The just-concluded fiscal year was a difficult one for Coal India (CIL), with the organization obtaining to cope with demand decline and import substitution, even as it faced difficulties with coal top quality. CIL chairman and managing director Pramod Agrawal speaks to Indronil Roychowdhury about how the organization managed the troubles, and the challenges awaiting it in the new fiscal year. Excerpts:
How has CIL recast its small business in the previous year, offered the pandemic?
We responded to the scenario with resilience. During the lockdown, we felt a decline in demand, but have been nevertheless expected to stimulate supplies by means of out-of-the-box measures. We focussed on escalating e-auction volumes, rather than premiums. We have closed the year with 124 million tonne of e-auction allocation.
We relaxed circumstances to attract clients: the trigger level or minimum assured quantity has been raised from 75% to 80%, coal up to 120% of annual contracted quantity (ACQ) has been provided. ACQ was raised to up to one hundred% of normative requirement for energy sector buyers. Also, energy sector FSAs have been signed without the need of hyperlink to overall performance, and versatile lifting was permitted for non-regulated sectors all through the year. All these measures kept our sales buoyed to some extent.
We ended FY21 creating 596 MT against final fiscal’s 602.1 MT. Our offtake in FY21 fiscal has been 573.8 MT against final fiscal’s 581.4 MT. Also, the demand shrinkage from our main coal customer, energy sector impeded supplies although escalating coal inventory at pitheads to more than 99MT. Enhancing production would only have produced our stocks piles greater.
Do you feel industrial mining will finish to CIL’s monopoly?
The apprehension that industrial coal mining would destabilise CIL is unfounded. Under Atmanirbhar Bharat, the aim behind the entry of private players in industrial mining is to ramp up indigenous coal output and meet the domestic demand in a self-reliant manner by decreasing import dependency and forex outgo. In that sense, it is a welcome move. I do not see any conflict among CIL and private players.
We continue to operate inside our personal competent sphere, preserving our leadership status. Key difficulties that will support us keep ahead are established infrastructure, streamlined operations, uniform coal top quality, price efficiency and reputable, timely delivery. If there are some mutually useful widespread causes (with private industrial miners) like building widespread regions or infrastructure, we may well probably take a get in touch with on these on a case-to-case basis.
The government’s concentrate has been on import substitution. How has CIL helped this initiative?
CIL has enabled import reduction to the tune of 90 MT in FY21. We opened a new auction window in October exclusively for clients importing coal and booked 7.5 MT. We permitted our coal firms to sign MoUs, below import substitution, with 17 energy plants linked with them. Under this, more than 11 MT was provided. We provided 9.7 MT of more coal to state and central producing firms below a flexi-utilisation policy, enabling them to lessen coal imports. Additional coal was provided to the non-regulated sectors against fuel provide agreements of up to one hundred% of annual contracted quantity. Of course, freight price enhance and rise in international rates could be supplementary variables that helped curb imports.
Issues relating to coal top quality have when once again cropped up. But you claim Rs 660 crore this fiscal as net top quality bonus. How will you settle this disagreement?
Indian coal is heterogeneous due to its drift origin and the calorific worth of coal extracted from the very same seam at diverse points tends to differ, given that a seam is extended. Moreover, CIL does not declare coal grade, but the Coal Controller’s Office does it annually. This at instances leads to downgrading or even upgrading of declared grade top quality inside the seam.
We have reassessed coal grading of 35 higher-capacity mines contributing 71% of the total production, and there have been no grade variations in the mines of 4 subsidiaries and minor variation in the mines of 3 subsidiaries. Of the 374 mines reassessed final fiscal, gradation remained unchanged in 335 mines. Upgradation occurred in 15 mines. Around 50% of our total production is carried out with surface miners entailing blast-totally free seam exposure, which leads to greater top quality output. We have on line ash analysers in NCL and MCL mines for actual-time top quality assessment.
We use mobile crushers for sized coal. Thereafter, we carry out authorised third party sampling and provisional billing on declared grade.
Sometimes, Indian coal rates are greater than imported coal owing to rail freights and statutory levies. Isn’t this hampering import substitution?
Although CIL presents coal at considerable discount, the statutory levies and higher rail freight tends to make landed price of CIL’s coal much less competitive than coal sourced from abroad. It would support CIL serve the nation greater if some freight concessions are permitted to clients situated among 701 and 1,400 km. Most of our buyer concentration is inside the stated distance. Taxes and levies on domestic coal are somewhat higher compared to coal of equivalent GCV sourced from abroad. If there is a relook at levies and tax rationalisation on domestic coal, it would be a shot in the arm for CIL’s import substitution efforts. GST compensation cess at `400 per tonne is also an additional issue that could be looked into.
The government has currently proposed forming a coal exchange. What is your take on it?
The proposal is at a nascent stage, but it would be on the lines of commodity derivatives exchange. The e-trading platform will find out transparent pricing, with demand and provide being the driver. A unified coal trading platform can support enhance advertising and marketing and usage of domestic coal. It may well lead to greater price tag discovery and have more rapidly sales cycles. It would have wider attain to buyers across the nation, which includes smaller sized traders and purchasers. Price negotiation and counter-supply facility can support enhance sales volume.
What are the challenges awaiting CIL in the new fiscal? Where is CIL going to go 5 years down the line?
The main close to-term challenge is depleted demand for coal. Wage revision of non-executive workers will be effective from July 1, but big manpower reduction will have a stabilising impact and so the wage bill impact may well be flat. Increasing outstanding receivables is also a major challenge to us, even though there is no debt threat given that most of it is from Central and state gencos.
Five years therefore, CIL would continue to be vibrant, preserving its dominant function in meeting the main portion of the country’s key industrial power requires. Our percentage share may well lower steadily, but in absolute terms we would nevertheless be an power leader.