India Ratings and Research (Ind-Ra) in its latest report has said that demand for domestic coal is likely to be subdued in Q2 (July-September) of the current financial year (FY21), on the back of lower demand from end-user industries amid the COVID-19 pandemic along with high inventory at power stations. It noted that domestic coal production remained subdued for the third consecutive month in June 2020 year-on-year as well as month-on-month. Accordingly, it said the coal offtake reduced in June 2020 year-on-year but improved month-on-month with the gradual relaxation in lockdown norms.
According to the report, the share of imports in the total domestic consumption reduced to 22 percent in June 2020 from 28 percent in FY20. While the non-coking coal imports reduced 34 percent y-o-y, coking coal imports declined 41 percent y-o-y. However, it said 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 said a global shift towards greener fuels and simultaneous withdrawal from coal-based energy may be a key challenge to participation of industry players.
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