It may now cost less to import coal than procure it locally.
Globally, coal prices fell to their 12-year lows on Wednesday, hit by a slowdown in demand, especially in India and China, which have until now been the main consumers. Prices have been falling for sometime now.
Benchmark API2 2016 coal futures fell to $52.85 a tonne, a level not seen since November 2003.
“Indian coal imports are now under pressure... Coal imports ran at their weakest annualised rates since October 2014,” Australian bank Macquarie said in a statement. “Such a fall might not be just a temporary blip,” it added.
Sambitosh Mohapatra, a partner with PricewaterhouseCoopers India, said steel and cement companies, which had bid aggressively during the first round of coal block auctions in February this year, could find it costlier to mine coal domestically when compared to the imported price.
The price decline has also weighed on Coal India Ltd (CIL), which saw its average earnings from e-auction fall to Rs 2,184 per tonne during April-June from Rs 2,450 a year ago, a CIL executive told HT. E-auction accounts for one tenth of the miner's output.
Kuljit Singh, a partner with consultancy firm Ernst & Young (EY), said CIL's premiums are also partly down due to weak domestic demand. “There is an industrial slowdown, because of which prices are tapering off,” he said.
And with power firms facing repayment issues, CIL is finding it difficult to collect the auction amount, the executive said.
Moreover, NTPC Ltd, India's largest power producer and an important player in CIL's e-auction, has not been participating recently. An NTPC spokesperson declined to comment.