Kolkata: Disappointed at the pace at which Coal India Ltd (CIL) is able to build infrastructure to move coal from mines and to scale up production, chairman and managing director N.C. Jha says the state-owned miner can only supply half the country’s thermal coal needs. Edited excerpts from an interview:
How do you explain the decision to build your own power plant when you are unable to fulfil the country’s thermal coal needs?
There are so many power plants in India, and CIL building another one doesn’t make any sense unless you consider the specific problems of the coalfield where this power plant is proposed to be built. We have decided to set up a 1,600 megawatts (MW) power plant at the Ib-Vasundhara coalfield, which is run by our subsidiary Mahanadi Coalfields Ltd. There are four-five mines in this coalfield, and the potential to scale up production at these mines is huge.
Supply concerns: Jha says Coal India has been saying since 2007, when the new coal distribution policy was formulated, that it cannot supply more than 50% of India’s coal needs. By Indranil Bhoumik/Mint
Though we have initiated the process of laying a 54km railway track to connect the Ib-Vasundhara coalfield, moving coal from there will always be difficult. The plan is to ramp up production and burn the coal at the pithead. It is to optimally exploit the production potential of this coalfield that we have decided to set up a power plant in partnership with a power company, and have asked Power Finance Corp. to help us identify a suitable partner for the project.
We have similar problems in at least three other coalfields. Though we haven’t considered setting up power plants at these coalfields, logically speaking, this experiment could be extended to other areas as well where production is hobbled by infrastructure bottlenecks.
The availability of railway rakes has in the past few years slowed coal movement. Has the situation improved?
Currently, we have no complaints about railway rake availability. Rake availability went up to 190 a day sometime ago, and during this month 180 rakes were available on average every day, compared with 168.6 rakes at this time last year. My aim is to ramp up dispatches to 200 rakes a day over the next few months, and I am not worried about the availability of rakes as of now.
So why are power companies crying foul over poor coal supplies?
Acts of god such as excessive rainfall and floods are beyond our control—our production was very badly hit in August, September and October. In August alone, production was almost one-fifth lower than our target. But otherwise, from 11 October, coal supply to all power plants is quite satisfactory—all are getting their daily requirements. It seems strange that despite supplying so much coal, power companies say they aren’t getting enough. Actually, power demand in India has grown exponentially— companies need more coal not only for their new projects, but also for their existing units— but we, as miners, couldn’t expand production at the same pace.
We were asked to give a letter of assurance to every power project coming up in India, but we have been saying from 2007, when the new coal distribution policy was formulated, that we cannot supply more than 50% of India’s coal needs. Unfortunately, we were not taken seriously. Besides our inability to expand mines, the infrastructure for transporting coal from our mines remains hugely deficient. We currently have 45 million tonnes (mt) of coal in our stockyards, and we are willing to offer it immediately if somebody could move it from there.
Land acquisition remains your biggest challenge, correct?
Let me cite an example to make my point. The Gevera mine in the Korba coalfield of Chhattisgarh, which is run by our subsidiary South Eastern Coalfields Ltd, currently produces 35 mt a year. We started with a production of 10 mt a year, and gradually raised production at the mine. We have been extracting coal there for the past 16-17 years, and to keep the mine alive, we have to expand, but we have been struggling for the past five years to get more land.
To expand this mine, some five-six villages may have to be relocated, but unless we manage to acquire land, I am seriously concerned about its ability to produce coal next year. Similar constraints face many other projects... But if the problem with land acquisition could be sorted out, production of coal wouldn’t suffer— CIL has every other capability...
You have been pursuing some acquisition opportunities abroad. Have you made any progress at all?
I must admit there hasn’t been much progress as yet. The proposed joint mining and production-sharing deal with Peabody Energy Corp. seems to have gone from our hands. Companies such as Peabody expect quick decisions. We discussed its proposal at the board level, but the committee tasked with evaluating the proposal couldn’t take a call.
We still have three other proposals from the past that we continue to pursue. That apart, we can now consider several proposals that we have received from unlisted companies. We have lately been given the permission to deal with such firms.
CIL is expected to accumulate Rs 60,000 crore in cash reserves by the end of the current fiscal. How do you propose to deploy it?
You must have noticed that in the quarter till 30 September, our net profit grew 74% (over the same period last year), and that was largely on account of an increase in interest income from our accumulated cash—increased costs offset the increase in revenues. Though the return on our accumulated profits is enviable, we wish to deploy this cash in our core business.
In my mind, it should be channeled into three-four initiatives. We need to make substantial investments in building coal washeries, which will enable us to sell better-quality coal. Also, we need to create railway linkages to at least four coalfields.
But I am not satisfied with the pace at which we are expanding infrastructure—be it setting up new washeries or laying railway lines.