October 4, 2019 - State-controlled mining firm Coal India (CIL), the country's largest coal producer, has been forced to suspend operations at its 30mn t/yr Dipka thermal coal mine because of flooding caused by heavy monsoon rains.

CIL may face a significant loss of production, although it is not clear when operations will resume. The open-cast Dipka mine in central India is operated by CIL's South Eastern Coalfields subsidiary. It is the main supplier of coal to the country's 2.98GW Sipat coal-fired power plant in the central Indian state of Chhattisgarh, which is operated by state-owned utility NTPC.

Market participants have said they are monitoring the situation closely to see what impact the loss in production from one of CIL's largest mines could have on seaborne demand and prices in the coming weeks.

The loss of up to 2.5mn t/month of coal from the domestic market would amount to a "potentially large volume if it has to be replaced by imports", a Singapore-based trader said. "It depends on whether CIL has enough stockpiles to cover any potential shortfall and for how long."

CIL is undertaking an extensive exercise to remove water from the mine and six heavy duty pumps have been deployed to the site. The inflow of water from a nearby river that resulted in the flood was stopped today, a company official told Argus. But it is still unclear when operations will resume.

The shortfall in coal supply to NTPC's Sipat power plant is being met by supply from an adjoining mine, CIL said. But it is unclear for how long the adjoining mine will be able to meet the shortfall as the Dipka mine is usually the power plant's main supplier.

The flooding could make it even more difficult for CIL to meet its production target of 660mn t in the 2019-20 fiscal year that ends on 31 March next year. CIL saw its output decline by more than 23pc in September to 30.8mn t, possibly as a result of heavy monsoon rains during the month. A decline in output from one of the country's top producers is likely to raise coal imports this year.

The company produced 241mt of coal In April-September, the first six months of India's 2019-20 fiscal year, down by 6pc from the year-earlier period.

Bombay Stock Exchange-listed CIL reported a fall in output across its coal mines in different parts of the country in September, a stock exchange communication showed on 1 October. CIL did not explain why its output has fallen, but Indian coal production and deliveries are usually lower during the July-September monsoon season.