Offtake and production has finally improved in the last two months. Do you expect this to continue, given that prior to this you had a very tough time meeting the internal targets also?
Oh! yes we will be meeting the target this year and we have kept a very high target for ourselves this year because we plan to produce some 46 million tonne incremental over last year which will be the highest in the history of Coal India for any single year.
Do you think you will be able to meet your FY18 production target because it would require a double digit run rate for the balance of the year?
Last month we grew by 10% and this year also already we are in double digit growth. We are striving to achieve the target.
Coal stocks at power plants are running low right now. Is that on account of the fact that Coal India was unable to meet its production targets and when is it that you expect the situation to change?
Last month, we supplied 21% more coal to power plants. Even this month till yesterday, the growth and supply to coal to power plants is about 21%. This year in April-May and earlier also in January, February, March, power plants in order to reduce the inventory at their end, did not take coal as much as Coal India wanted them to take. As a result we had huge coal inventory of 68 million tonnes as on 1st April 2017. But suddenly because of failure of hydro, nuclear and then wind power generation in months of July, August and September, there was this sudden increase in demand for coal-based power plants. It came as a surprise to all of us but thanks to Coal India team and power sector team and railways team, everyone has taken it as a challenge and with the concerted effort of everyone, there has been an increase of 21% in the supply of coal to power plants in September and in this month. I hope this continues in days to come as well. It is not the shortage of coal supplied by Coal India that has resulted in this crisis but it is because of poor monsoon in some of parts of the country, hydro generation has gone down.
If I remember the figure correctly, in August, there was 12% negative growth in the hydro generation, there was negative growth of about 36% in nuclear and there was a negative growth of 7% in other power plant generation. Thanks to coal-based power plants, the ministry of railway, the ministry of power, the ministry of coal and thanks to our honourable minister who monitors it around the clock, there has been a big rise in the supply of coal to power plants.
Do you think Coal India is well equipped to cater to the demand?
It is a very good news for the country as a whole. Demand has increased but mainly because of the failure of these three sectors — hydro, nuclear, wind and all these.
What is the average pricing? You are signing PPAs. We understand the price differential in India versus global is quite high and also due to the allocation to the regulated sector where realisations are quite low. Is that not hampering CILs financials?
So you must appreciate the effort of the government recently. We have gone for the Shakti Scheme where the power tariff was decided by auction. It was a bid based on the discount being given in power tariff. That is one very positive step of the Government of India. Our government is really trying to bring the cost of power down as much as possible and this is one step and that has been really very successful.
Now let us talk about wage hikes. The 20% wage hike means a Rs 5700 crore impact on the financials. How do you plan to tackle this impact? If you have to maintain your margins, either you have to increase prices or cut back on cost?
Every fifth year we revise the wages of our employees. This revision was due from 1-07-2016. It is already more than one year over and we had a series of meetings — nine in total. Yesterday was the 10th meeting and the unions were initially adamant. They were demanding some 50% hike in their basic wages but after negotiations, they agreed to 20% increase in the basic wages of course along with some perks. All in all, it is a very good deal and the level of motivation of our employees will naturally be high because it was pending for more than one year.
Yesterday we also decided to launch a welfare, safety and productivity enhancement drive throughout Coal India Ltd. We are starting this drive from the 16th of this month.
It will continue for one month and we are planning to hold various seminars, meetings in all the subsidiaries and may be at two or three places in one subsidiary. Already, the action plan is in.
The most pleasant thing about this drive is that unions have agreed to be part of our teams. This is one of the best examples of participative management where unions and management have taken the challenge collectively and I think this drive will really help in enhancing our productivity and production.
Whatever the incremental increase in the pay that we have to bear, we will try to compensate this by increasing productivity.
You also have plan to invest about Rs 15000 crore for capex. Tell us how exactly do you plan to utilise this chunk of money?
We must build the capacity because as soon as the present government came into power in 2014 we embarked on mission 1 billion. Coal India is striving to achieve one billion tonne of production by 2020. Already we are on the path and for that we are required to build the capacity and this capex is just part of that drive.
The coal sector is slowly opening up to other commercial mining companies with bids for 10 coal blocks which are expected to be placed for commercial mining how do you plan to tackle that and safeguard your own market?
Healthy competition is always good for any sector. If commercial mining really comes up, we will have the benchmarks and I am sure Coal India will improve its efficiency because competition is really required to improve one’s efficiency. That is a very good initiative of the government of India to reduce the prices of power. Read more