We're producing what's possible, operating scenario should be understood
Jan 16, 2012
Business Standard, New Delhi
Coal India Ltd, the world’s largest producer and India’s state-owned miner, is going through a difficult period following an unprecedented decline in output. Chairman Nirmal Chandra Jha defends the company’s recent performance in an interview with Sudheer Pal Singh. Edited excerpts:
Have you agreed on a 25 per cent rise in workers’ wages this time? What would be its impact?
The last meeting with workers remained inconclusive. The two sides agreed on a 25 per cent hike, but subject to certain conditions. That issue is to be resolved in the next 10 days. After the next meeting on January 27, we will decide whether more negotiations are required. The wage hike will not necessarily be followed by a price hike. It will depend on how much increase is settled.
How do you counter the allegation that the sector is going through its worst phase, led by Coal India’s dismal performance?
The allegation needs to be examined in the light of the current operating scenario. Ninety per cent of Coal India’s production comes from open-cast mining. This requires digging the earth, which requires the right to do mining. If coal-bearing land is not given to us, from where would coal be produced? Forest clearances cause delays. Newer terms and conditions are being imposed every time a proposal is taken up. The Forest Rights Act (FRA), 2006, has made settling the rights of all dwellers of the forest a pre-condition. Also, there is a new issue, of the Wildlife Conservation Plan which has to accompany every proposal. In another new issue, a digitised map of the mining plan has to be prepared with the differential GPS by the miner. All these delay the clearance of land for mining purposes. If any incremental production comes from the same mining area, it is again a violation of the law, of the Environmental Clearance (EC) limit. Also, people with land rights do not vacate land. Even if the acquisition is allowed on paper, physical possession is not always feasible. On the one hand, production from a mine is limited. On the other, people are asking for more coal.
Has not the end of the No-Go policy helped? What led to the downward revision of this year’s target?
A ministerial group recently recommended that the No-Go rider be dispensed with and projects be cleared on individual merit. But this was happening earlier, too; we have come back to the same regime. As on date, we have 177 forestry proposals awaiting clearance. The current year’s target was 447 million tonnes. This required a modest growth of 4.9 per cent. Unfortunately, this year’s monsoon played havoc on our mines and we had huge negative growth in the three months of August, September and October. And, we fell short of 26 mt from the year’s target. Making up the loss is possible only if we grow positively in the months of November till March. If we have a 10 per cent growth in the last three months this year, we would end up producing around 440 mt. But the target for these dry months was already kept high. g higher than what is already high is difficult.
There is potential in a lot of mines to produce more, but by doing this, we would cross the EC limit, which is not allowed. In other cases, the EC limit is present but we cannot produce because of forest clearance and land acquisition constraints.
But land acquisition is an evergreen problem. What makes it special this time?
Land acquisition problems have never been so acute in the past. The problem has aggravated as states have come up with newer relief and rehabilitation policies in the past three-four years, enabling land oustees to get more and more compensation. Also, the Land Acquisition Bill is pending in Parliament, which promises oustees four times the market price. So, why will a land holder give away land until the Bill becomes an Act, making it mandatory for the company to pay four times higher compensation?
There are contradictory provisions in the Acts which disable coal companies from getting land. While acquiring land, a miner cannot pay more than what is to be provided in the compensation provision of the Coal Bearing Areas (Acquisition and Development) Act. So, while the CBA Act asks miners not to pay more than a certain amount, the Land Acquisition Bill asks them to pay four times the market price. This dilemma should be resolved at the earliest. In some cases, we are not getting land even after paying the market price. All over the country, there is an aversion to give away land. While compensation would go up, we are not free to price the coal at whatever price we want.
But coal prices are deregulated.
Deregulation is on paper. It is theory. Naturally, the ministry continues to have a say on prices. The largest consumer is the power sector, whose product is regulated. So, we are not free to fix any price of coal. We are selling coal at a discount of 26 to 70 per cent of the imported price in energy terms. It is not feasible to have 100 per cent import parity in the coal price. The country is not in a position to absorb that high cost.
Do you think it is justified for the power ministry to blame CIL for its ills, given the widening gap between CIL-linked power capacity and coal receipts from CIL?
The blame is not justified. CIL is not the repository of the entire country’s coal resources. CIL is trying to produce the maximum it can. It should be the power sector’s lookout if they are not able to meet generation targets. Even in the current year’s extremely bad situation, we have supplied 91 per cent of the Annual Contracted Quantity (ACQ). Whenever Letters of Assurance (LOAs) have been granted, we have always informed the government that CIL does not have enough coal. We were forced to issue LOAs. If coal has to be imported, consumers have to take coal at that price. When CIL had initially tried to import coal and asked for a back-to-back tie-up, nobody came forward.
CIL has made it clear that it will not be able to meet everybody’s requirement. If this has to be done, 50 per cent of coal will have to be sourced from imports. Even while we supplied 303 mt last year to the power sector against the committed 323 mt, we had 70 mt in the stocks. We have produced enough. CIL cannot make this coal reach their power plants. If they require coal, they should lift it from the pithead. Even in October, when e-auction coal was diverted to the power sector, nobody lifted that coal. So, what is the fun in blaming CIL? Even in the past two months, CIL has added four mt coal to the stocks. This is because we are not getting sufficient rakes. We required 200 rakes in December but we got 186. This translates to a loss of loading of 50,000 tonnes daily. We cannot create rail infrastructure for the entire country. These issues have to be solved at the national level.
Are you in favour of the share buyback proposal in CIL?
We have not received any intimation from the government on this matter. I understand that in a buyback, the company extinguishes its share. What is the benefit to the company of this buyback? If I extinguish my share, it will be bought by somebody, from my money. My cash balance will be reduced and the interest income on this cash will also reduce. The company’s profitability will be reduced. The company will look for greater profitability for the shareholder from this money. The buyback route has been rarely practiced, as I understand. The cash reserve is with public sector banks, which are adequately utilising it elsewhere.