Coal India Ltd., the state-owned mining company, reported a 17% decrease in its third-quarter profits, attributed to a slowing economy that has led to modest growth in coal consumption, which is essential for generating nearly 75% of the country’s electricity. For the quarter ending in December, the company’s net income dropped to 85.1 billion rupees, down from 102.5 billion rupees in the same period last year, as stated in a company announcement. However, this profit still exceeded the average analyst estimate of 83.7 billion rupees.
The deceleration in the country’s economic growth is beginning to impact the power sector, with electricity demand increasing by only 2.7% during the quarter, a significant decline from the 10% growth recorded a year prior. A sustained drop in demand could deter investments and impede plans for expanding capacity. As the world’s third-largest carbon emitter, India is relying heavily on coal to meet its energy requirements, with government plans to add nearly 90 gigawatts of coal-fired capacity by 2032.
Additionally, the company has implemented a new accounting policy regarding the provisions for removing the earth covering coal seams, resulting in write-backs that have positively influenced earnings. Shipments and production during the period both increased by 1.5% compared to the previous year. According to Rupesh Sankhe, vice president at Elara Capital India Pvt., Coal India is currently under pressure to reduce production temporarily and manage its inventory, but output growth is expected to resume with the arrival of summer.
