Ladies and gentlemen, good day and welcome to the Q2 FY 2022 earnings conference call of Coal India, hosted by Prabhudas Lilladher Private Limited. As a reminder, all participants lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference has been recorded. I now hand the conference over to Mr. Kamlesh Bagmar from Prabhudas Lilladher Private Limited. Thank you, and over to you, sir.
Yeah. Thank you, Jacob. Good evening all, and thanks for logging in the call. We are pleased to host Mr. Pramod Agrawal, the Chairman and Managing Director of Coal India, for an investor call post Q2 FY22 earnings and to discuss his views on the coal sector. Along with him, we have Mr. S.N. Tiwari, Director of Marketing, Mr. Samiran Dutta, Director of Finance, and Mr. Viswanathan, the Company Secretary. Now, I hand over the call to Mr. Agrawal for his opening remarks, which will be followed by Q&A. Over to you, sir.
Good afternoon. Thank you, Kamlesh, for arranging this con call. I'm really thankful to everybody for participating in this. We have uploaded our latest figures, et cetera, on the site in the form of presentation. I hope everybody would have gone through it. I think there is nothing further for me to add. I'll rather go for the question and answer session, and in that, I will explain whatever points that you will expect me to explain. Thank you. Let's start with the question and answer.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question from the line of Amit Dixit from Edelweiss. Please go ahead.
Yeah, hi. Good evening, everyone. Thank you for the opportunity, sir. I have a couple of questions. The first question is on the grade mix that we had for FSA in Q2, and how does it compare to Q1?
Grade mix. What do you mean by grade mix? Means average grade for the Q1 and Q2? Are you asking that question?
Yeah, sir. That would help.
G11.
Generally, it is G11, and it was in G11 even in Q1 also. There has not been any change in the grade mix.
Sure. Why I'm asking because there was no change around the FSA realization actually went down slightly, I mean, in Q2. I just thought it might be due to some grade change and all. That's it.
It may be because there is more supply to power sector. As you know that for power sector we charge 20% less price. Whatever extra we have supplied has mostly gone to power sector. That's why the average realization would have gone down compared to the last thing from FSA.
Okay, sir. The second question is on e-auction. In terms of e-auction volume, what is the likely volume to be offered in Q3 and premium achieved thus far? What could be the likely volume you would offer in Q4?
Last year, we had auction means the firm figure was about 50 million tons. That was given in the last two quarters. I hope that we will be giving almost the same quantity of coal. Means offering it, this will be less because last time the materialization during the auction was less. This time materialization is very high, so slightly more amount will be offered. Slightly more quantity will be offered. Then I think we will be able to sell off about 40-50 million tons in this e-auction this year. That will depend how the coal situation in the thermal power stations are. If the power demand increases tremendously and we have to face that situation, then perhaps this figure we will have to reduce.
What is the premium achieved, sir, so far in, I mean, two months or of Q3?
In this, we are achieving almost 45%-50%. In the last quarter, it might have been slightly higher. On the average, in this year we have achieved 45%-50%. Today the question of premium is not there. It's a question of supply. Whatever we offer, the premiums are very high.
Okay. Sir, I mean, the point of the question was that in October and November, particularly in October, we get to hear that the supply in e-auction was very less. Is it possible to quantify the supply until now, I mean, until November 20 or something?
I won't be able to compare October to October or November to November. Overall till October end, our supply has been 3 million tons extra than what it was last year. See, there are two things. In October, the supply for this e-auction would have been less. Because of the power crisis in the country and the stocks were going down in the powerhouses, we had to give extra supply to powerhouses. Actually, in October, we supplied almost 56 million tons to powerhouses, which was about 4-5 million tons extra than last year. The second thing that happened is that in the initial week of October, there was heavy rainfall, and because of that, even during another week there was heavy rainfall because of this dispatches were late.
The fact remains that our supplies were much higher than last year. Most of the increased supply or even otherwise, the supply went to powerhouses because there it was an urgent situation where we were required to increase the stocks in powerhouses.
Okay, that is helpful, sir. Thanks, and all the best.
Thank you. The next question from the line of Bharani Vijayakumar from Spark Capital. Please go ahead. Mr. Vijayakumar, your line is unmuted. Please go ahead with your question.
Am I audible now?
Yes, you are.
Yeah. Can you give a color of the special forward e-auction for power, the number in the overall e-auction sales in, say, FY 2021, and how it will be for FY 2022, given we have stopped the e-auction sales through other modes?
No, we have not stopped e-auction to other modes. We had reduced during October. Actually, this year, till now we have auctioned about, I mean, total quantity booked is 70 million tons, which is almost at the same time, which was done till the-
Last year.
During this period last year also, we have not stopped it, but the extra supplies that we were doing, about 59 million tons or 56 million tons of extra coal that was supplied, it has gone mainly to powerhouses. That is the point I was trying to make. It is not that we have reduced the supplies to NRs. Expectations from all the sectors from Coal India have increased tremendously because of the increased price, and hence there is this. That fact remains that during October, definitely supplies to NR, this e-auction thing has reduced. Special forward, we have got almost special 34%-35% extra premium. The premium was 35% till now, average premium. Last year, the premium was hardly anything.
I don't have that figure, but then last year it was hardly.
7%.
7 or 8%.
Do we expect the e-auction sales in FY 2022 to be similar to last year's number of, say, 95 million tons?
Booking definitely.
100 and last year.
120.
Last year, the total booking was 120 million tons. We'll try to achieve that figure, but giving any firm commitment at this point of time will be difficult because I don't know how the power demand is going to pan out. The expectations from power sectors are very high. If their expectations prove to be right, then perhaps this figure will get reduced.
Sir, I understand. This 124, is it booking, right? So I'm talking about the sales. Actual sales was around 94 million tons, if I'm not wrong.
Yeah, 94 million tons. The sales will be. Again, the same things remain. If we don't do booking, there will not be any sales. It will depend largely. We are trying to achieve that figure of 90.
Okay, coming to our FY 2021 numbers, what was the overall sales to the power sector, sir, of the dispatches we did?
To October 2, 1991.
As to October.
Of the 573 of dispatch, what would it be for power sector? Because the number given doesn't include the e-auction number specifically for power sector. It will be great if you can give overall for power sector through linkage and through e-auction, how much was it in FY 2021?
I will tell you. That the marketing is there. He will give you the figure.
Current financial year till October 2021, 291.72. The comparative figure with the previous year was 237.75. The growth is 23%.
Okay. My final question, you mentioned that the drop in realization in the second quarter in linkage was due to higher supply to power sector because we charge lower. I missed that percentage. How much we charge lower for power?
It is about 20%.
Yes. Price difference 20%.
There is a price difference of 20%.
May I know why for power sector alone it is lower?
It was fixed long back and it was based on the. Yeah, please. That the marketing will explain.
Gentlemen, basically, power end prices are controlled by so many other things like PPA, government regulations, where they have to exercise that caution of not charging or overcharging. Whereas for a product like, say, aluminum or cement, they have their end prices are not controlled by anything. They can charge as per their market scenario.
For them, since they are market driven prices for their end product, we do charge 20% more. But for power, since it's PPA driven prices and government also does take care that, the prices of power which is to be utilized by common people or industry does not go on a very high note. It is like controlled.
Okay. I have further questions. I'll come back in the queue, sir. Thank you so much.
Okay.
Thank you. The next question from the line of Vishal Chandak from Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Thank you very much, sir. My question pertains to your CapEx program. If you could just highlight, you know, where are you in terms of CapEx with respect to the fertilizer plant and obviously on the target of 1 billion tonne of coal mining. You had said that you would be spending about INR 40,000 crore-INR 50,000 crore over a span of next 4-5 years, rather 3-4 years. Where are we in that regard, sir, in terms of ordering of equipment, et cetera?
See, ordering of equipment, et cetera, I think most of the equipment there was lack or there was shortage of equipment. We have placed the order like draglines. We placed the order for six draglines. We have placed order for the 240-ton dumpers, shovels, et cetera. I mean, it's a continuous process, but whatever was shortage have been placed and we have started receiving the equipment. This year we had planned to invest about INR 17,000 crore, and last year we had spent something like INR 13,500 crore. This year we, till this time, we have spent something like INR 7,000 crore, and I'm quite hopeful that if we're not, means we will, we'll be achieving our target in this.
Most of this money, except for a small component which goes for fertilizer plants of Talcher and all those 3 fertilizer plants which were already committed, rest of the money is being spent completely on coal or coal evacuation structures. What we had planned that in next 3-4 years we will be spending more than INR 40,000-50,000 crore. We are completely on course. Most of the projects that were likely to take off have been signed and the work have started except for few exceptions where the contracts are failed, like in Konar, where we have gone for retendering. For railway projects also, it is being now monitored by the Railway Minister himself. I'm quite hopeful all these projects will now completed well within the time limit that we have set.
Sure. That's very helpful. Sir, in light of the CapEx program that we've already announced and we are working on it, so how soon can we be ready for this 1 billion-ton target?
We were planning for 2023-2024, but that seems to be complete and reasonable. We are targeting for 2024-2025. It will depend largely on how the demand scenario pans out. We cannot produce coal and keep it. Last year we produced 576, but we ended the year with a stock of 1,100 million tons. This year we are thinking that we will be producing something in range of 640 million tons. Let's see what the stock position is. If the stock position is not good, definitely next year the production will increase, but 1 billion tons we are targeting for 2024-2025, depending on the demand in the country.
Sure. Just one last question. You know, in the run up to the steep hike in the international coal prices, there was a huge opportunity for us to replace the imported coal. How much of imports have we been able to replace on a YTD basis and in this quarter as well, sir?
There are three types of coal we must understand. One is non-coking coal. That we are not targeting to replace, and we cannot replace because that type of coal we don't have. Second type of coal is very high grade coal like cement industry uses, even the pet coke and high GCV value anthracite, et cetera. That we again don't have. Lower type of coal means
G9.
G9-G11, 13 type.
14-15.
We have been able to replace almost 50%, I am told. About 45% have reduced in the last year compared to last year. Last year again, it was a loss, I mean, last year also the import was less compared to the year before, but this year we have reduced substantially.
40%.
Secondly, what has happened because of the high price of the coal in the international market, the power plants located on the coastal areas which are based on very high GCV coals, they have reduced their production of energy substantially. That too we are supplying from our coal. The domestic coal-based power plants are now generating that energy to fulfill the gap. To that extent also, something has been replaced.
I think in one of the earlier quarters, you'd mentioned that the addressable market for import substitution is close to about 100 million tons.
That's right.
Right. No, I completely agree. Sir, I just wanted to understand on a structural basis, how much of that market we have captured? As in, a price arbitrage is one factor. Tomorrow, if the international prices go down, then definitely, these people will again switch to imports.
Yeah.
On a structural basis, have we been able to, you know, move from import, move towards more towards import substitution?
See, when I say 100 million tons, that is equivalent to almost 70-80 million tons of imported coal. There were 100 million tons of our coal is slightly inferior but we have been able to supply about 60-70 million tons extra coal this year to replace that.
Right.
The exact figure, I will request Mr. Nathan Saab to give it to you separately because I don't have those exact figure right now.
Got it. Thank you very much, sir, and all the best.
Thank you. The next question is from the line of Pinakin Parekh from JP Morgan. Please go ahead.
Yeah, thank you very much, sir. Sir, I have three questions. First, just to, you know, get the e-auction issue clarified. So the first half e-auction coal sales were 57 million tons. Last year was 94 million tons. You basically highlighted full year around 90 million tons, which would imply that the second half e-auction coal sales are around 50 million tons versus 57 in the first. Is that understanding correct?
Yeah, you are just completely right. If it is 57 million tons, I don't have that figure, but if you are saying that must be the figure. 57 million tons coal supply has taken place, so 33 million tons. I'm saying that provided, but I had put one caveat that the power sector should not increase their demand tremendously again, as they did it during the October month.
Got you, sir. Now just complete the e-auction loop. In first quarter and second quarter, average e-auction realization premium to FSA realization premium was 13% and 15% respectively. This per you right now stands at over 50%, right? Would that be correct?
Yeah, that's right.
Correct.
Understood. Sir, my second question relates to cost. Now, diesel prices have come off very sharply, and historically, there used to be a relationship between diesel and the consumables and other costs. What would the recent diesel price decline translate in terms of cost impact on coal and whether we will see this deflation being offset by either higher employee costs or some other cost?
This question I'll request that to finance also.
Yeah.
Because there is some linkage between increase in price of diesel and increase in cost. That will apply while deflation takes place. He will explain that.
Yeah. In fact, Pinakin, as we had earlier also given, many a times.
Mm-hmm.
A sort of guidance that what is the impact based on the total absolute usage of diesel. Both in the contractual and as well as my departmental together. This time by 18 rupees gradual increase over Q2 to Q2, we had a hit of around INR 600 crore. Going by that, 130 crore liters of consumption, it is for a rupee, the thumb rule was, which stands till now, around INR 130 crore is impacted.
INR 130 crore impacts are per quarter or per month?
Per year.
Per year.
Per year.
Per year.
Per year. Understood. Sir, my last question relates to FSA coal price hike. You were earlier confident of getting a FSA coal price hike early on, but that seems to have meandered away. How do you see, sir, potential hikes on FSA coal?
See, I am quite hopeful that it should happen soon. In October, because of the crisis, everybody was shaky. Let me add to one point that coal price increase is not something where we have to bring all the stakeholders on board. That process is on, and everybody understands that we have reached to a point where the coal price increase has become
Inevitable.
Inevitable. I'm quite sure that it should come very soon. When will it come? It's very difficult for me to say. It's not something that we have left it.
Understood. Thank you very much, sir.
Thank you. The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.
Thank you for your time for the call, sir. I really appreciate. Sir, very brief couple of questions. Firstly, on the wage negotiation, sir, I believe we've started making some provisions. If you can help on that account, as to what is the kind of cost increases that you are envisaging, and for that we are providing on a quarterly basis or an annual basis.
Rahul, I will also take this question. I'm Samiran Dutta. If the question that you have asked is the impact or the provisioning that we are currently making. In this quarter, we have made a provision of around INR 300 crore. You will appreciate that it is still a somewhat ad hoc provision because unless and until there is some headway into the negotiations which are in very nascent stage, it is very difficult to understand the impact or going forward, how much we will be finally taking.
In any case, unless and until the final NCWA agreement takes place, there are certain things which we cannot in fact provide, which can be provided or liability only booked when only that gets finalized, like the actuarial valuation part of it, which also accounts for almost, say 25%-30% of the wage settlement. Now, coming to this, as I've mentioned that we have already taken INR 300 crore. This is in the backdrop that almost 75,000 personnel has already gone down from the last NCWA. Going by the
Other organizations also, the trend that is taking place, the DA increase is also less. The impacts are no way similar to what had been in earlier cases. Keeping all these things in mind, we have provided already INR 300 crore in this quarter.
Okay. Sir, any number that you think of, which is, you know, can be anywhere between say taking a INR 300 crore ad hoc, I believe that'll be 1,200. But anything you believe you can contain it within 1,000 crores or 1,500 crores, anything like that? Any thoughts?
As I mentioned, you know, actuarial valuation is one area where it is very difficult to, in fact, pre-calculate or how much will be the other effects, that has got other effects. Because it's a very high manpower-based company, the actuarial valuation plays big spoilsport in that respect, rather than the actual, quantum or the minimum guaranteed benefits that we call. What we are providing as of now is on an understanding on what the minimum guaranteed benefits can, accrue or at this stage can be envisaged. That's how we are looking into it.
Okay.
Getting a firm number will be difficult.
Sure. Thank you. Sir, can you throw some light on, sir, what is the daily on an average offtake that we are currently seeing, and what percentage of that is going in for power sector and the balance for non-power?
It is about 1.9 million tons is what we are dispatching now almost on the average. This month last year in the last week was slightly higher. Out of that 1.9-
0.5.
1.65 type is going to power.
Sir, is this better than what we were doing in Q1 and Q2 in terms of non-power?
Non-power is about 3 lakh. Actually, I will explain. On average, 1.9 lakh has gone in this month for total in this. But the average to power is 1.6. Whenever it goes to 1.96-1.97, then the power goes right up to 1.61, 1.65, 1.66. So about 3 lakh is going to non-power sector on average. If any increase in coal dispatch generally goes to power. I think in Q2, we were dispatching almost same or slightly less than this to the non-power sector. It was 2.5 lakh per day. Now we are doing about 3 lakh.
Okay. This is helpful. Sir, again, harping on the same point, you know, which previous participant said, sir, we are bearing the brunt of cost increase in a significant way, whether it is diesel or, you know, wage costs. While the other people in the energy value chain are able to pass on costs, it's becoming difficult for us. You know, any kind of price hike will be, you know, big relief for, you know, the investors as a whole. Just to continue that point, sir, how is the debtors position? Is that stabilized or is it again building up? How do you see it qualitatively?
The overall position you are saying or what?
Sir, debtor position, the incremental coal sales.
Overall debtor position is actually.
Receivables are decreasing.
Yeah, receivables are decreasing, and you will have to keep in mind this is on elevated sales amount also.
Mm-hmm.
As a percentage of sales, it has significantly gone down.
Debtor days is fine, is comfortable.
It's gone down to around INR 12,000 crore net of provisions that we make for some great slippage and all. If you are looking at the balance sheet level figures, 19,000-odd crore rupees were there at the end of March or at the beginning of the financial year, which has now gone down to 12,000-odd crore rupees. Almost 7,000 crore rupees have declined over 19,000.
Okay. Last question from my side, I'll get back in the queue. Is on the CapEx on, you know, the non-coal related activities, for example, aluminum and, you know, if you can throw some light that are we looking to do any major CapEx from our side, or it'll just be, you know, a developmental small token which we would like to do?
As of now, nothing has been spent on all these things except for the solar power generation thing we have procured. Well, not procured in the sense that we have won this auction, a tender in Gujarat, which is 100 MW. For that, we are investing something. Secondly, we are investing, which was already taken decision on FCIL and HURL. Besides that, we have not spent even a single paisa anywhere else except for preparing the fund. Whenever we go, we'll see the viability of the project and anything related to mining is easily doable by Coal India. Beyond that, it will be very cautious move and with the help of partners only.
Okay. Sir, lastly about the solar manufacturing panel, module manufacturing, which we had participated in the PLI. Any progress on the same and any technology partners you're looking at?
We had issued RFQ. We are issuing the RFP, and we'll, if we get the response, then only we will think of participating. Again, as I mentioned, in that our partnership will be a minority partnership. It will not be majority partnership. It will be helping something getting into the country rather than actually running the factory.
Okay, sir. Thank you and all the best. I'll be back in the queue.
Thank you. The next question is from the line of Prashanth Kota from Dolat Capital. Please go ahead.
Sir, good evening, and thanks for the opportunity. Sir, I have two questions. The first one is on the exports. Sir, is there a potential to do any exports from India for a company like Coal India? This I asked last year also, but now this it's maybe a little bit more relevant given the higher international price. Is there some opportunity that we can tap into?
There is an opportunity only to the market which are located nearby, like Bangladesh, Nepal, Bhutan, et cetera. Otherwise, the general market trend and the quality of the coal in India, in that situation, it becomes very difficult to go beyond Bangladesh only there.
Okay, sir. Wonderful. Sir, my second question is more from a more of a structural question. Sir, if you see the incremental ROCE that the company makes is negative. That is, if you are generating INR 25,000-30,000 crores of EBITDA, we are spending INR 12,000 crores of EBITDA, the INR 12,000 crores on CapEx, 12 or 10 or 9,000 crores each year. Then that's not adding to incremental EBITDA. So we are doing a large CapEx, and after that we are producing some volumes, incremental volumes, and large part of that is going to power sector at very low, at significantly low prices. Hence, the significant CapEx that we are doing each year, significant is very large CapEx as a percentage of EBITDA, is not adding to EBITDA.
Hence, incremental ROCE is negative. Hence, over the last 10 years, we see significant structural decline in shareholders, yet there is dividends paid out. Adjusted for that also, we have not done great. Sir, in the past you have indicated that, when you decide on FSA price hike, et cetera, you, the broad thumb rule you have is to maintain 30% EBITDA margin. Sir, when you are just my one request or, you know, wanted to know your thought process. While doing this EBITDA margin 30% calculation, please reduce it INR 7,000 crore-INR 8,000 crore further from the EBITDA, because that is going to CapEx and that's not yielding incremental profit.
Assuming that EBITDA is not INR 30,000 crore, at just INR 22,000 crore right now, and based on that, please, if you could set the new FSA prices. Otherwise we'll continue to be incremental ROCE negative, sir, on incremental capital that we are deploying. Just wanted to know your thoughts on and, you know, how do you think about this?
See, if you see Coal India's expenditure on capital or CapEx, except for the last year, it has been in the range of INR 6-7 thousand. For such a large company, that INR 6-7 thousand is actually a very low investment. Last year we invested something like INR 13,000, and this year we are expecting something like INR 17,000 crore. This CapEx, getting the same amount of ROCE without increasing the price is something not possible. Because our CapEx is not something like additional capacity generation, in the sense that, it's not a factory, where if you do additional CapEx, that means you generate another line for production. It is continuous. Our CapEx is to get the land and to rehabilitate the people continuously, and to even maintain the same level of production, we need a huge investment.
Whatever we were doing till now was to that only and without investing substantially on evacuation and production. This is for the first time that last year we tried to increase investment in production as well as
Evacuation.
Evacuation, like we have taken FMC projects. Rail lines also we are trying to complete like Dharamjaygarh, Gharghoda-Kharsia line has been, Dharamjaygarh-Kharsia line has been completed to large extent. We are trying to double the Sardega-Jharsuguda line. All these things we are taking up, and FMC projects we have taken up very seriously. Unless we do these investments, even maintaining the EBITDA will not be possible, and the coal production will go down. Even in coal industry, even to maintain a certain level of production, you have to keep on doing extra investments. That is, that should be understood.
Sure, just to follow up on this. I completely agree with you and appreciate you know, the actual on the ground issues that you have raised. The limited point we're trying to make is that many large investors also have been patient since several years that they set the coal FSA coal prices higher, taking into account this dynamic that the CapEx is so large or the incremental CapEx is required to even maintain the current level of production. What you are seeing is instead of-
I completely agree with you.
Basically, instead of seeing coal prices, yeah.
While fixing the FSA prices, means I will definitely try to fix it keeping all these things in mind. We would like to have a good. For the last four to five years, we have not increased the price. This is, we have reached to a level which I'm telling them this is not even commercially viable to do the production. Everybody has understood that, but then it is taking a while. I'm quite sure that proper decision will be taken soon.
Understood. Sir, thanks for your time.
Thank you. Ladies and gentlemen, you may press star one to ask a question. The next question is from the line of Noel from Ashika Group. Please go ahead.
Hello. Yes, sir. Actually, sir, I just wanted to get a small idea. In the presentation it is mentioned that there are some rail links which are being commissioned at the end of FY 2022, 2023 and 2024, three separate projects. I just wanted to get an idea what kind of cost benefits we can see in the FY 2023 and onwards as in this on a project-wide basis. Can we get that breakdown?
Whether we get the breakeven in these projects or not, that is not very critical. I won't be able to say right now because I will have to identify which are the projects which are. Like, okay, I will try to answer this question differently. Tori-Shivpur line, if it is doubled and whenever it is completed, we will get a huge breakeven. Right from day one, there is no shortage of coal, and actually many new mines of private sector are also coming. There will be a huge offset from that area, and there will not be any problems. Similarly, Sardega-Jharsuguda line. Again, there is even our Siarmal is coming on that line.
If that line, Barpali-Belpahar, if those projects, this project is completed and production from those mines start, then there will not be any problem of getting breakeven because whatever. Not only we are getting in two ways. First thing is, okay, whatever the railways give me one thing, one source of revenue. Secondly, it helps me in increasing the production also. Suppose the mines Kulda-Garjanbahal. Kulda-Garjanbahal today is producing something like 25-26 million ton, and we are projecting that in another two to three years it will start producing something like 40 million ton. In that same vicinity, Siarmal is there, which is expected to produce 40 million ton.
If these two mines have to be to produce, and if this coal has to be evacuated, then without that line, we cannot do it. Finding the breakeven of line alone, although that line will give me breakeven right from the day, first year, if I get this type of traffic, but finding that breakeven will not be very right way of looking at it. Because without that line, I cannot produce coal and all that investments we are doing in mines will go waste. The viability of the project should be seen in a more comprehensive and composite way. Since mine plus line, both investment, we should see whether we are getting some yield or not. That should be the right way. Because we cannot transport that much of coal through road. That is just an impossibility.
Okay. Thank you for the clarity on that particular point. Yes. Apart from that, I just wanted to get an idea. Right now, what is our, I mean, I didn't exactly hear this. What exactly is our production aim for FY 2022 and 2023?
2022-2023, we are thinking of something like 700-710 million ton, depending on the demand scenario.
Okay. This, okay, great. This is for the current financial year? Sorry, this is next financial year, right?
This is for next financial year.
Okay, fine. Yes. Yes, just to confirm, with this current financial year, we are aiming for e-auction sales to be roughly flat year-on-year, right, compared to FY 2021.
Yeah, that's right.
Okay. Thank you. Thank you very much.
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question. So you mentioned about the effort that we put in terms of taking FSA realization higher. Now, just keeping in context with what's happening in the power sector right now with power companies still not getting paid for their dues, do you really see that we have an opportunity to take any meaningful price increase in FSA? How realistic is it for us to be able to do so? Would it be fair to assume that the price increase in FSA market would be good enough to make sure that whatever wage bill increase, et cetera, we see increase in contractual labor costs, et cetera, it's good enough just to match that? Or do you think this is going to likely contribute to higher EBITDA margins? Those would be my questions.
What will happen, I am not very sure of that. In last four years, we have not increased the price. Whatever price we are going to increase should definitely be adequate to give the right EBITDA that this sector expecting, increase in contractual labor, contractual price, et cetera, that have been there. With the decrease in the diesel price, perhaps, that will not go as high as I was expecting about a month back or so. Similarly, labor cost increase this year is not likely to be very high because, in general, except for few provisionings that we have had to make because of certain reasons, otherwise, cost of labor has remained constant last year also and this year also.
It has remained almost constant because of the high rate of retirement, attrition, et cetera. Mainly retirement. Because of that, the labor cost is not increasing. You are right, with the wage negotiation, the prices, the cost will increase. Increase in other factors like general increase in the market, prices, general inflation, et cetera, that is affecting our margin. Whatever increase we are looking at is definitely much higher than compensating these increases.
Understood, sir. That's helpful.
Thank you. The next question is on the line of Amit Bhatt from Mist Engineers. Please go ahead.
Can you please quantify overdue outstanding from DISCOM till date, sir?
DISCOMs, we don't have overdues with their general supply to only GENCO.
GENCO, yeah. Sorry.
The GENCOs' receivables is about net receivable is about INR 12,000 crore right now. At the end of October, I don't know what is at this point of time, but at the end of October it was INR 12,000 crore.
Sir, is there any concern regarding increase in the outstanding again because of the emergency-like situation? Because you have to supply and even if they're not paying.
Nein, nein.] One must understand why the receivables increased.
Mm-hmm.
It increased during the pandemic because electricity was being supplied, but they were not getting paid at all. The receivables in the hands of DISCOMs means the amount that DISCOMs were receiving from general, except for industry sector, which also was switched off. Rest of the sector was. It was. There's just nothing compared to what they used to come. Because of that, it increased. After first or second quarter, we tried to control it. From this year, first quarter onward, we have been trying to control the receivables from the GENCO, and we have reduced it to INR 12,000. If something like pandemic again happens and everything is shut down, one cannot say. But because there is shortage of coal or shortage of something, this receivables will not increase because at the
We use this opportunity as an opportunity also to get money because there is demand from many people. We say that we will give coal only on priority to that person who is paying upfront. That has helped us to reduce the price, to reduce the receivables, and in future it will go down further.
Sir, you have done a great job by, you know, recovering this, those overdues in last quarter. Sir, now as you explained that, you know, we can take advantage of the situation in this one particular manner, that we can recover faster. Can you please, you know, give us a guidance that, you know, when we are going to get, you know, the reasonable amount of outstanding at the end of the year?
It will be very difficult for me to give the timeline. In general, now we are following a policy in which we say that whatever money you are giving, one-third will be adjusted against the past receivables and two-third will be the supply. For two-third, the coal will be supplied. That has helped. It is very difficult to enforce it at every level and to each customer. This is the general policy, and this has helped us in this, reducing the receivables significantly.
Sir, this outstanding can affect the CapEx or a dividend?
Oh, no. We have still the liquidity of about INR 27,000 crore. Thank you.
Okay. Thank you, sir.
INR 30,000.
Okay. Thank you.
Thank you. The next question is from the line of Bharani Vijaykumar from Spark Capital. Please go ahead.
Thanks once again. Sir, can you give what is our expectation of dispatches for entire FY 2022?
I think it should be in the range of 670-650 million tons.
Okay. For FY 2023?
It will be very difficult, but if the demand is there, we should reach something like 700 type. It will depend on production next year, because this year we had an advantage of having huge stocks. Next year that will not be there.
Okay. There is, you know, some news floating that the FSA linkage price can be hiked by 10%. Is there any such number we have in mind?
Everybody is free to assume something. It has not been finalized as yet.
Right. Regarding the wage negotiation, so it would be primarily for the non-executive cadre, if I'm not wrong, correct?
It will be non-executive cadre, but it will affect the contractual labor also. Because contractual labor, this daily wages are dependent on the minimum of what we give to our labor. It will affect there also.
Okay. Because the last big hike in the wage cost happened in FY 2018, if I'm not wrong. Probably there was a big number close to INR 10,000 crore. Any number we can expect in FY 2022 or FY 2023 in terms of how much can the employee costs go up yearly?
Very difficult to say. Very difficult to say, to give any number.
I would like to add one thing only in this regard. Without going to numbers, you see in the FY 2018 that you mentioned, that has had a double effect of increase, gratuity to INR 20 lakhs also. That was a massive one. Almost 50% of the entire effect was due to gratuity. In fact, more than that for including all actuarial valuations. This time around there is no such expectation.
Sure. You mentioned we consume about 130 crore liters of diesel per year, correct?
This is what the Director of Finance told you.
Okay. I think those were my questions. All the best, sir. Thanks.
Thank you.
Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.
Yeah. Thanks for taking my question again, sir. On receivables front, you know, while if you go subsidiary-wise, you know, you will see that NCL are better off. While if you look at ECL and BCCL, particularly, I mean, their receivables are pretty stagnant. I just wanted to get an idea of where the receivables are stuck and whether we would be able to reduce receivables of these subsidiaries as well. Will Coal India go to the historical number that we used to have by end of the year of around INR 8,000 crore or by end of this financial year?
You see, Amit, answering your question, I think you must have seen some old figures. As far as even those subsidiaries that you mentioned, ECL and BCCL, particularly BCCL, had run up to almost INR 3,800 crore at one point of time in the last financial year. That has now got reduced almost to half, less than even half. The liquidation is taking place, but you'll have to also appreciate that the customers who are there for BCCL and ECL, there are certain customers who had been paying less in the past, but now that they have also increased their delinquency, so this is going to go down further. It has gone down heavily in BCCL and ECL also. There is no such definition.
Maybe some rate difference is there of liquidation.
Okay, that's very heartening. The second question is on, you know, expected dividends since we have already, you know, there is a board meeting planned for the first interim dividend. Given that FY 2021 was a challenging year, but still, you know, kudos to you that you gave dividend which was higher compared to FY 2020. This year we have seen significant cash accretion. Our cash balance is possibly one of the highest that I have seen in last several quarters. Can investors expect dividend for this year to be higher than FY 2021?
Without forecasting, I would only like what you have mentioned already, that the receivables have gone down, the cash position has been better. Although H1 to H1 basis, the profits have been flat. Q2 is flat and H1 basis it has been slightly lower. This is only the interim one. We will be discussing that in the Board meeting. We'll discuss this in the Board and we'll definitely see. One of the two constraints that we have in deciding what would be the distribution is that profits per se in those subsidiaries which pay dividend, that has been. This is not on the overall Coal India basis. Number two is also the cash position. Now, cash position, as you have already mentioned, that has bettered.
Profits are also being maintained by those major subsidiaries. Let's see how much comes at the discussion.
Great. That's helpful. The third question, if I can squeeze one more, is a data-based question. What was the overburden removal in this quarter? Of course, overburden ratio I will calculate. If you can give me the overburden removal.
Overburden removal during this quarter, you mean? This quarter was-
Yeah, this quarter.
271.03 million cubic meters. In the last quarter.
Yeah. Great, sir. That is very helpful. Thanks and all the best.
Thank you. The next question from the line of Gokul, an individual investor. Please go ahead.
Good evening, everyone. Thank you for the opportunity. My first question is on the quality of the different types of coal. Is it because India is lacking the quality coal throughout the country, or is it because we haven't been able to explore, or is it due to lack of viability of the mines?
In general, Indian coal is of poor quality, except in few pockets, like in ECL and in CIC field of CCL. Our coal quality is poor. It's not that we are not exploring it or we are looking at, I mean, viability issue. Will have to be seen if it is a very deep-seated coal, then perhaps it will not be viable to take it out. In general, the Indian coal quality is poor. It is not that we are unable to exploit it just because of any other factor.
Oh, okay. Thank you. Also, is it possible to like expand the exploration to other minerals in the lands you already have? Or is it also not viable to consider other opportunities in other minerals?
We have been thinking about finding some other minerals in this area, but where the coal seams are there. We have not found any other mineral which can be very usefully extracted. This is a detailed question which I don't have much of clarity. I have not come across any other mineral which can be extracted from this area.
Bauxite is there in Jharkhand nearby.
Bauxite mines are different mines. That is a completely different area for coal mine. Like bauxite mines are there in Odisha as well. Those Odisha mines are very good bauxite mines, but those are in a different, completely different area from our areas of operation.
Multi-mineral seams are not there.
Multi-mineral seams are not there, to my knowledge.
Okay. Finally, also, regarding the non-coal sector. From last con call, we have been saying that we have incorporated the subsidies in subsidiaries, but we lack the aggressiveness in pursuing,
Is it because we don't want to spend too much capital or is it the intention of the management is not to follow the non-subsidiary the other sectors very aggressively? Is it like looking at the long term because there's a lot of opportunities and we do have a lot of cash if we can decrease the dividend policy a bit, and instead of paying out lots of dividends, we could use the capital more wisely into you know other sectors. What could be your thoughts on that?
See, the thing is for coal, the solar power generation, we are looking very aggressively, but because of certain reasons we could not succeed in many of these auctions that we participated, mainly maybe because we are slightly conservative or maybe because we were not very sure of the policies that have developed in the last two, three quarters. We have been bidding for almost everywhere, but we have not succeeded. Perhaps we need to be slightly aggressive in that. In PLI scheme, the PLI scheme we did participate. We now, it seems that we will get PLI, but right from very beginning, we were saying that this is not the area in which CIL is looking for a majority partnership, and we are looking just for minority partnership, and we are in search of the partner.
We hope that we'll get and then it will take a while before getting it. CIL tried to enter that field only when not many people were eager. Now, since many people are eager to participate, I don't know how much viability will come, and then we'll see how to go further. Aluminum sector, we are working very hard on that. We are in negotiation with Odisha government. Again, one has to move slightly cautiously and all these things, time taking, the mines, getting the area, et cetera, takes time. It will take a while. It's not that we are not interested, but we are interested only if there is a viability in all these projects.
Okay. Thank you so much.
Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Kamlesh Bagmar, can we close this phone conference call after this call? Yes, sir. Yes. Good evening, sir. Namaskar, sir, for the opportunity. Please go ahead, sir. Sir, I have a couple of questions. I will be very, very brief, sir. Firstly, sir, if you could give guidance on the CapEx part, sir, how much has been the CapEx spent on the new mine and how much is on the existing infrastructure, especially on the evacuation part, sir? And also on the report on the ESG front, sir, where are we in the midst of releasing the ESG? And also on the closure of the non-viable mine. And sir, lastly. You asked three, four questions. Taking ESG report first.
We have published the ESG report, and it has been uploaded about 4, 5 days back. About 15th, just before 15th of October or so it was uploaded. The second thing you asked about the closure of the mines. We had identified 23 mines. After that, 12, 13 have been closed. 4, 5 mines, I said that either these mines we'll take up the projects in which we will increase the production and try to reduce the losses. 4 or 5 mines of ECL and one mine of SCCL we have identified where the production can be increased. One mine of SCCL actually it was in advance, where we are introducing this continuous miner. In SCCL, in ECL we are trying to merge these mines so that the production can increase.
We are making all efforts to reduce the losses in there. We have some, whether by closing the mines we are saving money or by upgrading the mines we are saving money, we work on that. If there is by upgrading the mine, we save slightly, we reduce the losses slightly higher, then in that case we are going for that. That increases. Because most of these underground mines have better coal also, which is in huge demand. The third question that you asked about the CapEx, I won't be able to give you the figure how much we have invested in mines right now. Sorry, new mines and in railway infrastructure, evacuation infrastructure. In general, about 30% of our total investment goes for acquiring land and rehabilitating people.
Rest of the things are in different desk. But, I will request Mr. Viswanathan to give those figures to you separately.
Right, sir. Sir, lastly, about the dividend part also, sir. You spoke about this earlier that since we are receiving dividend from the subsidiaries, the tax incidence part comes into play. On taking dividend and buybacks, which one works out better tax efficient, sir? On the aluminum and the solar part also, sir, you were telling that we are looking at emphasizing to develop, to look into the aluminum sector. Sir, on one hand the government itself is looking to divest National Aluminium , if my understanding is correct. We deliberating on a new venture altogether whether the gestation period is also high. On one side the government coming up with disinvestment of an existing well-established player.
Where is this delink? Why Coal India pursuing it separately when the baby is itself on the block, if my understanding is correct. Our investment in the solar sector, sir, where are we, how much CapEx are we doing for this year, sir?
See, it will be better if you ask one question at a time.
I'll do that, sir. Firstly, on the dividend and the buyback tax incidence arbitrage part, specifically.
I will request Samiran to explain.
Yeah. You see in buyback, in fact, because of that 115QA which was newly introduced in the last, the Income Tax Act. Thereby, you are getting the unlisted companies also, when they are buyback, they are making buybacks. Previously, it is only the listed companies when making the buyback, they were exempt from the taxes. They are no more in the case of unlisted also. It becomes a double taxation in the hands of the my subsidiaries, which are unlisted, as well as when Coal India pays out of those proceeds received from them, which has already been once taxed, are also getting taxed. That way, in the same transaction or the amount of proceeds that we pay for buyback is double taxed.
Sameer, in dividend, when we receive the dividend, we give tax. It is exempted by way of a section called 80M, that if we are paying out of the subsidiaries money, then it is not double taxed, it is taxed only once. That way, in the same proceeds, if you are making buyback, it is getting doubly taxed, and ultimately these shareholders are getting less. Through dividend route, they are getting one tax less. That's how it actually works.
Sir, since this is an analyst meet, and the budget is around the corner, the presentation should be made from companies having huge cash balances like ours and other PSUs also to correct the laws for the benefit of the minority shareholders. Just a small data point, September 2019, the investor base was 6 lakhs. Today, the investor minority shareholders base is above 1 million. There has been a tremendous increase in the number of investors over a period of 2 years, and the stock price has also not performed. On the basis of these tax anomalies, even companies eager to distribute cash are unable to do so.
If the presentation could be made to the finance department before this budget and get this corrected.
You are right.
Yeah.
The matter has been already highlighted in appropriate places.
Yes, sir.
Let's wait and see.
Yes, sir. Also on the aluminum part and the solar, if you could give more clarity. When National Aluminium is one of the company which is on the divestment-
No, Saket Kapoor.
Yeah.
The question that I heard, you had mentioned that aluminum, one aluminum company getting disinvested. That's not a, that's only a process of further listing and, you know, for value unlocking. That doesn't mean there cannot be other players in the field. Particularly, suppose hypothetically also, Coal India has larger cash base and more EBITDA or the margins maybe from other players. That's all. There are, you know, always opportunities to be worked out. That way also, Coal India, it was looking into it. Although, as has been already mentioned, I think CIL has already gone into that.
On the solar front, sir, normally what have been the CapEx for the first half and-
Solar, we have, we are doing on the two fronts. One is installing our own solar power plants for own consumption and bidding for others. In our own consumption, we have tendered out about 175 MW of this, and some of the tenders have been finalized. In some cases, we have got very high price. I won't be able to tell you how much we have finalized. About 175 MW is in pipeline for our own consumption, which we are installing on areas that spaces that we have in our coalfield area. Secondly, we have got this 100 MW in Gujarat, which we are likely to complete before next April. About INR 450 crore will be invested in that.
That way, I'm looking at about INR 1,000 crore in investment this year in solar thing.
Right, sir. Thank you, sir, for all the elaborate answer. On the ESG front, sir, what has been the feedback from the investing community? You articulated to the investors that things would look different when you will be explaining how wrong perception has been on the ESG front for Coal India in particular. What is the thought process and what is the feedback after the ESG report being published, sir?
I think the feedback has been good. In general, people are understanding that Coal India is not neglecting ESG thing. See, last year we did plantation over about 830-840 hectares. This year we have increased to 1,300-1,360 hectares. This is an increase of almost 50% in single year, which never happened in the history of Coal India. We are doing this water and overburden dumps, etc., are there. We are trying to stabilize them in big way by developing grasslands over that. So that will improve the environment in which we are working.
We are investing in long way in this FMC projects which we have requested NEERI to do the study, and they have come up that it reduces the particle burden or dust burden by about 80%-90% in our areas of operations. We are going a big way in this. All these things take a while before the impacts become quite obvious to the public, because they don't read the report and they don't believe it many a times. They believe what they see. Now they are seeing that the trucks are plying on the roads and that is generating lot of dust. Once that stops, it will definitely be, go in a very big way positively.
We are in direct communication with investors on a regular basis, and I think slowly they will understand that in our areas of operation, Coal India is performing a very important economic activity. In those remote and poor areas, whatever we are doing is quite beneficial to the society at large.
Yeah. Thank you, sir, and all the best. I hope a lot of feedback has come from the investing community that would be looked into and addressed at the appropriate forum, so that investors' value can be created, sir, over a period of time.
Okay, thank you.
Thank you.
Can we close Kamlesh now? Hello?
Yes.
Thank you.
Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Kamlesh Bagmar for closing comments.
Yeah. Thank you, Mr. Agarwal, and your entire team for your valuable time and great effort which has been put up on the detailed presentation and answering the calls, answering the questions. Sir, any closing remarks which you have, sir?
Closing remarks. Thanks a lot for attending this con call and trying to get our point of view on all the issues. The only remark I can make is that the journey of coal is not going to end soon. Coal will continue as an important supplier, a fuel source for energy, at least for a decade or a decade and a half. There's no way we can wish away coal. Thank you very much.
Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.