Interview with Chairman and Managing Director, Coal India
Low realisation from e-auctions and depleting interest income from banks saw state-owned Coal India (CIL) posting a 14.8 per cent decline in net profit to Rs 3,065 crore. In an interview, Chairman & Managing Director of Coal India, Sutirtha Bhattacharya says power consumption will go up because of electrification. Edited excerpts:
Where do you see the demand for coal coming, given there is surplus? Increasingly, there will be a move towards renewable power.
We have to understand the anatomy of money that comes to us. A customer pays for the electricity bill that goes to the distributor and then the generator, who pays to the fuel supplier. Depending on the generation efficiency and the aggregate technical & commercial loss of different states, we are entitled for payment accordingly.
Our dues have increased to roughly Rs 12,000 crore. But, it’s not as if we have stopped producing coal. Our 75 per cent supply goes to the power sector. When we ended last year, we had with us almost 58 million tonne (mt) coal stock. And, coal-fired power utilities held close to 39 mt, which is equivalent to 28 days stock. As on March 31, around 96 mt was coal stock, of which 58 mt was at our end and 38 mt with power plants.
Power plants started optimising their inventory at an economically affordable level. This is also because they are confident the supply from Coal India is assured. Two years before, this confidence was not there. Coal stock now is down to 20 days.
With quality improving and efficiency increasing, coal consumption is going down but power supply is increasing. The challenge lies with power distribution companies.
Besides, thermal power generators have to fight with other sources of power. With the 24x7 power drive that is going on along with feeder separation, rural electrification and industrialisation, power consumption will go up.
Is the company looking at paring production?
Both production and dispatch have increased. Dispatch has increased to 534 mt during 2015-16. We have shown coal production can improve. Along with the Indian Railways, we have shown enhanced amount of coal can be dispatched as well. To cut cost, power plants have started to rationalise their inventory, leading to less offtake. Besides, with a good monsoon, hydropower will improve and there will be less agricultural demand.
Keeping in mind generators would rationalise their inventories, how realistic is the one-billion tonne production target?
The one-billion tonne production is not for today. Much is being made and unmade about the target. The issue is, import of coal is still happening. If we can produce coal at an economic level, why do you need to go abroad for coal? We can become self-sufficient and that is our objective. If I can produce coal economically in the country for the cause that exists in the country, we must do it.
At a time when climate change commitments require less reliance on coal and there are issues of tribal rights, why should surplus coal be produced and exported?
Our objective is not export. We produce high-grade coal from Raniganj, which has no takers in the country. In our country, boilers would not accept this coal and neither would customers, since it is expensive. Only the coal which we are unable to sell here is offered for export. But, in other countries, if there are consumers for such coal, we will export. Any export is made only in a win-win situation. We are trying to find such a market. But, we will not export even an ounce of coal the country needs. Bangladesh has no other source of coal. But, if they are willing to buy high gross calorific value coal up to G-5 grade, which the Indian market won’t buy, why should they buy from other countries, and not us?
After mapping the Bangladesh market, CIL is considering selling high-grade coal to Bangladesh, which is being used there. We can either shut operations in these fields or find a market for these. We satiate the domestic market and reduce import liability, wherever possible. What we can’t sell in India, we would export. We have earlier sold small amounts to Bangladesh, Bhutan and Nepal. But, that was long ago.
What are your capex plans?
Capex has been pegged at Rs 7,765 crore for FY17. We should achieve it. We will, in fact, try to overshoot it.
Indian coal is more suited to the power sector. Is there any way you could reduce the dependence on it and diversify your customer base?
There is no ONE way. Wherever coal is being used, it is for power production, including steel. In addition, coal is mostly used for heating. In steel, coking coal is used, which our country is not endowed with, in large reserves. But coal is also possibly used in producing methanol and in the chemical industry.
Low realisation from e-auctions and depleting interest income from banks saw state-owned Coal India (CIL) posting a 14.8 per cent decline in net profit to Rs 3,065 crore. In an interview, Chairman & Managing Director of Coal India, Sutirtha Bhattacharya says power consumption will go up because of electrification. Edited excerpts:
Where do you see the demand for coal coming, given there is surplus? Increasingly, there will be a move towards renewable power.
We have to understand the anatomy of money that comes to us. A customer pays for the electricity bill that goes to the distributor and then the generator, who pays to the fuel supplier. Depending on the generation efficiency and the aggregate technical & commercial loss of different states, we are entitled for payment accordingly.
Our dues have increased to roughly Rs 12,000 crore. But, it’s not as if we have stopped producing coal. Our 75 per cent supply goes to the power sector. When we ended last year, we had with us almost 58 million tonne (mt) coal stock. And, coal-fired power utilities held close to 39 mt, which is equivalent to 28 days stock. As on March 31, around 96 mt was coal stock, of which 58 mt was at our end and 38 mt with power plants.
Power plants started optimising their inventory at an economically affordable level. This is also because they are confident the supply from Coal India is assured. Two years before, this confidence was not there. Coal stock now is down to 20 days.
With quality improving and efficiency increasing, coal consumption is going down but power supply is increasing. The challenge lies with power distribution companies.
Besides, thermal power generators have to fight with other sources of power. With the 24x7 power drive that is going on along with feeder separation, rural electrification and industrialisation, power consumption will go up.
Is the company looking at paring production?
Both production and dispatch have increased. Dispatch has increased to 534 mt during 2015-16. We have shown coal production can improve. Along with the Indian Railways, we have shown enhanced amount of coal can be dispatched as well. To cut cost, power plants have started to rationalise their inventory, leading to less offtake. Besides, with a good monsoon, hydropower will improve and there will be less agricultural demand.
Keeping in mind generators would rationalise their inventories, how realistic is the one-billion tonne production target?
The one-billion tonne production is not for today. Much is being made and unmade about the target. The issue is, import of coal is still happening. If we can produce coal at an economic level, why do you need to go abroad for coal? We can become self-sufficient and that is our objective. If I can produce coal economically in the country for the cause that exists in the country, we must do it.
At a time when climate change commitments require less reliance on coal and there are issues of tribal rights, why should surplus coal be produced and exported?
Our objective is not export. We produce high-grade coal from Raniganj, which has no takers in the country. In our country, boilers would not accept this coal and neither would customers, since it is expensive. Only the coal which we are unable to sell here is offered for export. But, in other countries, if there are consumers for such coal, we will export. Any export is made only in a win-win situation. We are trying to find such a market. But, we will not export even an ounce of coal the country needs. Bangladesh has no other source of coal. But, if they are willing to buy high gross calorific value coal up to G-5 grade, which the Indian market won’t buy, why should they buy from other countries, and not us?
After mapping the Bangladesh market, CIL is considering selling high-grade coal to Bangladesh, which is being used there. We can either shut operations in these fields or find a market for these. We satiate the domestic market and reduce import liability, wherever possible. What we can’t sell in India, we would export. We have earlier sold small amounts to Bangladesh, Bhutan and Nepal. But, that was long ago.
What are your capex plans?
Capex has been pegged at Rs 7,765 crore for FY17. We should achieve it. We will, in fact, try to overshoot it.
Indian coal is more suited to the power sector. Is there any way you could reduce the dependence on it and diversify your customer base?
There is no ONE way. Wherever coal is being used, it is for power production, including steel. In addition, coal is mostly used for heating. In steel, coking coal is used, which our country is not endowed with, in large reserves. But coal is also possibly used in producing methanol and in the chemical industry.
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