New Delhi, Oct 21 (IANS): Coal demand is expected to pick up on a year-on-year basis as the end-user industries ramp-up capacity utilisations during the festive season, said India Ratings and Research (Ind-Ra) on Wednesday.

The ratings agency cited that coal demand is expected to rise as the end-user industries ramp-up their capacity utilisations to cater to improved demand for their products, gradually overcoming Covid-19 led disruptions.

"Coal supply is also expected to improve YoY, given the easing of mobility restrictions, receding inventory levels at power stations and the government's continued focus on reducing coal imports, by entering into definitive agreements with end-users to substitute imported coal with domestic coal," the ratings agency said in a release.

"The green shoots of demand in the economy indicate a recovery path ahead. Supported by a 4 per cent YoY recovery in domestic power demand for the first time after six consecutive months of a lower yoy demand, coal offtake recovered strongly by 26.6 per cent YoY to 50.1MT in September 2020, higher 6.3 per cent month on month (mom)."

"The increased demand was also partially fed by inventory at power stations."

Accordingly, domestic coal production bounced back sharply in September 2020 to 43.9MT, higher 25.3 per cent YoY and 10.7 per cent MoM, despite the monsoon season.

"Such recovery has been seen after subdued production for the four consecutive months over April-July 2020, followed by a marginal 1.8 per cent YoY recovery in August 2020," the statement said.

"Domestic coal imports are likely to have been lower in September 2020 YoY, due to the consistent push from the government of India to reduce coal imports, especially non-coking coal, which can be substituted partially by domestic coal."