Coal India's restructuring process in place

State-run coal miner Coal India Ltd is also heading for a restructuring, with the government inviting expressions of interest (EoI) from consultants to draw out a plan. The idea is to spin off CIL subsidiaries as independent entities to ramp up production by infusing competition.

“It has been proposed to take up a study for restructuring CIL to assess drawbacks inherent in a monopolistic situation, for improving competition among coal mining companies, for evolving administrative structures to enhance planning capability in companies and improving investment plans,” the coal ministry said in a statement. Consultants have 15 days to submit EoIs and three months to submit the report.

Restructuring of CIL was originally proposed by the T L Shankar committee on coal sector reforms that submitted its recommendations in 2007. The panel had suggested staying away from any major legal or administrative restructuring of the coal behemoth. It had, however, recommended making changes at the board level by making the chairman and managing director of CIL the chairman of the boards of all subsidiaries. The idea was to hold the CIL CMD accountable for the performance of subsidiaries.

The Shankar committee had asked the government to go for the restructuring in the 12th Plan period (2012-17). The government had accepted the recommendation. Accordingly, the 12th Plan document pitches for spinning-off the CIL subsidiaries as separate public sector companies, ‘encouraged to develop their own strategies of coal development, including joint venture activities and acquisition of assets abroad’.

Coal India was formed in 1975 as part of the effort to nationalise the coal sector by enacting the Coal Mines Nationalisation (CMN) Act. Four coal production subsidiaries were set up, based on location of coal reserves across India, in addition to a technical exploration arm, Central Mine Planning and Design Institute of India Ltd. Later, three more production subsidiaries were added.

CIL alone accounts for over 82% of India’s 532 million tonne coal production. The miner produced 435 million tonne coal last financial year. This was a marginal (less than two percent) increase compared to the previous year. The company’s output has remained stagnant over the past two years owing to capacity constraints and delays in clearances for new mines.

The lag in production is likely to force costly imports to jump from the current 90 million tonne annually to 200 million tonne by 2017. CIL’s monopoly has often come in for criticism by customers, largely power companies, which blame the miner for abuse of its monopoly in production to dictate prices. CIL denies the allegation.

Coal India needs to mine 150 mt in Q4 to meet 2012-13 targets

Meanwhile Coal India will have to work fast to mine more than 150 million tonnes in the fourth quarter of 2012-13 to meet its full year target. In the first three quarters (April-December 2012), the public sector company mined 308.89 million tonnes.The whole year production target is set at 464.10 million tonnes.

The company is under constant pressure to mine more coal to meet increasing demand from several sectors, especially thermal power generation stations. “To achieve the production target, the required growth rate is 6.5%, which we are confident to achieve. The more crucial is offtake target,” said S Narsing Rao, CMD, Coal India.

“On one side it is quite challenging to achieve more than 150 million tonnes production in the fourth quarter. But the silver lining is that we have already achieved higher output compared to last year,” he told. However, pending environmental and forest approvals may prove to be major hiccups to clinching production targets, he cautioned.

The public sector miner clocked 6.1% growth in production during April-December 2012. It mined 308.89 million tonnes in the first three quarters of 2012-13 against 291.24 million tonnes in the same months last year. However, the company took a hit during October-November, with production increasing by just 2.4% in the third quarter of the current fiscal year. This is because of untimely rains and festival holidays affecting work at the mines.

Coal India registered 7.9% growth in offtake during the first nine months of 2012-13. The public sector miner delivered 335 million tonnes of coal during April-December 2012 (310.5 million tonnes). The increase in offtake is primarily because of increased rake availability and clearing pithead stock.

The company had pithead stock of about 70.88 million tonnes as on April 1, 2012, which reduced to 43.93 million tonnes as on December 31, 2012. In the third quarter of the current financial year, offtake was up by 8.9%. The public sector miner delivered 120.2 million tonnes of coal during October-December 2012 (110.4 million tonnes).

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