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| Coking coal prices, quality are not competitive enough globally | | Q&A: partha S bhattacharyya, Chairman, CIL |
| Margaret Williams / Mumbai Apr 11, 2009, 00:21 IST |
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 Coal India (CIL), one of the largest coal companies in the world with reserves of 287 million tonnes of coking and non-coking coal, has charted out a growth path with focus on acquisitions. In an interview with Margaret Williams, Chairman Partha S Bhattacharyya talks about various issues, including the roadmap for the company, coal prices in a volatile commodity market etc.
In the wake of a decline in raw material prices, do you see any price revision for coal in near future?
It’s difficult to comment on this issue at this point of time as prices keep fluctuating.
Further, CIL’s thermal coal prices are very low compared to international prices, so there is no question of reducing prices now. Even after the meltdown, our coal is 50-60 per cent cheaper compared to international prices.
In terms of coking coal, our prices are comparable with international prices for long-term contracts. Since our coking coal quality is not good, so our prices are not competitive.
With a correction in prices of coal properties (mines), is this the right time to buy them?
Definitely this is a good time to buy coal properties. Though there has not been much of a correction in prices of unlisted coal properties, the share prices of listed coal property firms have come down substantially.
Still, those properties accompanied with a lot of legal, technical and due diligence issues may not be a good buy.
CIL has engaged its wholly owned subsidiary Central Mine Planning & Design Institute (CMPDIL) to examine the viability of 77 projects due to the implementation of the National Coal Wage Agreement, which is likely to cause a financial burden of about Rs 1,800 crore? What is the status now?
Costs have gone up because of the wage increase. As a result, viability of the projects is being reassessed. Many of the projects seem to be unviable till prices are revised. The report is expected within 2-3 months.
We have to do a rethink over unviable projects. But we also have a committed target to produce 520 million tonnes. So we have to keep an eye on the target as well as costs.
By 2011-12, a demand-supply gap of 200 million tonnes is expected. How do you expect to meet it?
According to current statistics, there will be a gap of 230 million tonnes. Scaling up our production in the country is a difficult proposition. Buying land for exploration is a problem, then there are a host of clearances like forest, environment required.
A large number of our projects are still awaiting environment clearances. I have asked for mapping all the go and no-go areas in forests with proven reserves, but that is yet to be worked out.
The importance of coal in providing energy security and as a growth driver have to be appreciated by various quarters. Once this is done, the process of clearances will expedite, leading to more coal production.
Our coal minister has visited three states and emphasised on the need to expedite these issues, especially clearances, so that more projects could be taken up. Sensitisation efforts are going on.
In the backdrop of the present backlog, I don’t see the possibility of further increasing domestic production. Whatever we have to do, we have to do it abroad. Either through imports, which needs to be further supplemented with mining over there. So there is an urgency to acquire mines.
Mining abroad and bringing coal to India is not easy. In the case of Mozambique, we don’t expect coal to come before 4-5 years.
What kind of mines you are planning to acquire?
For Coal Videsh, we are keeping our options open for buying either operational or exploratory mines. Primarily, we will be looking for mines which are unexplored because those are usually cheap. We are making efforts to locate properties with substantial yield.
The price gap between explored and unexplored mines is very attractive to make us pitch for unexplored blocks.
What is the company’s focus this year?
In the current financial year, we are focussing on two things — eco-friendly mining and corporate social responsibility. We will focus more on eco-friendly mining and focus on environmental and socially sustainable operations.
Our rehabilitation policy has been revised in 2008. We are open to further changes. It is reasonably okay and the only problem is about land pricing. Others of market prices for land acquisition, but what we approach the district collector. Apart from paying the price, we offer a lot of other benefits. Still we are facing problems. We need a foolproof system, so that we are able to achieve a transparent price discovery mechanism.
Another thing, we don’t want to make a lumpsum payment to land owners because they are not competent enough to invest their money properly for a secured future. What is needed is to ensure steady flow of income.
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