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Coal India spends a lot on salaries and wages; land acquisition is getting tougher, says director AK Jha

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Source: Financial Express, November 1, 2019

While Coal India expects to remain on a growth trajectory till 2030, it foresees coal demand plateauing after that. Chairman and managing director AK Jha speaks to Indronil Roychowdhury on the company’s future course of action.



Coal production is witnessing a decline in India. As the main producer, Coal India’s ouput was down 23.5% in September, partly owing to floods.



Production has always been the main factor for Coal India’s business. From a level of 490 MT in FY15, the company’s production grew to 607 MT in FY19 and then it targeted a production of 660 MT for the current fiscal, which have been hit due to heavy monsoons.



Tell us about your strategy to boost output, given that a heavy dependence on coal imports could widen the country’s trade and current account deficits.



Last year, India produced 730 MT and used 965 MT of coal. So, we imported around 235 MT. India has a coal reserve of 320 billion tonne so it is imperative that we use it to the fullest extent to reduce our energy imports as much as possible.



Coal India has set a target for 2025-2026 to produce 1 billion tonne of coal. This year, we tried to keep the growth at around 8%, but unfortunately due to extended monsoons, which is continuing even in this month, our production has been hit. One of our mines (Dipika mines of South Eastern Coalfields), which produces 1 lakh tonne a day has been fully flooded. That is why we are behind our target this year and the y-o-y growth is minus 8%. But CIL has a lot of resilience, and once the weather improves, we will augment production.



What are the key bottlenecks to your plan to accelerate production?



When it comes to mining, there are a few uncertainties. About 95% of our production comes from land-intensive open-cast mines. With each passing year, land acquisition and possession is becoming tougher. So, if the process of land acquisition is expedited, I don’t see any reason for not attaining a growth of 50-60 MT a year.



Secondly, all major coalfields are situated in the eastern part of India, where the law and order situation in some of the places is not that good. In case of ECL, BCCL and CCL, there are a lot of issues.
While the government is asking CIL to produce more coal, it is also giving much emphasis on renewable capacity addition.



There is no conflict here. India’s total electricity consumption is around 1,200 units per person, which is much below the consumption of the developed countries and also of the world average. So, there is still a lot of growth opportunity in electricity.



Clearly, renewables alone will not be able to take care of the rising demand for power. Compared to thermal power, renewable has a minor share in the country’s overall power generation. But as renewables’ share grow in the days to come, thermal’s share will reduce in percentage terms, but in absolute term, it will continue to remain dominant.



My belief is that coal production will reach a plateau at 1.5 billion tonne by 2026 when CIL will produce 1 billion tonne per annum and other agencies around 500 mtpa. At that time, renewables will be in greater focus and caps will be placed on the use of coal for climatic considerations.



Now that 100% FDI has been allowed in the Indian mining sector, do you see big foreign players willing to jointly work with Coal India?



It will be premature for me to say anything on this. But I can say if mining coal is not easy for me, it will not be easy for foreign players. Problems of land acquisition, law and order, and getting statutory clearances will need to be removed.



The country requires more than 1,000 MT of coal and Coal India still produces at a 600 MT level. So, let other agencies do the rest. If there can be private players in other sectors of industry, why can’t there be private players in the coal sector?



More than 50% of my expenditure goes to paying salaries, wages and providing other benefits to workers. I don’t think private players will be ready to accept it as a benchmark.



Since 80% of CIL coal goes to the power sector, your revenue stream is largely dependent on it. But the power sector is under stress.



It does impact a lot. In the first case, we are providing subsidised coal to the power sector, at a 40% discount compared to the international prices. But our objective is to enable supply of power to the citizens at affordable prices.



Although CIL’s operating margins have been going up, its net worth has been eroding. Isn’t this a matter of concern?



Coal India’s net worth has once again started looking up. Till last year, it was going down. Since the government is the owner of the company, we will have to follow the policies and decisions. The government takes decision on the larger interest of the country so they may not always be business-friendly.



What has happened toCIL’s plans to acquire assets abroad?



We have identified assets in Australia, Canada and Russia but until something materialises, I won’t be able to give you the details. We do think acquiring some coking coal properties abroad will be for the best interest of the country. We are also trying to appoint a merchant banker for properties in Australia. But we are not getting the required response to our tender because all the major global bankers are not willing to do due diligence for coal mines because they consider coal a dirty fuel.

News Source: Financial express
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