In the latter half of the current fiscal year, global coal prices are anticipated to surge, potentially influencing the pricing dynamics of domestic e-auctions for coal in India. Analysts suggest that despite this surge, Coal India Ltd might not immediately revise prices, opting instead to focus on escalating output to counterbalance the impact of heightened imported coal prices on power companies and consumer electricity tariffs.

Presently, domestic coal prices hold a discount of 40-50% compared to international markets, with India relying on imports to meet over a fifth of its coal consumption, accumulating an import bill of nearly Rs 3.9 trillion last year. However, with increased demand preceding the winter season and supply constraints, international coal prices are expected to rise.

Indonesian coal prices to India ascended from $53.5 to $60.3 per tonne in October, while domestically, coal sold through e-auctions currently stands at around Rs 3,200 per tonne, down from Rs 4,800 per tonne last year. Experts forecast a potential increase of $2-$10 per tonne in imported coal prices due to seasonal factors impacting production in Indonesia, along with winter stocking preparations by countries like China, Korea, and Taiwan.

Although the first half of the fiscal year witnessed a drop in global coal prices due to abundant supply and reduced premiums for Australian coal, the International Energy Agency reported a change in this trend due to normalized production following La Niña disruptions. However, the section of coal sold via e-auctions might witness a price surge if international prices rise, according to Partha S. Bhattacharya, former Chairman and Managing Director of Coal India Ltd.

Despite potential global price increases, Coal India may abstain from price revisions, leveraging its robust growth and cost management capabilities. However, elevated coal prices might challenge India's coal imports, which are critical to meet the burgeoning power demand. Current data reveals that 64 out of 182 monitored power plants in India face critical coal stock shortages.

This situation raises concerns about India's dependency on imports to meet its power demands, prompting the government to direct power plants to import 4% of their coal requirement for blending till March 2024. Additionally, experts highlight the impending challenge of disposing of produced coal due to its perceived low quality, potentially leading to difficulties for public sector companies.

As India grapples with both power shortages and potential price hikes in the global coal market, ensuring a stable and efficient coal supply chain remains a significant concern.