Hyderabad: India’s second largest coal producer Singareni Collieries Co. Ltd (SCCL) will bid for contract mining projects of public sector power utilities and mineral corporations across the country, stepping outside the southern state of Andhra Pradesh for the first time, said a top official.
“This is part of a multi-pronged strategy that we have firmed up to stay afloat in the backdrop of the anticipated production constraints in our existing open cast and underground mines,” said chairman and managing director S. Narsing Rao.
The rationale behind adopting the “multi-pronged strategy” was to supplement revenue and profit. Rao said SCCL, which produced 50.42 million tonnes (mt) of coal in the year to March, a 13% increase over the previous year, has “almost reached a plateau” in coal extraction.
“We are unlikely to report more than 1 mt to 1.5 mt of incremental growth a year going forward, mainly owing to restrictive and difficult geo-mining conditions that we are in,” he said.
Rao said SCCL had identified many captive coal mines of state-owned entities that are coming up for bids for coal extraction.
These coal blocks are located in Chhattisgarh, Orissa, Madhya Pradesh, Uttar Pradesh, Kerala and Maharashtra, which were allotted to the state electricity boards and state mineral development corporations.
“With our huge experience, expertise and manpower, we hope to successfully compete with global and domestic private sector coal mining firms in bidding for these coal mines for contract mining operations,” he said.
SCCL has already started participating in tenders by the Central and state government undertakings. Each of these blocks has the potential for extraction of 15 mt to 30 mt of coal a year, which is a lucrative opportunity for revenue and profit growth, he said.
The projects would not require huge investments since the cost of land acquisition and rehabilitation and resettlement (R&R) packages will be borne by the coal mine owner.
“What we need to invest is only on equipment and manpower, which may not be more than Rs100 crore to Rs200 crore per coal block. But the returns would be attractive in the range of Rs50 crore to Rs100 crore a year,” he said.
For the year 2008-09, SCCL reported revenue of Rs6,396 crore and a net profit of Rs132.83 crore.
As part of the strategy to supplement revenue and profit, SCCL is now setting up a 600MW coal-fired power project in Adilabad district of Andhra Pradesh at an investment of Rs3,000 crore.
“We expect to generate profits of Rs350 crore to Rs400 crore a year on a turnover of Rs6,000 crore to Rs7,000 crore from the 600MW power project, which will commence commercial operations in September 2013,” he said.
Rao said the coal miner was targeting at least Rs500 crore of net profit a year from supplementary business sources such as power production, contract mining and consultancy services within the next five years.
The company expects to report a consolidated revenue of around Rs15,000 crore to Rs16,000 crore from 2014-15 from all the firms businesses—own mining, contract mining, power generation and consultancy services—and a net profit of Rs700 crore to Rs800 crore a year.