Hyderabad: India’s second largest coal producer Singareni Collieries Co. Ltd will invest Rs.10,360 crore over the 12th Plan period (2012-17) to expand production, open new mines and build a 1,200 megawatt (MW) coal-based power plant in Andhra Pradesh’s Adilabad district, a top executive said.
Of this, the company invested Rs.3,220 crore in 2012-13, said Sutirtha Bhattacharya, chairman and managing director, in an interview on Wednesday.
Of the total investment, Singareni will spend Rs.5,276 crore to expand its core mining business, the company said on Wednesday.
This will include opening nine mines, of which three are underground mines with a combined capacity of 3.47 million tonnes per annum (mtpa); the rest are opencast mines with 12.60 mtpa combined capacity. These mines will replace nine ageing mines that are expected to be shut by end of 2017 as their reserves get exhausted.
Singareni is also scouting for new coal blocks in India and abroad to expand its presence beyond Andhra Pradesh.
The company operates 49 mines, of which 15 are opencast and the remaining underground. In the year ended 31 March, Singareni Collieries produced 53.190 million tonnes (mt) of coal, clocking revenue of Rs.10,311.73 crore. It aims to reach coal production of 275 mt in the five years to end-March 2017, 15% more than the 239 mt it was producing in the 11th five-year Plan period (2008-2012).
Singareni Collieries is jointly owned by the Andhra Pradesh and the Union governments, with the state holding a controlling stake of 51%.
Spread across 612.21km over Adilabad, Karimnagar, Khammam and Warangal districts in the Godavari Valley Coalfield in Andhra Pradesh, Singareni Collieries holds estimated reserves of 9877.68 mt.
“We are planning to open new mines and invest in newer technologies of underground mining to do mining in a cost-effective manner,” Bhattacharya said in an interview at his office in Hyderabad.
Increase in production cost is a key concern for Singareni Collieries, analysts say.
“Our operational cost structure is quite high because of higher stripping ratio,” said Bhattacharya, a senior bureaucrat in the Andhra Pradesh government who took over charge of Singareni Collieries in May last year from S. Narsing Rao, now the chairman of Coal India Ltd.
Singareni Collieries’s average cost of production at Rs.1,850 per tonne is 76% higher than that of Coal India’s, largely due to deeper deposits that require costlier underground mining methods and higher overburden removal at its opencast mines. Singareni Collieries produces 22% of its coal from underground mining, while Coal India produces just 8% of its coal through this method.
“There is a concern of increase in cost, though the (coal) prices meet the cost at the moment, but there is pressure on the system,” Bhattacharya said. “The thrust of the company is to improve profit-turnover ratio.”
Singareni Collieries supplies most of its coal to the state-owned Andhra Pradesh Generation Corp. Ltd (APGENCO) and NTPC Ltd; it sells the rest to cement, steel, pharma, ferro alloys and other industries at spot prices.
Its price of coal ranges from Rs.420-3,896 a tonne for 17 grades of coal. Singareni Collieries increased the price by an average Rs.18 on all grades in April.
Singareni Collieries, which makes its bread and butter through coal mining, wants to diversify its basket by entering allied areas like power production, contract mining and consulting services.
The state-owned mining company is setting up a 1,200MW power project in Adilabad district in the vicinity of its Srirampur area mines at an estimated cost of Rs.6,500 crore. The first unit of 600 MW is expected to go into production in mid-2015, followed by the commissioning of second unit in the later half of that year.
“We will be investing around Rs.2,000 as our equity from internal accruals,” Bhattacharya said. The entire debt is provided by Power Finance Corporation.