‘Coal imports a new vertical and revenue stream for us’

‘Coal imports a new vertical and revenue stream for us’

21 Jun    Finance News

Coal India (CIL) has been given multiple tasks by the government in recent weeks: Meeting a stiffer production targets, importing coal for supplies to power plants, ensuring infrastructure for evacuation and meeting green commitments. While all these entail heavy investments and risks to profits, CIL chairman and managing director Pramod Agrawal tells FE’s Indronil Roychowdhury about the company’s strategy for delivering on all the fronts while keeping its bottom-line protected from shocks. Excerpts:

CIL has set a target to produce 700 MT of coal this fiscal. Is this target achievable?
The target is challenging but not unrealistic. We have achieved nearly 97% of the progressive (periodical) target so far. We will likely close Q1FY23 with a 35 MT rise over same quarter of FY21. So, the annual asking growth rate is down to 9% from 12.4%.

Have you firmed up plans for coal imports given the government’s directive?
Though coal imports is an uncharted terrain for us, we have floated three back-to-back international competitive bidding tenders already. We adhered to the timelines set. This is a new vertical for us, which will potentially open a revenue stream.

Your focus has been to supply coal to the power plants but given shortages in the non-power sector (NPS), do you have any plans to increase supplies to them?
CIL’s priority is to ensure adequate supplies to the power sector whose end-product is under the regulated regime. Our commitment is to see that the nation gets electricity at competitive prices. Once the appetite of the power sector is fully satiated, we shall ensure sufficient supplies to our NPS customers as well.

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How do you see the coal sector reshaping in India With increased targets and other deliverables how far do you think CIL would be able to stick to its net-zero emission commitment?
Coal mining per se does not offend the environment much. It happens during the burning of coal and in its transportation. For cleaner transportation of coal, we have introduced a first-mile connectivity that reduces road movement of coal. In our net-zero emission effort, we are aiming at installing 3,000 MW solar Projects by FY24. Work orders for 240 MW have been awarded in FY22. We will scale this up sizeably in the coming years. For our own consumption, 4 million units of power was generated through solar projects in our subsidiaries. We are also actively participating in tenders floated by SECI, Solar Park developers and discoms for executing solar projects.

Surface miners in opencast mines is another mechanism that helps us to be on track with our net-zero commitment since it entails blast free extraction of coal. It is environment-friendly, reducing noise and dust pollution.

Where does the issue of wage revision stands at present?
The eleventh wage revision for our non-executive workforce under national coal wage agreement is due. So far, four meetings have been held. CIL was the first CPSU in the country to have successfully concluded the previous three wage agreements. Keeping up with the trend, we hope to quickly seal the wage pact this time as well it in a mutually beneficial manner.

There were issues of irregular salaries in subsidiaries due to transformation in financial accounting mechanism (ERP). Has CIL started working on these?
When migrating from one system to another, seamlessly structuring the salaries of around 0.25 million employees across CIL and its subsidiaries was a huge task. Initially, there were some technical glitches but those have been sorted out immediately.

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Is there any possibility of coal price revision in the near future?
It is bound to happen but to draw a timeline would not be possible. For more than four years, there has been no price increase whereas most of the input costs, including diesel and explosives, have increased. Despite this, our prices have been steady. We are now reaching a level where to stay commercially viable, price increase is essential. When and how much would be a collective board decision. But the idea is we have to be adequately compensated and whatever the increase, it should take care of our Ebitda. While protecting our bottom-line, we will also consider the impact on price of energy in the country because coal price increase has an influence on various commodities. We will take all our stakeholders on board. We endeavour to balance the price increase judiciously.

Evacuation should be a concern when the output target is steep…
Aligning robust evacuation infrastructure with production expansion is crucial. Even with the current coal despatch of 2 MT per day there is no evacuation crunch. For quicker and quality loading, we have identified 44 first-mile connectivity (FMC) projects, and these are under implementation. We are also investing in the construction of new rail lines in areas having a high-yield production potential to augment coal movement.

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