NLC to move beyond lignite to fuel future growth

Written by Kavitha Venkatraman | Updated: Aug 31 2010, 03:51am hrs
Neyveli Lignite Corporation (NLC), a mini-ratna PSU with interests in mining and power generation, is mostly in the news for wrong reasons. In the latest, in early July, nearly 14,000 of its employees struck work to press their demand for a wage revision, among other things. The six-day-long strike was called off after a tripartite meeting between the labour commissioner, NLC chief general manager and trade union leaders of the DMK and PMK. Strikes are nothing new to NLCs chairman and managing director AR Ansari. He and his management team work hard to ensure that disputes are resolved early so that power generation is not disrupted. Ansari was instrumental in ensuring a 22% growth in NLCs top line at Rs 4,121.03 crore for FY10. In an email interview to FEs Kavitha Venkatraman, he talks about NLCs labour issues, projects in the pipeline and investment plans. Excerpts:

NLC has been in the news often for frequent strike calls by the employees. What has been the impact of these strike calls and how does the management insulate itself from these issues What steps are you taking to improve industrial relations

At NLC, we have two recognised unions that represent the workforce in all negotiations with the management. Also, there are some non-recognised unions, which cannot take part in any negotiations with the management. There are also unions representing contract workers.

This kind of a setup is perhaps unique to NLC. These unions take up one issue or the other and go on strike at the drop of a hat. Such strikes do not have any material impact on the company.

As far as handling the strike calls are concerned, I would like to say that, in NLC, the mines are highly mechanised, hence the role of technical executives and supervisors are vital. They take over the operations of equipment, and thus, production is maintained. Further, the management takes care to build up sufficient inventory of lignite to feed the power stations during strike periods.

The management of NLC always takes the first step in resolving the issues. The management sits with the unions for discussions till an amicable settlement is reached. For example, in the recently concluded wage revision for workers, there has been not less than 65 rounds of discussions before the settlement was reached. NLC has always given the best to its workmen.

Has the company witnessed power generation problems and suffered losses because of the strike calls in the last five years

I would like to reiterate that the system in the company is such that no strike can bring down production completely. Power stations are being operated by executives, as the technology employed is highly sophisticated. Strike can affect labour-oriented areas in the power stations such as fuel-handling plant and the like to some extent. With adequate preparation, NLC has been managing the operation of mines and power plants even during the strike periods.

What are your investment plans for the current year

The company has earmarked about Rs 1,984 crore for investment in the coal and power sectors. Out of this outlay, Rs 314 crore has been earmarked for the coal sector and Rs 1,670 crore for the power sector. This apart, a provision of Rs 826 crore has been made for the Tuticorin project and Rs 325 crore has been allocated for a wind power plant.

How and when do you propose to enhance NLCs power generation capacity from the present levels Can you share with us details of projects in the pipeline

NLC has several projects in the pipeline. For example, it is in the process of setting up a 50 MW wind power plant in the Tirunelveli district of Tamil Nadu at a cost of Rs 325 crore. Tenders were floated for the power plant equipment and bids were received. They are currently being evaluated. For the project, the land has to be acquired by the main equipment supplier. This project is likely to be commissioned in 2011.

We are also planning to replace the ageing 600 MW thermal power station-I with lignite-based thermal power plants of 2 X 500 MW in Neyveli at an estimated cost of Rs 5,696 crore. NLC is awaiting necessary approvals from the government of India for the project. It already has land for the project.

NLC is expecting GOI approval soon for a 250 MW lignite-based thermal power station at Bithnok in Rajasthan. The estimated cost of the project is Rs 2,020 crore. We have already applied for land acquisition sanction from the government of Rajasthan.

Besides, there is a plan to expand the Barsingsar Thermal power station by adding 250 MW capacity with an investment of Rs 2,020 crore. Preparation of the feasibility report has been completed and the application seeking administrative sanction for land acquisition has been submitted to the Rajasthan government.

For the Jayamkondam lignite-based power project of 2 x 800 MW, the feasibility report is under finalisation. Administrative sanction of the Tamil Nadu government for acquiring land has been obtained. The project is estimated to cost Rs 9,433 crore.

NLC has proposed to set up coal-fired power plants of 2,000 MW, one each in UP and Orissa, with an estimated cost of Rs 20,000 crore. While in UP, the project is being planned in joint venture with Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd, the Orissa project is being contemplated with Mahanadhi Coal Fields Ltd. Besides NLC, Mahanadhi Coalfields Ltd and Hindalco already have a JV to develop a coal mine of 20 MTPA capacity at Talabira in Orissa. Using their share of coal from this mine, NLC and Mahanadhi have proposed to jointly set up a 1,000 MW power project at IB Valley in Orissa at an estimated cost of Rs 5,000 crore.

NLC was looking at acquiring mines overseas. Do you expect any deal in the current year How much has been set aside for these acquisition plans

Yes, NLC is looking at acquiring mining assets in order to supplement the coal supplies to the 1,000 MW Tuticorin project and to meet the coal requirement of new coal-based power projects. In order to acquire coal assets abroad (with the clearance from the ministry of coal), NLC had issued a notification for expression of interest (EOI). The response received is being evaluated. If everything goes well it is quite possible that NLC could complete the process in the current year itself. NLC is also taking steps to join hands with Coal India Ltd for acquiring coal assets. These proposals are in the initial stage and once we reach the critical phase necessary funds could be provided. As such the company has not earmarked any fund for its acquisition plans in the current year.

What are your recruitment plans for the current year

Right now, the company is having surplus manpower. We are trying to correct this situation by shifting excess manpower to new projects. Of course, we are recruiting personnel for statutory posts as and when required. In order to maintain succession, the company has decided to recruit about 50 trainees in the field of engineering, HR and finance every year. For this year, the company has recruited about 50 executive trainees through campus interviews from institutes like IIT, NIT, IIM and IIIT.

What about your diversification plans into new areas Will you branch out of lignite and power

The company can no longer pursue any expansion solely based on lignite. The mining industry encounters many problems, the major one being land acquisition. Realising the need for growth, NLC has moved into coal-based power generation. At present, as you are aware, NLC, in joint venture with the Tamil Nadu Electricity Board, is setting up a 2 X 500 MW coal-based power project in Tuticorin. Contract has been awarded to Bhel for main power plant equipment. The first unit is scheduled to be commissioned in March 2012 and the second unit in August 2012. NLC is also planning to participate in the competitive bidding for Ultra Mega Power Plant, subject to clearance from the ministry of coal. NLC is in the process of setting up a 25 MW solar plant. At present, NLC does not have any plan to branch out of mining and power generation.

What is your outlook for the current year How do you see your performance by the end of the current financial year

The outlook for the current year is quite good. We will be commissioning the thermal power station II expansion projects first unit of 250 MW capacity this year. The second 125 MW plant of the Rajasthan project has already been synchronised. There is every reason to expect a better performance in the current year over the record performance in 2009-10.

The government of India sanction for a 250 MW lignite-based power plant and its linked lignite mining capacity of 2.25MTPA at Bithnok in Rajasthan, and the 2 x 500 MW lignite-based power project at Neyveli, is expected. NLC is likely to place orders for major packages of these projects this year.