Commercial mining not a competition to CIL, says MD Pramod Agarwal

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Published: June 23, 2020 2:15 AM

He allayed apprehension that the entry of private entrepreneurs in commercial coal mining operations may shrink CIL's role.

The allocation of 16 new blocks few months ago to the Maharatna PSU swelled up its resources by around 9 billion tonne (BTs) to 172 BTs.The allocation of 16 new blocks few months ago to the Maharatna PSU swelled up its resources by around 9 billion tonne (BTs) to 172 BTs.

Coal India (CIL) doesn’t view commercial mining as competition to the PSU miner since 54% of the country’s entire coal resource of 319 billion tonne would remain under its control as also having an edge over other companies with ready mechanism for quality and timely supplies.

“Commercial coal mining is not going to adversely impact the production or profitability of the company. Key issues which will help improve to stay ahead of the competition include uniform quality of coal, cost efficiency in production and reliable timely delivery schedule. Introduction of higher degree of mechanised mining and increased supplies are other focus points,” CIL chairman and managing director Pramod Agarwal said, adding the company is confident of retaining its flagship position as the country’s leading coal producer, notwithstanding the opening up of the coal sector to private players for commercial mining.

He allayed apprehension that the entry of private entrepreneurs in commercial coal mining operations may shrink CIL’s role. “Commercial mining complements our efforts in shoring up the country’s indigenous coal output. It would not unsettle us,” Agarwal said.

The allocation of 16 new blocks few months ago to the Maharatna PSU swelled up its resources by around 9 billion tonne (BTs) to 172 BTs. Of these, Western Coalfields (WCL) and Bharat Coking Coal (BCCL) account for 5 blocks each. Eastern Coalfields (ECL) has 3 blocks whereas 2 belong to Central Coalfields (CCL) and one to Mahanadi Coalfields (MCL). None of the 41 blocks put up for commercial mining auction belong to CIL

However, irrespective of competition, CIL, over the years, has been working on becoming a cost-efficient producer in lowering the cost per tonne of coal produced and focusing on improved quality of coal supply. These two factors will determine the sale of coal in the competitive environment.

CIL’s advantage of over four-and-a-half decades of core competence, skilled human resource, established infrastructure, streamlined operations, infusion of capital in upgrading the technology and evacuation logistics, robust coal resource base and a slew of consumer friendly measures will give it an edge.

Market observers say with the government proposing to bring about an end to the FSA (fuel supply agreement) regime and create a coal exchange where all the mined coal will be traded through the online platform, there may be a need to bring about changes in the infrastructure layout, on which CIL has already invested heavily. Even the amount of Rs 50,000 crore which the government has proposed to spend to create evacuation infrastructure, takes into consideration the new trading and supply system or not is a matter that needs to be looked into.

Under the FSA regime, the end user is tied up with a CIL subsidiary and accordingly, its logistics are set. But open market would mean allowing the end user to make a choice of its coal from which ever source it would like. In that case, the government will have to ensure that logistics doesn’t become a bottleneck, a market observer unwilling to disclose his name said.

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