Higher coal prices to impact Vedanta's profitability in third quarter: Report

Higher cost of coal due to the ongoing shortage of the dry fuel in India will impact the profitability of Vedanta in the third quarter which is likely to be temporary, according to a report.

Various power plants in the country are grappling with fuel coal shortages.

"While higher coal costs in India due to ongoing 'coal shortage' would impact Vedanta's profitability in 3Q, we expect it to be temporary," according to the report by Credit Suisse.

Ramp-up of captive coal mines would help reduce cost volatility in the medium term, it said.

"We note that coal costs in 2Q were USD 300 per tonnes lower than peak (US$800 per tonnes), we may see peak costs in Oct. We believe Vedanta has scope to increase earnings further in FY23," it added.

Amid the low stock position at the electricity generating plants, state-owned CIL has asked its subsidiaries to refrain from conducting any further e-auction of coal, except special forward e-auction for the power sector, till the situation stabilises.

The development assumes significance as the supply of coal is being prioritised to the power sector to replenish the dwindling stock in the wake of reports of an electricity crisis looming large.

The company had earlier said it is augmenting its production and off-take steadily. Once the situation stabilises, expectedly within a short time, and stock at coal-fired plants attains comfort level, other sectors will be brought back to their regular supply norm, the public sector firm said.

Coal Minister Pralhad Joshi had on Tuesday said the government is making every effort to meet the coal demand of power producers, and stressed that steps are being taken to ramp up the supply of the dry fuel.

CIL, one of the major coal suppliers to the power sector, accounts for over 80 per cent of the domestic coal production.

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Vedanta Ltd, a subsidiary of Vedanta Resources Ltd, is a leading oil & gas and metals company. It has significant operations in aluminium, oil & gas, zinc, lead, silver, copper, iron ore, steel and power across India, South Africa, Namibia, and Australia.