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No plans for hike in price: Coal India

Coal India is looking to sell around 50 mt of coal via the e-auction route in the current financial year. The initiative is not only to improve top line but to also provide access to customers who are not able to source coal through the available institutions, says S Narsing Rao, chairman, CIL, in an interview with Resource Digest, excerpts...

Where do things stand with the signing of the FSAs and the discussion that you are having on the modified price pooling mechanism? Can you give us details on what has happened with the last few rounds of negotiation?

On the signing of the FSAs, a few more have been signed. I think this week the Uttar Pradesh state utilities have also signed. They have signed three of them and it now stands at 33, but it is not a question of numbers. Some of them have expressed some reservations on a few clauses. So we have said that we will look into that. According to us, they are very minor issues and we should be able resolve that.

How many more agreements are to be signed? Have you reached any agreement with some of the important players like National Thermal Power Corporation (NTPC )?

The total to be signed would be to the order of about 100, because each unit is an entity in this case. So, NTPC itself has to sign not less than 10 or 12. So totally, about 100.

We also hear that from sectors other than power, the demand for buying in e-auction is also reducing quite a bit, both in terms of volumes and also in terms of price. That is an important contributor to your profitability. Can you just tell us what your expectations are with regards to that for next year?

In the second quarter, about 1.5 million tonnes was less compared to last year and the price was also a bit less. I think this is totally on account of the international prices, because the international prices have come down and that’s why some maybe preferring the imported coal compared to our e-auction coal. However, I would expect volumes to be more or less flat as last year in terms of the volumes. The prices could possibly see a very small decline overall realisation for the next six months.

The volumes have fallen because for power companies especially, the off take is now better outside of e-auctions. What kind of targets have you set both for volumes on e-auctions for this year and the next year and how much have prices come off by in the market?

Our deliveries to the power sector have improved. Earlier some of the private sector power companies also used to buy coal in the e-auction. Now that the delivery has improved, they are not participating in the e-auction purchases; that is one factor. Another thing is, the international prices have come down substantially by about USD 20 per tonne or so in the last four-five months. We expect it to be in the range of around 50 million tonnes. Last year we did 52 million tonnes (mt) and this fiscal it should be about 50 million tonnes. Last year our additional revenue from e-auction was about Rs 5,000 crore plus, maybe this year it could be about Rs 100 crore or it could be less, this is what our estimate is at this stage.

You have also been looking for the possibility of another price hike. Can you tell us if your costs warrant some kind of a price hike and whether you are likely to push for it over the next few weeks?

There have been some cost drivers. One of them is because of this inflation; the dearness allowance neutralisation to the employees is slightly higher than expected. Secondly, sometime back there was a diesel price increase. And thirdly, we are doing some revision of the wages of the contract labour. Together, there will be some impact but at the moment we are not contemplating any price rise. Only in Q3 will we be possibly looking into that.

There had been indications that the government was toying with some kind of divestment program for Coal India whether through your subsidies, directly through you or a higher interim dividend. Are any of those options on the table?

The higher interim dividend could be an imminent possibility.

How much of your cash reserves might be cleaned out by a higher interim dividend?

Overall last year we paid 100% that was about Rs 6,300 crore. Surely it would be more, how much, that we need to sit in the board and discuss because Government of India nominees would also be there. We also need to know what is expected to the Government of India.

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