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Will the Increase in Operating Cost and Decrease in Net Profit Going to Deter CIL 1 Billion Plan?

News

State-run Coal India plans to change its e-auction supply strategy to bump up price realisation, which has dipped on account of abundance of the fossil fuel in the domestic market and availability of cheap imported coal. 

Source: ET

SNP Insight

The decrease in net profit of CIL due to increase in operating cost will impact the financial strength of the company. This may reduce the money flow from CIL to its future projects. Also the falling demand and price of coal in international market (Imported Coal price expected to fall by 10% in FY2016) lessen the price advantage of CIL. So it result in low price realization for unit coal sell for CIL. This may affect the investor confidence in future projects. So funding for future coal projects may squeezed.  Which may dwindle CIL’s plan to achieve 1 billion tonnes of coal production by 2020.

Source: SNP Infra Research