Coal India Ltd

Last modified by Asif Farooqui on 2021/03/09 07:56

Company Overview

Coal India Limited (CIL) (NSE: COALINDIA) the state owned coal mining corporate came into being in November 1975. With a modest production of 79 Million Tonnes (MTs) at the year of its inception CIL today is the single largest coal producer in the world and one of the largest corporate employer. Operating through 83 mining areas and spread over eight (8) provincial states of India. CIL is an apex body with 7 wholly owned coal producing subsidiaries and 1 mine planning and consultancy company spread over 8 provincial states of India. CIL also manages establishments like workshops, hospitals etc. and also owns 27 training institutes and 76 Vocational Training Institutes Centres. Indian Institute of Coal Management (IICM) as a state-of-the-art Management Training ‘Centre of Excellence’ – the largest Corporate Training Institute in India - operates under CIL and conducts multi-disciplinary management development programmes.¹

CIL is a Maharatna company - a privileged status conferred by Government of India to select state owned enterprises in order to empower them to expand their operations and emerge as global giants. The select club has only ten members out of more than three hundred Central Public Sector Enterprises in the country.

The producing Indian subsidiary companies of Coal India Limited:

Eastern Coalfields Limited (ECL)
Bharat Coking Coal Limited (BCCL)
Central Coalfields Limited (CCL)
Western Coalfields Limited (WCL)
South Eastern Coalfields Limited (SECL)
Northern Coalfields Limited (NCL)
Mahanadi Coalfields Limited (MCL)

One mine planning and consultancy company of Coal India Limited is Central Mine Planning & Design Institute Limited (CMPDIL). In addition, CIL has a foreign subsidiary in Mozambique namely Coal India Africana Limitada (CIAL). The mines in Assam i.e. North Eastern Coalfields are managed directly by CIL.

Mahanadi Coalfields Limited has four (4) subsidiaries which are
- MJSJ Coal Limited
- MNH Shakti Ltd
- Mahanadi Basin Power Ltd
Neelanchal Power Transmition Company Private Ltd
- SECL has two subsidiaries
- M/s Chhattisgarh East Railway Ltd (CERL)
- M/s Chhattisgarh East- West Railway Ltd (CEWRL)
CCL has one subsidiary
- Jharkhand Central Railway Ltd

Strategic Relevance

Produces around 83% of India’s overall coal production in India where approximately 57% of primary commercial energy is coal dependent, CIL alone meets to the tune of 40% of primary commercial energy requirement. The share of coal is expected to remain high at 48-54% till 2040. Accounts for 76% of total thermal power generating capacity of the Utility sector. Supplies coal at prices discounted to international prices. Insulates Indian coal consumers against price volatility. Makes the end user industry globally competitive. Plays a key role in “Make in India” and making India incorporate globally competitive.

Production and Growth

During 2018-19, CIL produced 606.89 Million Tonnes (MTs) of coal – an increase of 39.52 MTs over last year. CIL for the first time has breached the 600 Million Tonne (MT) mark in coal production registering a growth of 6.97% over the previous year. There has been around 7% growth in coal production during the year, nearly a threefold increase compared to the last fiscal’s output growth of 2.4 %. It is pertinent to mention that CIL leaped from 500 MT to 600 MTs in merely three years whereas it took the company seven years to migrate from 400 MTs to that of 500 MTs. Raw coal off-take Financial Year ending 31st March 2019 was 608.14 MT, an increase of 27.85 MTs over the previous year. Coal & coal products dispatch to power utilities (including special forward e-Auction) was 491.54 MTs. CIL is committed to play major role in achieving the Nation energy security. ‘Vision 2030’ for the coal sector in the country envisages a growth of about 7.6 percent till FY 24-25 to meet coal demand of the country. To achieve the projected growth in production CIL has identified major projects and assessed their related issues.

Projects

There are 119 ongoing Mining projects having annual capacity 0f 608.5 MT which have contributed 304.67 MT in the year 2018-19. Other than this, there are 85 completed mining projects having annual capacity of 185.20 MT Fifty-five (55) new future projects, with a targeted capacity of 195 MTs have been identified in FY 2018-19 to augment coal production of CIL to 1 billion tonnes by FY 2025-26

Products & Services

COKING COAL :

These coals, when heated in the absence of air, form coherent beads, free from volatiles, with strong and porous mass, called coke.²

These have coking properties
Mainly used in steel making and metallurgical industries
Also used for hard coke manufacturing

SEMI COKING COAL :

These coals, when heated in the absence of air, form coherent beads not strong enough to be directly fed into the blast furnace. Such coals are blended with coking coal in adequate proportion to make coke.

These have comparatively less coking properties than coking coal
Mainly used as blend-able coal in steel making, merchant coke manufacturing and other metallurgical industries

NON-COKING COAL :

These are coals without coking properties.

Mainly used as thermal grade coal for power generation
Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other heating purposes

WASHED AND BENEFICIATED COAL:

These coals have undergone the process of coal washing or coal beneficiation, resulting in value addition of coal due to reduction in ash percentage.

Used in manufacturing of hard coke for steel making
Beneficiated and washed non-coking coal is used mainly for power generation
Beneficiated non-coking coal is used by cement, sponge iron and other industrial plants

MIDDLINGS :

Middlings are by-products of the three stage coal washing / beneficiation process, as a fraction of feed raw coal.

Used for power generation
Also used by domestic fuel plants, brick manufacturing units, cement plants, industrial plants, etc.

REJECTS :

Rejects are the products of coal beneficiation process after separation of cleans and / or middlings, as a fraction of feed raw coal.

Used for Fluidized Bed Combustion (FBC) Boilers for power generation, road repairs, briquette (domestic fuel) making, land filling, etc.

CIL COKE / LTC COKE :

CIL Coke / LTC Coke is a smokeless, environment friendly product of the Dankuni Coal Complex, obtained through low temperature carbonisation.

Used in furnaces and kilns of industrial units
Also used as domestic fuel by halwais, hotels, etc.

COAL FINES / COKE FINES :

These are the screened fractions of feed raw coal and LTC coke / CIL Coke respectively, obtained from the Dankuni Coal Complex and other coke oven plants.

Used in industrial furnaces as well as for domestic purposes

TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH :

These are products from Dankuni Coal Complex using low temperature carbonisation of non-coking coal in vertical retorts.

Used in furnaces and boilers of industrial plants as well as power houses, oil, dye, pharmaceutical industries, etc.

Coal Reserves and Resources

As of April 1, 2010, the company had total coal resources of 64,786 million tons, comprising, pursuant of ISP classifications, Proved Geological Reserves of 52,546 million tons, Indicated Geological Reserves of 10,298 million tons and Inferred Geological Reserves of 1,942 million tons. As of April 1, 2010, from its total coal resources of 64,786 million tons, 30,356 million tons had been considered for mining studies (mine planning and feasibility studies), and the remaining coal resources of 34,430 million tons had not yet been considered for such mining studies. From the 30,356 million tons of coal resources that had been considered for mining studies as of April 1, 2010, 21,754 million tons has been estimated as its Extractable Reserves.³

Coal marketing

Sale of Coal

Offtake of raw coal crossed 600 Million Tonnes (MT) landmark and a record offtake of 608.137 MT was achieved during 2018-19, surpassing the previous highest of 580.28 MT achieved during the last year by 4.80 %. In the process, 1.396 MT of coal stock was also liquidated during the year.

A major thrust was made to bring the linked thermal power stations of the country out of critical stock position. A record dispatch of 491.54 MT of coal and coal products was made to power sector in 2018-19, exceeding the target of 489.01 MT and registering a growth of 8.2% over 454.224 MT dispatched in 2017-18. As the result, about 15 MT of coal was added to the stocks of the linked power station and none of them was in the critical stock list of CEA as on 31.3.2019, though as many as 30 of them were in the critical stock list as on 1.4.2018

Auction of coal through Spot e-Auction, Special Spot e-Auction, Special Forward e-Auction for Power and Exclusive e-Auction for NonPower schemes had continued during 2018-19 with better yields as compared to the previous year. Booking of coal in the auctions conducted during 2018-19 was against a premium of Rs. 8983 crores, at 77% over the notified price of coal. The booking of coal in the auctions conducted in 2017-18 was against a premium of Rs.6589 crores, at 50% over the notified price.

Long term demand creation

Additional long term demands are created through linkages allotted through the below mentioned schemes formulated by the government:⁴

SHAKTI

SHAKTI Policy contains provisions for coal supply for various categories of power plants fulfilling different criteria.

Until 2018-19, MoC has recommended signing of FSA with 8 Thermal Power Plants (TPPs) under the provisions of Para A information of SHAKTI for an Annual Contracted Quantity of 20.167 MT and FSAs have been signed with 5 TPPs for the ACQ of 16.967 MT. Also, on the recommendation of SLC(LT), FSAs have been signed under the provisions of Para B of SHAKTI with 4 Central/State Gencos for an ACQ of 8.883 MT as on 31.3.2019.

Further, linkage of 27.18 MTPA had been booked by the power plants in the auction of linkage conducted by CIL under the provisions contained under Part B(ii) of SHAKTI, out of which FSAs for 26.28 MTPA had been executed until 2018-19. The levellised discounts in tariff offered by these power plants for securing these coal linkages is expected to result in an annual saving of Rs.125 crores in tariff for the end users.

More long term demand through FSAs shall be added, as linkages are expected to be granted through the second round of linkage auction under Part B(ii) of SHAKTI and as grant of linkages under other provisions of SHAKTI are gradually being operationalized, the modalities of which are under finalization by the Ministry of Power / Ministry of Coal.

Auction of coal linkages to Non-Regulated Sector

Fresh linkages to consumers in Non-Regulated Sector are granted through auction of linkages conducted in terms of the policy formulated by the government on 15.2.2016. The coal against the linkages secured in the linkage auctions are supplied under the FSAs to be executed for a period of 5 years, the tenure of which can be extended further for 5 years upon mutual consent. In case of Steel Sector, the FSA tenure has been increased from 5 years to 10 years, with provision of mutual extension by another 5 years.

In the events of Tranche-IV of the linkage auctions conducted during 2018-19, linkage of 33.18 MT/Per Annum was secured by the consumers at an average premium of 32.68% of the Notified Price. In the four tranches of auctions conducted between the years 2016-17 and 2018-19, total linkage of 78.36 MT/Per Annum had been granted at weighted average premium of 20.26% over the Notified Price. The additional premium shall be applicable throughout the tenure of these FSAs over the Notified Price applicable from time to time for the supplies.

SWOT Analysis

Strengths

Large Scale of operations allow economies in scale of production
Vast coal resource base
Geographical spread of operations in India allows proximity to a large and diversified customer base
Strong financial credentials.
Skilled and diversified workforce with experience
Well positioned to cater to high demand of coal in India
Consistent track record of growth & strong track record of financial performance
Strong capabilities for exploration, mine planning, research and development

Weaknesses

High cost of production in underground (legacy) mines
Evacuation infrastructure bottleneck in certain areas due to land. statutory clearance and law & Order issues.
Inherent inferior quality of indigenous coal due to high ash content.
Constraints in land acquisition.

Opportunities

Coal to remain the key primary energy source in India
Rural electrification and Power for All UDAY scheme
Enhanced demand of power due to increased use of electric vehicles.
Optimizing production cost through Linkage rationalization.
Export opportunities to neighboring countries
Strong economic growth in India and resultant demand for energy, particularly coal as an energy source
Being a cheaper source of energy compared to alternate sources available in India, demand to continue to remain strong
Coal to liquid and coal to gas technology

Threats

Resistance to part with land, creating problems in possession of land and rehabilitation.
Rapid appreciation in land cost.
Decrease in coal demand and Increase in proportion of renewables in the energy mix.
Energy storage solutions.

Industry Overview

Coal remains the predominant indigenous energy sources and accounts for 55% of primary commercial energy in India. The energy security of the country and its prosperity are integrally linked to efficient and effective use of this abundant, affordable and dependent fuel, coal.⁵

In terms of availability, coal is one is the most abundant fossil fuel available with India. The geological resources of coal in India are in excess of ~300 Billion Tonnes. At the current rate of production, the reserves are adequate to meet the demand for multiple centuries to follow.

Government of India has successfully electrified 95% of the targeted households in the last five years and envisages to provide access to clean, cheap and sustainable electricity to the rest of the needy population as well. Though the proportion of non-coal sources, particularly renewables, has increased over the last few years yet coal shall remain the dominant fuel source for electricity generation in India in near future as well.

Today India is the 2nd largest producer of coal in the world producing about 730 Million tonne (Mt) of coal in 2018-19. The coal sector in India is dominated by state producers including Coal India Limited and Singareni Collieries Company Limited. Coal India Limited (CIL), with its seven wholly-owned coal producing subsidiaries and one mine planning and Consultancy Company, is the single largest enlisted Maharatna company in the world, with a total production of 606.89 Million tonne (Mt) during the fiscal 2018-19 which is 83% of the total coal produced in the country.

Outlook

CIL has envisaged coal supply target of 660 Mt in 2019-20 which is a growth of about 8.5% over the previous year. About 80% of the said production would be consumed by power sector only. CIL's growth plan for the future is in synergy with the ambitious plan of the Government for 24 X 7 power supply to all homes in the country for which a roadmap to achieve 1 Bt of coal production by 2024-25 has been finalized.

For sustainability and growth, thrust on minimizing the environmental impact is laid for qualitative improvement in coal production through selective mining, beneficiation & blending and diversifying into clean coal technologies.

Apart from creating new infrastructure, optimum utilization of existing capacity through linkage auction scheme is being ensured through an inbuilt system of source rationalization for non-regulated sector. Further, it has been envisaged to ensure "1st mile connectivity" to consumer through non-road mode like conveyors, MGR/Rail etc.

CIL is also exploring opportunities to diversify into coal to chemical business. This is to ensure greater value addition and thereby improving financial performance of the company, and ensuring long term sustenance.

CIL has planned a capital investment of Rs 10000 Crs for maintaining its volume growth in 2019-20. In addition, the company has also envisaged for investing substantial amount in different schemes in 2019-20 such as development of railway infrastructure project, solar power, pit head power plants, surface coal gasification, Coal Bed Methane (CBM), revival of fertilizer plants etc.

The two major Railway Infrastructure Projects on deposit basis that have already been completed are: -

.Tori Shivpur New BG Line - This railway line caters to North Karanpura Area of CCL and it is planned to evacuate about 32 Mty of coal once the line comes through in the state of Jharkhand.
Jharsuguda-Barpali-Sardega Rail Link relates to the Basundhara coalfields of MCL and the envisaged capacity evacuation is 70 Mty of coal from MCL.

The three major railway infrastructure projects being undertaken by JV mode are as follows:

East Rail Corridor (CERL) and East West Rail Corridor (CEWRL) are planned for evacuation of coal of Mand- Raigarh and Korba - Gevra Coalfields of SECL respectively by Rail JVs CERL & CEWRL in the state of Chhattisgarh. In all, about 180 MTY of coal shall be evacuated through these two corridors.
The Shivpur-Kathautia rail connectivity is envisaged to be executed by Rail JV, JCRL (Jharkhand Coal Railway Limited) formed among CCL (Central Coalfields Limited), Govt of Jharkhand and Indian Railway represented by IRCON, in the state of Jharkhand. About 30 MTY coal from the mines of CCL is planned to be evacuated through this line.
MCRL (Mahanadi Coal Railway Limited) has been formed among MCL (Mahanadi Coalfields Limited), Govt. of Odisha and Indian Railway represented by IRCON, for creating rail infrastructure in the state of Odisha.

Apart from the above projects undertaken by CIL, Railways have also taken up as their own projects like the Barkakana-Barwadih-Garhwa Road third line, the Jharsuguda-Bilaspur fourth line, the DFC-Dadri to Sonenagar line & Extension upto Koderma, Third & Fourth lines from Talcher to Budhapunk, Third line from Budhapunk to Rajatgarh, Doubling of line from Singrauli to Shaktinagar via Karaila Road and a Third line from Jharsuguda to Bilaspur. These lines are expected to ease the existing congestions in the critical railway routes from smoother movement of freight traffic and facilitate evacuation of about 100 MT of coal.

CIL already has a committed long term linkage of nearly 700 MTPA from Power and Non-Power Sectors. It also has a steady demand for offers of sale through various e-Auction Schemes. CIL has assured demand for its production projections, as more firm linkages shall be added under the ongoing process of allocation of linkages to various segments of Power Sector consumers through 'Scheme for Harnessing and Allocating Koyla (Coal) Transparently in India (SHAKTI)', the policy introduced by the government on 22.5.2017 for grant of coal linkages to power sector and also through further tranches of auction of linkages for Non-Regulated Sector consumers that shall be conducted by CIL.

Financial highlights

On Feb 11, 2020 Mining major Coal India reported a 14.1 per cent decline in profit at Rs 3,921.81 crore for the quarter ended December 31. Analysts in an ET NOW poll had projected the number at Rs 3,977 crore. The state-run company had reported a profit of Rs 4,566.81 crore in the same quarter last year. Coal India’s net sales dropped 7.8 per cent from a year before to Rs 21,566.41 crore.⁶

The company’s consolidated margins came in at 21.4 per cent, compared with Street estimates of 21.1 per cent. During the quarter under review, the company produced 147.50 million tonnes of raw coal compared with 155.97 million tonnes in the same quarter a year ago. Its offtake also declined to 141.60 million tonnes from 153.83 million tonnes a year ago.

Coal India Q3 net profit falls 21% to Rs 3,085.4 crore ⁷

February 11, 2021; Coal India has posted 21.4 percent fall in in its December (Q3FY21) quarter consolidated net profit at Rs 3,085.4 crore versus Rs 3,924 crore in the same quarter last year.

Its revenue was up 2.1% at Rs 23,686 crore versus Rs 23,190.5 crore.

Earnings before interest, tax, depreciation and amortization (EBITDA) was up 4 percent at Rs 5,165 crore versus Rs 4,968.4 crore and margin was at 21.8% versus 21.4%.

Its other income for the quarter was at Rs 648.6 crore versus Rs 1,412 crore.