. However, it said that the commercial coal mining and the associated reforms announced by the government will help in shaping the coal sector towards a more deregulated and competitive scenario in the long-run. However, Ind-Ra said resistance by some states over environmental concerns for some mines on offer is likely to stall the auction of such blocks. Furthermore, it added that a global shift towards greener fuels and simultaneous withdrawal from the coal-based energy may be a key challenge to the participation of industry players.