Coal India's production set to rise most in 5 years

Miner to exceed production target of 482 mt this financial year

This financial year, growth in Coal India Limited (CIL)'s output is set to rise to a five-year high. The company, ready to hit the market with its mega Rs 20,000-crore share sale later this year, would exceed the production target of 482 million tonnes (mt) for this financial year, against production of 452 mt in 2012-13, Coal Minister Sriprakash Jaiswal said today.

In 2013-14, CIL's growth would be more than 6.7 per cent. The last time growth exceeded six per cent was in 2009-10. "Issues troubling CIL investors, including payment dues, would be resolved before the proposed follow-on issue," Jaiswal told Business Standard in an exclusive interview. Consumers, largely power companies, have delayed payments totalling Rs 9,000 crore to CIL. Power generator NTPC alone is sitting on Rs 3,000 crore of CIL's receivables. Jaiswal said he had raised the issue with the power ministry.

CIL Chairman and Managing Director S Narsing Rao has said this financial year, the company would increase overall offtake to consumers 7.5 per cent to 500 mt, against 465 mt in 2012-13. "This would be achieved by implementing two strategies - accelerating project expansions of about 18 mt and higher liquidation of ground stocks," Rao told Business Standard. In an indication of the improving performance, CIL had produced 37 mt in April, exceeding the production target, he added. The company has consistently liquidated pithead stocks to raise supplies to power companies. Stocks fell from 70 mt in April 2012 to 58 mt in April this year. Through the past month, the stocks have further fallen to 53 mt.

CIL's output performance is significant, as the fate of about 60,000 Mw of new power capacity, to be commissioned between 2009 and 2015, depends on the incremental output achieved by the miner through the next three years. The company had managed to beat a two-year-long stagnation in production by increasing output four per cent to 452 mt last financial year. It has committed meeting at least 65 per cent of the demand from the new capacities through domestic supply - a gargantuan task, given the constraints posed by delayed green clearances and land acquisition for new mines.

 

 

Also, the miner would have to keep a watch on delays in new environmental clearances (ECs), as many of CIL's mines have reached their EC limits, forcing it to curtail production to avoid violating norms.

As on March 15, CIL's new mining capacity of around 40 mt was held up, owing to delays in clearances by the environment ministry. An additional capacity of five mt was stuck due to pending forest clearances. However, with the Cabinet Committee on Investment clearing mega mining projects in bulk, the output is expected to improve further.

 

The company's minority shareholders didn't approve CIL's indecision on a price rise, despite Rs 6,000 crore of additional outgo on salary hikes. Besides, The Children's Investment Fund has moved the high courts of Kolkata and Delhi, challenging the government's interference in CIL's pricing decisions. The London-based hedge fund holds about one per cent equity in CIL, but is the single-largest minority shareholder in the company.

On whether the government would address the concerns of investor, Jaiswal said the government's policy, as well as the functioning of the company, couldn't be dictated by minority shareholders.

OUTPUT PRESSURE

• Coal India has been under government pressure to sign fuel supply agreements (FSAs)
• CIL has signed 61 FSAs for supplying additional 89 mt coal annually
• Power generation of additional 24,300 Mw possible under 61 FSAs
• In 2013-14, CIL has planned 482 mt production, 492 mt offtake

Source: Coal India