Coal India Ltd (CIL) has lined up massive plans to ramp up its mining capacity, while also roping in the private players in a big way as mine development operators (MDOs). The state-run miner, which reported elevated capex consistently over the last several years, will keep the pace in the coming years as well, with greater focus on coal transportation infrastructure that will help cut costs and improve margins. The capex plan is in sync with the government’s strategy to slash import reliance for the fuel and limit inward shipments of the fuel to only those fuel varieties that aren’t domestically available. Chairman and managing director P M Prasad, says the company has no plans to raise prices to the thermal power sector in the current financial year, even as e-auction premium has fallen of late. CIL, which reported a 12.5% rise in its consolidated profit after tax to nearly Rs 6,800 crore in Q2FY24, on a 4% annual increase in operational revenue, is also putting its diversification plans on the fast track, with 3,000 MW solar units set to go on stream by FY27, Prasad told Arunima Bharadwaj in an interview.
What is your capex target for the next financial year?
In about 117 ongoing projects, we are looking to invest Rs 16,500 crore for FY25. This apart, Mine Developers and Operators (MDOs) will also make significant investments, under long-term sub-contracts. The capex would be focused on strengthening of infrastructure, especially transport. (In January, 2023, the ministry of mines told Parliament that MDOs assigned by CIL via open global tenders, are implementing 15 greenfield projects with investments of around Rs 20,600 crore in land acquisition, rehabilitation and resettlement issues, and railway sidings).
How have e-auction volumes improved in recent years, and what kind of premiums are being fetched from this lucrative segment?
Currently, there is a decline in e-auction premiums compared to last year but the quantity of coal offered for sale via this route is higher. Till November FY24 we have offered 55.5 MT of coal under e-auctions, up 79% on year. Booked quantity also went up by 64% to 49.6 MT during this period. Of the total 460 MT of coal produced till November, the allocated quantity in e-auction accounted for 11%. We typically place 10% of production under the auction with an option to increase it to 20%, after fulfilling power sector’s requirements.
This year, our supplies to the import-intensive non-regulated sectors (NRS) are at an all-time high, with dispatch of 96 MTs till December-end, up 35% on year. With the increased supplies there is a feeling of coal adequacy in the market. Last year NRS opted for more coal through e-auction rather than importing because the international coal prices were high then. This fetched higher e-auction premiums. Since imported coal prices have lately cooled considerably, e-auction premiums are plummeting. Our target for e-auction is 20% of the production of the remainder of the current fiscal year.
When can we expect the company to come out with a price hike/revisions for various grades of coal?
There is no such proposal for this financial year. On pricing issues, our dual aims are to ensure energy at an affordable cost to the country, especially making electricity available at a fair price and protecting our bottom line.
What are your projections on coal production for the next financial year?
As of now, we are aiming at 850 MT output for FY25, (against a target of 780 MW in the current fiscal). Outsourcing the production and participation of MDO helps in pushing up our output. MDOs role would be to excavate, extract and deliver increased quantities of coal in accordance with the approved plan in an economically viable manner.
Of the 15 MDO projects having a combined targeted capacity of 173 MT per year, mining operations have begun in three projects whose collective capacity is 54 MT/year. Work was awarded for nine projects of 77 MT/year capacity. The rest are advancing. We are also increasing operational efficiency at every level and pressing hard to possess more land and get more green clearances.
Is there any plan of entering into any fresh contracts for importing coal on behalf of state gencos and independent power producers?
There are no such plans.
When are your thermal power plants likely to be commissioned? Have you signed power purchase agreements for them?
CIL through two of its subsidiaries is in the process of setting up two thermal power plants. One is through joint venture mode between SECL and Madhya Pradesh Power Generating Company Ltd (MPPGCL) for the development of a 1 x 660 MW supercritical unit at Amarkantak. The second one is a supercritical plant being set up through a special purpose vehicle (SPV) in Sundargarh, Odisha called Mahanadi Basin Power Ltd (MBPL). The SPV is planned in two stages. Phase I of 2X800 MW capacity and Phase II having 3X800 MW capacity. CIL has commenced the exercise of initiating power purchase agreements with State Discoms. The first MoU has been executed between CIL and Assam Power Distribution Company for the purchase of 1200 MW of power from the proposed MBPL Power Plant. The process of commissioning may take 8 to 9 years including land acquisition.
Solar is the main element of your diversification portfolio. When can we expect the solar power projects under pipeline to be commissioned?
We are planning to set up solar power plants of 3,000 MW capacity. These would be set up in CIL’s land and outside on pan India participation. We are targeting 320 MW capacity this fiscal followed by1422 MW and 1158 MW respectively in subsequent two fiscal years. We hope all these will come up by FY27. We are looking at an investment of about Rs 16,500 crore on these projects at a ballpark figure of Rs 5.5 crore per MW.
What strategies are in place by CIL to ensure adequate pithead stocks?
Coal inventory at CIL’s pitheads is 50 MT (as of December 28) which is around 59% higher compared to 31.5 MT of the same period last year. Our production is also growing at a healthy 11% over last fiscal which ensures adequate stock at our end. This is despite near 9% growth in total supplies over a high base of last fiscal.
What is the progress on reopening discontinued underground mines?
CIL is revisiting 34 discontinued underground mines to unearth their locked up coal assets. LoA (Letter of Authorization) has been issued for 17 mines having 27.5 MT/year capacity and these mines will contribute from FY26. Others are under progress.
How does Coal India plan to expand the railway network for coal evacuation?
Eco-friendly mechanized coal transportation is being pursued through 61 first mile connectivity (FMC) projects under three phases. Combined, these projects will have a total evacuation capacity of 763.5 million tonnes per annum (mtpa) once fully operational by FY29. With 151 mtpa capacity already existing before the company initiated the new projects, the total transport capacity would go up to 914.5 mtpa. The current capacity is 278 mtpa We will be dovetailing FMC projects with existing and new rail connectivity networks connecting them with major routes.
What are the investments lined up for infrastructure building and railway network lines?
CIL will be investing about Rs 24,750 crore on FMC projects spread over till FY29. A portion of it has already been used. We have identified 24 rail connectivity projects at an investment of about Rs 4,000 crore to tie them with FMC projects. Besides these we are setting up 21 railway sidings at a capex of Rs 3,500 crore to be completed by FY26. To have in place a strong coal evacuation infrastructure, investment of approximately Rs 20,000 crore will be pumped into three major rail lines to come up in Odisha, Chattisgarh, and Jharkhand where three of our subsidiaries MCL, SECL and CCL are based.
These companies will contribute to the bulk of our production in ensuing years and having robust evacuation logistics is vital. Some of the rail lines are already operational and the rest are under progress.
