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Reducing Coal Demand may Drag DownCIL's Coal Production Growth

News

In a dramatic turn of events, Coal India Ltd, the biggest producer of coal in India, is facing difficulty in finding sufficient buyers on its e-auction platform. In July, only 68% of the coal offered in e-auction found takers, a note from Motilal Oswal Securities Ltd says. In July 2014, that ratio was at around 90%.

Source: ET

SNP Insight

The falling demand in the country may affect the future production of CIL. The excess production of coal when there is low demand may result in increasing the expenses of CIL on coal storage. Also the market value of coal may fall down low level where the cost of production is more than the selling price of coal. So, this may affect the financial strength of CIL. The dull financial performance may make it tough to find investors for future coal projects.

Source: SNP Infra Research