Coal ministry’s 710 million tonne production target makes CIL stakeholders jittery

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Published: April 28, 2020 2:45:23 AM

The ministry could have set a target of removing the huge burden and could have kept coal at exposed seams. As and when required coal could be extracted out of the seams.

CIL sources has maintained that there will be a gestation period before these things happen and production could pick up only then.

Coal India’s (CIL’s) target of producing 710 million tonne (MT) in FY21 seems unrealistic by a section of the stakeholders in view of the low demand under which the mining behemoth is reeling at the current point in time. CIL ended FY 20 producing 602 MT — 58 MT short of the target — and is still left with a stockpile of 125.5-75.5 MT at pit heads and 50 MT at the power plants. This means it has 30 days of coal stock at the power plants. Thus, producing 710 MT in FY21 would eventually result in more pilferage, deterioration in quality, increased environmental pollution and creating more stockpile with high chances of catching fire.

Although Union coal minister Prahlad Joshi has said power demand will go up once the country exists the lockdown phase and Union commerce and railways minister Piyush Goyal foresees an opportunity for India turning to a manufacturing hub, CIL sources has maintained that there will be a gestation period before these things happen and production could pick up only then.

In the power sector, even the pre-Covid situation was not healthy as the demand was low. Average plant load factor (PLF) for power plants was only 60% and in the Covid situation, even the peak demand continues to remain at an average of 117 GW. Besides, there are not much thermal capacity addition to happen because the focus has been in adding renewable energy.

The ministry could have set a target of removing the huge burden and could have kept coal at exposed seams. As and when required coal could be extracted out of the seams. But ministry sources insisted that keeping production target on the lower side would mean escalating the cost per tonne of production and also decreasing the output per man per shift.

Coal production from open cast mines costs between Rs  1,500 and Rs 1,800 per tonne. Though producing from underground mines cost Rs 6,000 per tonne, the company has almost shut all the underground mines to make mining profitable, extracting only 5% of its total production from the underground mines. Salaries and wages of CIL workers are the highest in the industry, accounting for nearly 50% of CIL’s operational cost and therefore asking for more production would mean optimising the value of the company’s human resources.

But the highest incremental production achieved so far has been 44.5 MT in 2015-16, the year in which CIL ended up producing 539 MT. Any incremental production beyond this level from open-cast mines doesn’t seem feasible, and CIL, at best, can produce 650 MT in FY 21 not considering the 125 MT stock pile lying with it.

Meanwhile, to reduce operational costs, CIL has shifted all its subsidiary marketing counters from Kolkata and other regional cities to its subsidiary headquarters and this has to be made effective by the end of June. While CIL officials felt there would be other measures to reduce operational cost and the government was eager to pass on the benefit to the power sector, there were even chances that the ministry made a downward revision of the production target for FY21.

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