For some years, state-owned Coal India (CIL) was crippled by shortages, stagnant production, low buffer stocks, inadequate transports and more. Last year, however, was a pleasant change. In FY15-16, the company saw a net profit growth of about 4 per cent, a production growth of 9 per cent, and most important of all, a decline in its import bill — a cause for cheer as India is the third largest coal importer in the world despite massive reserves.
Within a year and a half of Coal India chairman and managing director Suthirtha Bhattacharya taking charge, 536 million tonnes of production record was added to the books of the company in fiscal 2015-16, 42 million tonnes more than the previous year — a growth of 8.5 per cent. For the entire fiscal 2015-16, Coal India’s consolidated net profit was up 4 per cent at Rs 14,274.30 crore, while total income increased by 12.4 per cent to Rs 1,11,608.5 crore.
Despite missing the 2015-16 target of 550 million tonnes, the growth in net profit was quite an achievement for the ‘Maharatna’. Going by analysts, this growth is to be attributed to: ease in land acquisition, swift environment and forest clearances, and speedy evacuation of coal.
Operating through eight subsidiaries, CIL’s mining used to get delayed as the subsidiaries weren’t empowered to take decisions, which had to be routed through the headquarter. But after Bhattacharya came in, he addressed the issue with utmost priority, and set a system in place for speedy mining mechanism.
The demand for coal has a direct bearing on production. For that matter, CIL representatives routinely conduct meetings with consumers to understand their need, says Bhattacharya. The efforts are further backed up by the marketing department of the company. About 75 per cent of the total coal produced by CIL is utilised by power plants across the country. The rising demand from them led to increased production. However, with a slowdown in recent times, the demand for power has slumped, but is likely to improve as reforms initiated by the government start to yield results in a few quarters.
It is a well-known fact that power plants in coastal regions prefer imported coal as their landed cost is low. CIL recently cut prices of high-grade coal, and now its prices are 20-30 per cent cheaper than the price of equivalent imported coal. The company’s efforts to match up is on point, and will be augmented by inflation-linked hikes, rise in e-auction volumes and likely price hikes in low-grade coal. The prospects for the company are getting brighter with the improving average sale price, owing to higher sale of coal through e-auctions.
Despite the noise over coal-powered plants, Bhattacharya says coal will remain the primary power source for India. So ‘more power, less coal’ has to be the goal. The company today is India’s top coal producer, with an 80 per cent share currently. While there are plans to open up coal production to private companies (a 33 per cent share of the 1.5-billion-tonne target for 2020), CIL may continue to maintain a high share due to its ample coal reserves.
Of course, the company will welcome competition from private sector players. After the coal allocation scam in the previous regime, fresh and transparent auctions have led to the entry of many formidable private sector players. Coal India officials are confident that their entry will lead to improved efficiencies in the whole sector. After all, king coal is here to stay and Coal India too as the king!
BW Reporters
Naina Sood is a Economics graduate and has done her post graduation in International economics and Trade. She has deep interests in Indian economy and reforms
