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CIL PERFORMANCE – A MAXI ONE FROM THE MINI-RATNA.

Coal India reported a profit before tax of Rs 9,576.22 crore for 2007-08 on the back of a 5.1 per cent increase in production to 379.49 million tonnes over the previous year. However in terms of the growth target set for the Eleventh plan period the physical performance fell short of the expectation. Coal India aims to produce 520.5 mt in the last year of the Eleventh Five Year Plan (2007-12), 44.2 per cent more than the 360.9 mt it produced in 2006-07, the final year of the Tenth Plan. This means the company will have to increase its raw coal production at the rate of 7.6 per cent in every year of the Eleventh Plan. Against this the growth rate in the first year of the Eleventh Plan was 5.1 per cent.

“The profit figure is provisional, pending the final audit of accounts and without provisioning for wage revision,” said Coal India chairman Partha S. Bhattacharyya. “However, on a like-to-like basis, this is 12.37 per cent more than the Rs 8,522.22-crore profit in the previous fiscal,” he added.

A wage revision is under negotiation and, if agreed upon, Coal India will have to pay the arrear of the past 21 months. A 15 per cent increase in salary will mean an expenditure of Rs 1,400 crore towards the arrear payment. “A 22 per cent increase in wages was agreed upon at the last settlement,” Bhattacharyya said.

Coal India’s sales revenue in 2007-08 is also expected to be more than Rs 40,000 crore compared with Rs 35,000 crore a year ago. The company has already paid the government an interim dividend of Rs 1,705 crore.

However, Coal India’s performance was dampened by Eastern Coalfields Ltd (ECL), one of its nine coal producing subsidiaries. While all the other subsidiaries posted an improved performance in terms of production and profitability, ECL suffered a loss of Rs 647 crore after a 9.35-million-tonne (mt) shortfall in production from the target. ECL produced 24.06 mt last fiscal, which was 6.41 mt less than in 2006-07.

“ECL could not achieve its production target because the outsourcing contract for the Rajmahal project could not be finalised. Bid prices were not remunerative,” Bhattacharyya said.
The subsidiary also failed to do some preparatory work. “This problem (relating to hired patches) was mostly solved in the last financial year and ECL is expected to achieve its production target of 31 mt in 2008-09,” the chairman added.

As mentioned, CIL achieved a production level of 379.49 million tonnes in 2007-08 which is higher by 18.5 million tonnes (growth of 5.1%) over the previous year. The first half of the year witnessed major constraints by way of law and order problem in CCL and MCL, unprecedented rainfall, significantly higher than previous year and non-availability of forestry clearance and physical possession of land, particularly in Jharkhand. These two factors constrained the growth in the first half of 2007-08 at only 0.82 million tonnes (0.7%). However, the coal companies geared up in the second half and achieved a growth of 17.76 million tonnes (8.7%), which is better than the asking growth rate for the Eleventh Plan period.
*Figs in million tonnes
TargetActual achievedGrowth over targetSame period last yearGrowth over last year
First half (Apr- Sept)170.82157.88-12.94157.060.82 (0.7%)
Second Half (Oct 07- Mar)213.69221.617.92203.8517.76 (8.7%)


Subsidiary-wise production against target and last year is given below:
Figs in million tonnes
Company TargetActual Product Surplus ShortfallAchieved last yearGrowth over last year
ECL33.4124.06 -9.35 30.47-6.41
BCCL 25.2025.220.0224.211.01
CCL 44.0044.170.17 41.322.85
NCL58.00 59.621.6252.167.46
WCL42.4043.511.1143.210.30
SECL91-5093.792.2988.505.29
MCL88.0088.010.0180.008.01
NEC2.001.10-0.901.050.05
CIL384.51379.49-5.02360.9118.58

The CIL subsidiary which is responsible for the shortfall in production target has been ECL. All other companies have been able to achieve the target despite certain constraints stated earlier. ECL has witnessed a very serious shortfall of 9.35 million tonnes as compared to the target. 46% of this shortfall has been made up by the surpluses over the target achieved in other coal companies -mainly SECL (2.29 Mt), NCL (1.62 Mt) and WCL (1.11 Mt).
Shortfall in ECL was mainly on account of non-finalisation of tender for outsourcing in Rajmahal, overaging of departmental equipment and severe lack of preparatory activities in 06-07 for achieving the targeted production from hired patches in 07-08. The company sources claim that the problems have been largely sorted out and expected that ECL will achieve its targeted production of 31 million tonnes in 2008-09.
OB removal is an important performance criterion as through this activity, coal is exposed. Growth in OB removal is necessary to ensure growth in coal production in the subsequent period. During the Tenth Plan i.e. from 2002-03 to 2006-07, the growth in OB removal has been from 501.17 million Cub.M (2002-03) to 537.65 million cub.m. (2006-07) i.e. @ 1,4% per annum. Against this, the OB removal achieved in 2007-08 is 610.34 million cub.m. i.e a growth of 72.69 million cub.m. (13.5%).
The growth in composite production in 2007-08 was 11.04% significantly better than the earlier years.
Composite production of Coal and OB since 2002-03 year-wise and the growth percentage achieved is given in the table below:-
YearComposite Excvn/Prodn (MM3) Growth in %
2002-03682.84
2003-04688.73 0.86
2004-05718.444.31
2005-06 748.65 4.20
2006-07763.05 1.92
2007-08847.28 11.04

A major performance highlight in 2007-08 has been the successful arresting of the trend of persistent decline in underground coal production continuing for decades. This was the first time since 2002-03 there was little over 2 per cent increase in the underground coal production. The trend is expected to pick up in the later years of the Eleventh plan. The improvement in the underground coal production is the combined impact of a number of actions taken to increase coal production from the existing mines through introduction of new technology in some cases. In fact, the declining trend in underground coal production has been arrested in all coal companies except BCCL, CCL and NEC. The growth achieved in SECL by 5.36 Lt (3.3%) has enabled CIL to set-off the decline in BCCL and CCL.



Figs in Lakh Tonnes
YearUG coal production
Increase/decrease over the previous year
2002-03484.16-8.04

2003-04
474.45 -9.71
2004-05470.41-4.04
2005-06 458.17- 12.24
2006-07 433.22 - 24.95
2007-08
435.39
+2.17

The company-wise performance of underground coal production indicates the following position:-
Figs in Lakh Tonnes
Company2006-07 2007-08 Growth
Abs%
ECL82.6683.190.530.6
BCCL49.0144.64-4.37-8.9
CCL19.5518.30-1.25-6.4
WCL99.1599.780.630.6
SECL162.00167.365.363.3
MCL19.7421.181.447.3
NEC1.110.94-0.17-15.9
CIL433.22435.392.170.5

CIL has achieved not only the highest ever coal off-take of 375.32 million tonnes, but also the highest ever coal off-take growth over the previous year by 24.18 million tonnes. In percentage terms, it is 6.9%. However, despite such strong favourable growth, 22 power stations continue to remain critical as stocks at power house end have actually reduced from 14 million tonnes to 10.5 million tonnes i.e. by about 3.5 million tonnes. The poor coal stock position at powerhouse end continues to remain a cause of concern.
Meanwhile commenting on the outlook for 2008-09, the CIL Chairman said that while profit from operations was set to rise, an additional burden is expected following the award of the coal wage agreement (NCW-VIII) later this year. However unlike in the previous years, CIL is now entering into a five-year wage agreement in line with other PSUs.
CIL has two formidable suitors to join hands in joint venture. CIL follows the Expression of Interest (EoI) route for finalization of such proposals. Reliance Industries was keen on a CTL project with CIL. ArcelorMittal wants to develop the abandoned and unexplored reserves of CIL. Bhattacharya, the CIL CMD, would not mind shelving the EoI route if the government so directs and opt for tie-up on a nomination basis. Will Bhattacharya’s bosses in Delhi have the courage to give the nod?

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