Ladies and gentlemen, good day, and welcome to the Q1 FY23 post-results conference call of Coal India Limited, hosted by ICICI Securities. As a reminder, all participant 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 phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Modi from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good day, everybody. On behalf of ICICI Securities, I welcome you all to the Q1 FY23 post-result conference call of Coal India Limited. Today, we are pleased to host the members of the senior management of the company, led by Shri Pramod Agarwal, Chairman and Managing Director. Thank you, sir, for giving us time for this interaction. We will begin the call with remarks from Chairman, and after which we will open the lines for Q&A. I would like to hand over the floor to CMD now. Thank you, and over to you, sir.
Thank you, Rahul, and good day to everyone present. Let me first apologize for postponing this meeting twice. First, because of my sickness, and second because of some urgent work that emerged. I'm really thankful to ICICI for organizing this meeting. I really wanted to come personally to Bombay, but somehow it is not happening because of the pressures of increasing production. That is, demand for power coal has increased substantially, partly because the demand for energy has increased, and partly because the imported coal-based power plants have reduced their production substantially. The generation has reduced substantially. Secondly, even the CTPs which were importing coal and producing their own power, they have now shifted to the utilities and hence the power consumption through utilities have increased where the Coal India has to supply power.
In first quarter, we are happy to inform that we could meet the demand of the power sector, and we could maintain the supply to non-power as well. Because of increased production, cost per ton has reduced significantly. Because of increased international price, we could get higher prices in e-auction as well. Because of that, all of this has contributed in increase of profitability, despite the fact that our cost of production has increased slightly because of increase in price of diesel and petrol and increase in price of the explosives compared to last Q1. Increased production, increase of offtake has helped us in reducing the cost of supply, and this has helped us in increasing our profitability. The company is quite sure that this year we will be achieving the target of our 700 million ton, and for this we are working very hard.
There are certain problems in one or two companies, but we are trying to resolve it. Even then, even if it are not resolved, we'll increase the production from other companies to compensate for that. I'm quite hopeful that this year, I mean, it will be an outstanding year for Coal India, both from production point of view, secondly, from meeting the need. Because the production is there, we will be meeting the need of the nation. All of this will contribute to increase of profits of the company. Thank you. Now I would like to invite the questions.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star then 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 will wait for a moment while the question queue assembles. The first question is on the line of Amit Dixit from Edelweiss. Please go ahead.
Hello. Yeah. Hi. Good evening, everyone. Good evening, sir. Congratulations for a very good set of numbers. I have two questions. The first one relates to essentially the wage provisioning. We have not seen anything in the P&L so far, and this is contrary to, you know, earlier times, whenever wage provisioning was there, it was being shown from, you know, Q3 of that particular year. So far we have not seen anything. Could you please throw some light on the possible quantum of increase when you would provide for it? That is my first question.
Okay. Will you ask the second question as well? Then I'll reply both the questions simultaneously.
Yes, yes, sure. The second question is essentially on e-auction volume and pricing. What we have seen that the e-auction blended e-auction prices in Q1 were like INR 4,400 or more, but the bookings in last three months have been at upward, I mean, upwards of INR 8,500. So what kind of number can we expect in terms of realization in this quarter? And going ahead, so far in September, what kind of, you know, price you have seen? Has it fallen from that level? And what kind of volume can we see in e-auction for the whole year? These are the two questions, sir.
Okay. First is your wage provisioning. Last year we have provided something like 600-800 crore rupees?
Eight at least. It's INR 900 crore.
INR 900 crore last year we had provided for the wages, wage increase. This year, again, we are providing INR 150 crore per month, so INR 1,800 crore.
Okay.
Now we have provided INR 100 crores, and we will increase it in coming quarters. Maybe in third quarter onward we'll increase. It will be very difficult for me to say what will be the impact of the wage negotiation, but because the negotiations are still on, and we have not come to any agreement. But the impact, we will try to restrict it. Secondly, our you must understand that lots many people are retiring, and this is giving us some leverage. Like this year, again, we are expecting that 12,000-13,000 people will retire. So there will be increase, there will be some impact, but the impact is not going to be very phenomenal. It will be something which can be managed. With the price increase due, I think it will not have any impact on Coal India's bottom line as well.
E-auction price last in the first quarter was about INR 4,300, and that increase is substantial. Quantity was 20 million tons. I don't have figure right now what is the quantity we have auctioned in Q2, but I presume that this trend of about 20-25 million ton will continue throughout the year, and we will end the year with about 80-90 million ton of E-auction coal. This depends how the demand for the power comes up. If the demand of the power increases substantially, then our this ability to do the E-auction reduces to that extent. Price as of now is still very high, and in certain cases we are getting about INR 4,500 or even 300% of the premium.
I think about this range will be maintained if it does not increase further. At least this range will be maintained for e-rapuruction price as well.
Great. That's very helpful, sir. Just wanted to understand, INR 100 crores per month you are providing in wage provisioning, right?
Till now we have provided INR 100 crore. From quarter three onward or quarter two, let me see, we'll increase it slightly further. It is likely. Well, it will be very wrong for me to give any indication to what will be the wage impact because the negotiations are on, and if I indicate something, it will impact the wage negotiation.
No, sir, INR 100 crore is every month, right? Not every quarter.
That's right.
It's every month.
Every month.
Okay. That's fine, sir. Thanks and all the best.
Thank you. The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services. Please go ahead.
Yeah. Thank you very much for the opportunity. My first question was with respect to the status of the railway line or the railway projects. The Tori-Shivpur third doubling of the line and Jharsuguda-Sardega doubling of the line. What will be the current status of these expansions, sir?
Tori-Shivpur line, as you know, the second line was completed, and the third line work is in progress. I think next year it should get completed, if I'm correct.
Yes.
Yeah. Shivpur-Kathautia will get by 2024. This line should get middle of next year. It's the third line will also be laid. The work is on. The second question about Jharsuguda-Barpali-
Sardega.
Sardega. Jharsuguda-Sardega line. The first line is already there, it is functional. The second line, we have sanctioned it and it is likely to get completed by March 2023. There are three components in that. One is Barpali loop, and the second is some overbridge at Jharsuguda, and the third is line. Doubling of line as far as concerned will get completed next year. This loop will take another two year, and this overbridge, this flyover will get completed in somewhere in middle of 2024. This is our expectations.
Great. That's quite helpful, sir. My second question was with regard to the 1 billion ton production target. Now that coal is back in focus globally and everywhere there is a huge demand of coal. I'm sure now there is no dearth of demand going forward from both power as well as non-power sectors. How soon can we plan to realistically approach, you know, a full year production of 1 billion tons?
See, our target is to achieve by 2024, 2025. That is FY 2025 we should achieve the target that is given by the government. Earlier it was 2023, 2024, but as you know that we have lost two years because of COVID, et cetera, and the demand shortage. This year I am quite hopeful of achieving the target of 700. To achieve target by 2024, FY 2025, we need to produce about 840 next year, and then increase it to 1 billion the year after. I feel that may not be very realistic. Realistically speaking, perhaps by 2025, FY 2025, we will reach something higher than 900 million tons. The year after, definitely it will be achieved. If the demand is there, we will achieve the 1 billion ton target.
We'll try to achieve this by 2024, 2025.
Sir, if I keep things in perspective, what we are saying is between FY23 and FY25, we are going to expand by at least 200 million tons.
Yes.
That is more than 30% growth.
Not 30%, because FY 2023, we will be closing at 700. Yeah, it will be INR 200 million.
Roughly about 30%.
That's right.
We have never done this kind of a growth in the past. Land acquisition, clearances, R&R, evacuation, have we all the things in place or we are still, you know, we'll take it up as it goes forward?
See, there are many steps of this. First thing is PR approval. We have got a PR approved of all these things. We have issued MDO contracts for about 100 million tons. 50 million tons Siarmal, then we have done for Chandrapur, and we have done for Kotra Basantpur, and one more in this. MCL, there is one more we have done. So with all this, about 100 million ton we have already awarded. These are. We will produce coal by FY 2024. By any stretch of imagination, we can. By any means, they will produce definitely by FY 2025, this 100 million ton. Besides, we have got, in this year only, FY 2023 alone, till now we have got EC of about 60 million ton, 64 million ton.
EC we have already got. Government is quite proactive in granting EC. There are certain issues related to FC, but it is a continuous process. Last year also we got, don't remember the figure, but we have got sufficient FC clearances last year also, and this year again, there is a progress in that. Land acquisition, last year we got something like 3,000 hectares of land we purchased. This year again, we are going to do this. These are all continuous process, but we have got a plan on paper at least, which we are following, and till now we have been quite successful in that. If we push the thing, I think Coal India can achieve target.
Thank you very much, sir. That's quite helpful. I'll come back and wish you all the best.
Thank you. The next question is from the line of Pinakin Parekh from JPMorgan. Please go ahead.
Thank you very much, sir, for giving us this opportunity and doing the call. So my first question is going back on e-auction. Now, over the last few months, we have seen government policies which have tried to clamp down on so-called windfall profits of various companies and various sectors. In that context, sir, are there any risks to the e-auction prices or volume in terms of potential policy action? Does the company see, if prices remain such high, then there could be restrictions in terms of, you know, what kind of e-auction sales volumes is done? My second question is, there seems to be an increase in the receivables by around INR 3,500 crore in June versus March. So what has driven it?
Which state SCBs are driving that increase? Third is on the CapEx outlook. Can you give us a sense of the CapEx outlook for this year and, you know, what broadly areas would the money be spent on?
Okay. I think you have asked three questions. First is related to windfall profit. See, we are selling 90% of our coal on SSC, etc., which is tied up coal, and there is hardly any profit on that. We are getting only 10% coal, which is e-auction, and 10%-15% on which we make all the profit. In our case, there is hardly any windfall profit. If windfall profit, I mean, if they try to control the price of this e-auction coal, then they will have to increase the price of this power coal. To me, that doesn't seem likely at all, but it will be difficult for me to see what will happen in future. There has never been any talk of windfall profit. We are not making windfall profit per se.
Whatever profit we are making is just because we have increased the efficiency of production. Because we know that we have got a very huge production leverage. Our employee cost is very high, which remains constant, whether we produce 400-500 million ton or 700 million ton. By increasing the production, that cost per ton has been reduced. I don't think we are getting anything windfall in that sense. To me, that doesn't look anything, any possibility, and there has not been any talk about it. Second question was about receivables. Yes, receivables increased slightly from INR 11,000 crore to INR 14,000 crore in first quarter, but again, we have reduced it to INR 13,000 crore this year, this month. We have reduced it by INR 1,000 crore. See, there is.
Our quantities of supply to the powerhouses have also increased tremendously, about 20% or so. I'm not saying that if that increases, then the receivables should increase. There are periods when the SCBs and Gencos are under tremendous pressure, and we are also pressured to keep maintaining the supply, the supply lines properly. Otherwise there will be power cut in the country in one place or other, which is not acceptable. We had relaxed slightly during April, May, June period, because at that time the supply was very high, and we had to ensure that there is adequate spec-stocks for this rainy seasons as well. Now onwards, when this threat is not there, from October onwards, we will control it further.
We have controlled it in August also, and we will control it further so that our receivables will come down again. There is no risk involved in that. The third is CapEx. Last year we did something like INR 15,500 crore. This year we will keep INR 16,500 crore. See, whatever we are spending is being spent fully on coal related and coal production activity. I think this question is being asked to me for the last year, right from the beginning when I joined, because we have increased our CapEx substantially. You must understand that we are able to increase production this year just because we had made all those investments at the right time. Secondly, we are investing in a big way in our FMC projects.
There are 35 FMC projects that we have always been talking about. They will get completed by March 2024, as I have been committing it right from very beginning. There are nine more projects which are in pipeline, and then related railway infrastructure for these lines. This requires huge amount of money, and we have to procure land as well continuously. Unless we make these investments and the third investment is high capacity equipment. Unless we make these investments, the future production will get affected adversely. We have to ensure that there is a pipeline of investment, continuous pipeline of investment, in the CapEx, so that our production never gets suffered.
We need to create a situation where the capacity to produce in the country is slightly higher than the consumption requirement of the country, so that we can avoid import of the coal, at least lower quality of the coal. That is the thing we have to ensure, and for that, the CapEx is required.
Understood. This is very clear, sir. Thank you very much.
Thank you. The next question is from the line of Shivam Gupta from Akshaya Capital. Please go ahead. Shivam, your line is unmuted. Please go ahead. As there's no response from the current participant, we'll move on to the next. That is on the line of Sanjay Parekh from Sanjay Parekh Investments. Please go ahead.
I'm from Soham, Asset Management. Sir, one question I had was, if you were to compare on a kcal basis, the calorific value basis, what is the discount today on e-auction versus imported coal, sir? What is the gap you see, I mean, historically, how has that been, sir?
See, it is very difficult for me to compare these things. Let me try because I've not prepared some. The coal that we are supplying is mainly lower quality coal, and imported coal is generally higher quality coal. Hence, generally, the imported coal is in the GAR of 5,000. If you see what we are supplying normally is 3,500 GAR or GAR or 4,000 GAR. Comparing this cost, price of this just on calorific value will not be proper because you don't convert the inherent calorific value directly into energy. There are certain losses, etc. There are certain other things as well, like in sponge iron plants, they will always prefer imported coal if it is slightly costlier also, because it gives them a longer period of operation.
The yields are slightly higher and all this. There are many factors which improve. If you compare G5 coal of this Eastern Coalfields Limited, we are selling it at the, which is roughly in 5,500 kcal. We are selling it at the rate of about 10,000-11,000 INR per ton. Imported coal of the same quality will be in the range of about today $120-$125, because prices of coal have decreased in the international market from $134 to now $120. It will be, I think it will be in $125 range. There is some difference, but not much.
Okay. Okay.
It will be very difficult for me to answer this question directly. If you want, we can do some research and then give you.
No, perfect, sir. Thank you. Sir, second question is this coking coal, where we actually badly need as a country to be self-sufficient. There were some, you know, recently you'd also mentioned that we would step up on that. For coking coal over 3-five years, what sort of volumes can we get, sir?
See, we must understand that we're becoming self-sufficient in coking coal with the present technology is slightly difficult task. There are two aspects of coking coal. One is its hardness, and another is the ash content. We can reduce the ash content slightly or substantially also by washing the coal, but hardness cannot be increased. With present technology and with that precise capital, precise PCI, with the techno-
Stamp.
Stamp charging. Stamp charging technology, the maximum quantity of the Indian coal can be used up to 25%-30% also only for blending, and the rest 70%-75% they will have to import. For without stamp charging, the same, et cetera, following even 10%-15% mixing is possible. Beyond that is really difficult. In foreseeable future, becoming self-reliant in coking coal will be difficult. We are producing coal. This year we will be producing about 40 million tons of coking coal. The 5, grade 5 and grade 6, washing grade 5 and washing grade 6 is hardly used for the steel industry. Only 1-4 are used. In that also India, basically the maximum quantity of the coal comes from this washing grade 4.
We are trying to increase the production. We are making some policy interventions also, so that we are thinking that if the steel plants can take the coal and wash themselves, perhaps it will be better. We are thinking in those terms also. If that comes, then perhaps it will help the country to increase the usable coal in a bigger way. Giving any commitment or giving any, this will be difficult for me.
Sure, sir. Sir, the last one. You know, we are investing in renewables, in alumina plant and other ventures. Normally, what is the payback for these projects? That, payback threshold for us to invest in this project, sir.
See, for solar power, we are bound. We have to do it. Firstly, because we have to become energy neutral, and that is one area in which company has to develop. We can say that coal will last for another 20 years, 30 years, but beyond that technology will take over and everything does not last ever forever. Coal, solar energy one has to invest because as I said, we have to become energy neutral. Maybe in next two, three years we should target that. Otherwise coal production itself will suffer because of many pressures that are operating in the society. We look for IRR of at least 12% before investing in anything. But in solar projects sometimes we reduce that also. But we have not made any substantial investment in that. We have bid here and there.
Somehow the prices that is coming in the bidding are very low and Coal India has not been very successful in that account. Whatever solar plants we are installing or this which is likely to come to 450 MW or so, that energy will be consumed by us only, and that will definitely reduce the price of the energy for us. As far as for self-consumption is concerned, the IRRs are very high and the returns are very high. If you go for selling it in the market, the IRRs we are looking at 12% or slightly below that. At alumina, et cetera, that is we will not go unless the IRR is much more than 12%. We are trying to get alumina mine on nomination basis.
If we get that, we'll proceed with that. That I think should be a profitable venture. Rest assured, Coal India will not invest in any enterprise or any project where the IRR is not adequate.
Yeah, sir. Thank you. Sir, this is project IRR, sir, that's right.
Project IRR.
Yeah. Thank you, sir. Thank you very much.
Thank you. The next question is in the line of Kamlesh Bagmar from Lotus Asset Managers. Please go ahead.
Yes. Thanks for the opportunity, sir. First question on the part of coal compensation tax. If you see all the captive mines which have come under auction, they have the benefit that they don't have to pay the, that INR 400 coal compensation tax. Are we gaining any ground to the government saying that it's not a level playing field? Because all these coal mines which would be coming after five years or three years, would be enjoying such a significant benefit?
See if the coal is consumed by the same company and in the same state, then only the coal compensation tax will not be applicable. Many of these companies will be using this coal outside their state. How long will the coal compensation tax continue? It is difficult for me to say. This was till June this year, but this has been extended. Maybe it will get extended further.
Till 2026.
Till now they have indicated that it is 2026. 2020 till 2026, there is not much of pressure because that is the situation. Because not much of production is likely to come from this captive mines, et cetera. Not captive mines. If they are selling in the market, then they will have to pay the coal compensation. Our competition is always with the persons who are selling in the market. If somebody is doing his own mining and consuming it, there's hardly any competition with us. Second thing is that Coal India has got many advantages also. We are not paying any premium to the government on the royalty that these mines, captive mines users, et cetera, have to be paid.
Secondly, we have got the best mines. When compared to everything, and then this is completely passed through to the consumer, I don't think it's going to create much of a problem for us. You are right, we will take up this issue at the right point.
Okay. Sir, secondly, on the part of your investment in other projects like aluminum and the Talcher fertilizer and coal gasification. What's the status on that part?
See, you know that in HURL we have invested. In HURL, Gorakhpur plant has started. The other two plants are likely to start very soon. TFL, there is some delay of about 18 months. About 18 months delay is there because of COVID, et cetera. And there are some issues with visa issuance of visa, et cetera. Because of that, it has got slightly delayed. Aluminum project, it is still on the drawing board. I cannot say how it will develop.
Thanks, sir. Lastly, like, you have performed very strongly on the FSA realization. Despite the fact that your dispatches to the non-power sector has come down significantly by around 21% year-over-year, while the power volumes have increased. We are seeing roughly around 3%-4% increase in FSA realization. What's the reason? Is it because of the grade or like any other element?
I couldn't get your question. FSA realization has increased by 3x-4x.
3.5% year-on-year.
Huh? Percent?
Three and a half percent.
Okay.
You can answer that.
This is mainly because grade realization. See, previously people were not purchasing coal from BCCL and ECL because they are costly coal. Now they are purchasing that coal also. The coal mix has changed slightly because of that it has increased. I think that should be the reason.
Grade mix.
Grade mix.
Great, sir. Thanks a lot, sir.
Thank you. The next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, my question is, how many workers on an average retire every day, and what percentage of that portion is employed in underground mining?
Okay. See, today we have got about 240,000-245,000 workers. Out of that, about one lakh is there in underground mine and 140 or 145 is in open cast. That roughly in that range. About 5% of our manpower is reducing every year. This year again, it will reduce by about 12,000-13,000. That's the situation.
No, but that, out of 5%, what percentage is from underground? Because their productivity is ridiculous, and it is highly loss-making for us. Out of the retirees, majority are from underground mining workers or open cast? That is my question, sir.
See, in underground mines, they are the older mines, so the people engaged there are slightly older. I don't have this figure right now that what is the percentage. Higher percentage is from underground mines and lower is from open cast. I don't have exact figure right now.
Secondly, sir, when IPO was launched, at that time, presentation was made that we are investing very heavily in washeries. But we have not seen any significant increase in production of washed coal. By what time we can see significant increase in washed coal volumes, sir?
If you talk about washeries, there are two components of it. One is coking coal and another is non-coking coal. Non-coking coal, there's no purchaser of washed coal. People are not very eager, and they are not willing to pay for it. Even if they are saving. Unless we have got a FSA, this long-term tie-up with somebody, it will be difficult for us to sell the product in long term. Secondly, the government earlier had said that beyond 500 km, coal having more than 34% of ash cannot be carried. That limitation also has been removed now. In non-coking coal, perhaps washery, installing washery will be a risky thing. We are installing one more washery which was under construction, so it will come, maybe next year it should come in production.
We are not thinking of installing. At that point of time, people were very optimistic about non-coking coals. For coking coal, there were certain issues about the land leasing, et cetera, that has been resolved now. Now in CCL also, we are going to award the contract or we are going to do the tender so that these things are coming. Last year, we have increased our washed coal, washed coking coal production by more than 60%-70%. This year, again, we are going to double, almost increase by 70%-80% further. Two washeries have come in production, Madhuban and Patherdih. These two have come. Bhojudih is likely to come. Bhojudih, sir? Bhojudih has also come, but there's some problem of coal, et cetera.
These washeries, when they come, then coking coal production will increase. Non-coking coal, we are not investing much.
Sir, regarding coking coal also, your base is so low that even if you grow it 100%, so it makes hardly any difference. Can we expect this coking coal to touch 20-25 million tons over next two to four years? Is there any likelihood of that happening?
No, it's not likely to happen. This year.
Two-three years down the line, what should be the coking coal volume?
Sorry to interrupt, Mr. Shah.
Yeah.
Sir, may we request you return to the question queue. There are participants waiting for their turn.
Okay, thank you.
Thank you. The next question is from the line of
First with the question, people asking question would be, they should ask two, three questions, whatever, in one go, and let me answer that. If they have queries again, then they can come back in the queue. Or write us, we will give the reply because there may be many people, and going beyond some time will be difficult for me. This will bring, instead of question intercession, this will give satisfaction to everyone. The organizer can place. They can organize the way they want.
Thank you, sir. The next question is from the line of Atul Jain from Makaran F Invest. Please go ahead.
Yeah. Hi, sir. Good evening. Sir, my question, I'll just go quickly with them. My first question is, while the international prices are quoting at, you know, $400+, in our investor presentation, we are realizing about INR 4,400 on the auction and about INR 1,500 on the FSA. Why is there such a huge gap between the two? The second question is, sir, there are a lot of other conference calls of these power companies. The management is saying that they've been able to renegotiate their, you know, supply agreements and PPA agreements. They are able to get higher prices because of the increased coal cost and increased cost of production. Why aren't we able to achieve that if, you know, if that is the case?
Third question, I'll just quickly fit that in, is 25% of the production is allowed in the e-auction, but we normally average about 11%-12%. Is there any scope? Because as you said, that's the profit-making, you know, the unit. Is there any scope for an increase in that?
Now, comparing to international price, $400+ is the price for coking coal. That is not for normal coal. As I mentioned that in Indonesian, ICI 3 last week was $114 only. That too is very high compared to our price at which we are selling. As you know that our coal is slightly inferior grade and the consistency in our coal is low because of the occurrence. It is the geological thing that is happening. Hence, we always fetch slightly lower price than the international price. That, there is no anomaly on that. We cannot get the price of the coking coal. Coking coal is completely different basket. Secondly is PPA agreement, then renegotiating, et cetera.
Yes, imported coal-based power plants renegotiated the price with the discom, and they tried to increase their production. Still the discoms did not go beyond certain line, a certain limit. Hence, the production of imported coal-based power plant have been very low. It has been. In the last month, it was in the range of 100 million units per day, whereas their capacity is about 300, their capacity is about 350 million units per day. They were not producing adequate quantum of the energy, and they could not renegotiate much, and the state governments did not agree. As far as coal price is concerned, there is no negotiation on that. Whatever the price Coal India fixes that the consumer has to pay in FSA, that is as per the FSA clause.
Being the monopolistic monopolist organization, we have to bring all the stakeholders on board. In this inflationary situation, no government will allow. Let's be candid that no government will allow the prices of a fuel, of so critical fuel to increase substantially in the market. We have been discussing with the stakeholders. I've been trying for the last two years to increase the price. Because of the different situations, I have not been successful. After getting such a good profit, nobody will permit me, in at least the short duration, to increase the price substantially. There are talk going on to increase it, but then, in this inflationary environment, perhaps government is slightly. All the stakeholders are not coming on board.
About e-auction, we are allowed to auction up to 20% or 10%?
20%.
20% of our coal production through e-auction. Last quarter we did about 29 million tons.
INR 20 million.
29?
INR 20.9 million.
E-auction.
It is about 12%-13% of the total coal that was sold. The total coal sold was about 170 million tons. About 12% of that we have sold. Last year, we did about 900 million tons, which was about 16%-17%. We have to give priority to this power sector. There's no way in which we can ignore that priority. Hence, we had to reduce this quantum. In coming months, as our production is likely to increase and the demand from power sector is going to reduce, I am quite hopeful that e-auction volume will increase further.
Okay, sir. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Amit Dixit from Edelweiss. Please go ahead.
Yeah, thank you.
Sorry to interrupt, Mr. Dixit. We are not able to hear you clearly. Hello.
It seems that SECL has been an underperformer for quite some time as far as offtake is concerned, and ECL as well. Are there some specific issues there in the current month? Of course, we saw SECL bouncing back. If you can throw light on SECL in particular because it is the largest subsidiary that we have. The second question is on linkage materialization. A lot of companies in the non-regulated sector mentioned that the linkage materialization dropped in Q1. Is there any chance of the linkage materialization improving in this quarter?
Okay. Coming to SECL. SECL has got some problem in their major mines. There are three major mines which produce maximum coal in that company, Kusmunda, Gewra, and Dipka. We have been able to solve the problem of Kusmunda and Gewra. There is some problem in Dipka, which we are trying to solve. One or two villages have been solved, but one or two villages are still pending. We are actively working on that. If you see the dispatches this month, this has improved. If you see the OB removal, this has improved. But unfortunately, for the last 15 days, it has been also raining very heavily because of which SECL results which we would have predicted have not come.
In the first quarter, their performance was very good because they increased their production by, I think, about more than 35, 36% compared to the last quarter. You are right, SECL is the largest company, and it has to come back in a big way. I'm quite hopeful that this year from after this rain, from October onwards, they will perform much better. About linkage materialization, we are committed to meet the linkage materialization up to the level of the minimum guarantee that we have given. There are issues of transporting coal through rail because the priority being given by railway and everyone is to the power coal. To that extent also, the linkage is suffering. We were giving priority to the power coal also.
today, even today, we have got stock of about 31 million tons. In coming months, I don't think there should be any problem in meeting the requirement of non-power sector.
Okay. Great.
Thank you. The next question is on the line of Ansuman Deb from ICICI Securities. Please go ahead.
Thank you, sir, for the opportunity. Three questions. The first question is on the e-auction booking, which has dipped a bit this year. We have seen only 20 million tons of booking in the past five months. Where do you see this trajectory and will it improve going forward? Second question is on the Angul-Balram rail link. You had mentioned in the annual report that it was supposed to be commissioned in July 2022. Has it been commissioned and/or what's the status of it if not? The third question is on the coal gasification projects that we have announced. What is the status and who will be our technology partners on these projects? Thank you.
In the e-auction volume, the first quarter was perhaps 20 million tons. Now, if I am remembering correctly, this is low compared to last year, but the realization is very high. E-auction volume will increase in coming months with the demand of the energy sector going down. Because, as the trend has been in October, November, December, the demand for power goes down, and with that, requirement of coal also goes down. I'm quite hopeful that thereafter, there will be not so much pressure to supply to the power station. Secondly, I'm quite hopeful on this account because, today the powerhouses, the stocks at powerhouses is about 28-29 million tons. Last year it was 10-12 million tons. So this extra 16 million tons will give them lot of leverage.
This will help us in giving coal to non-power sector also. This is not like for next few days, perhaps the stock may go down, but after that, in October onwards or after twentieth of September, the stocks at the powerhouses are unlikely to go down. That's my whatever the trend we have seen, but nobody can say for sure because it depends a lot on the monsoon condition and the temperature thing. That is the situation. E-auction volumes should increase in coming months. Now, Angul-Balram, yes, we had hope that it will get completed by July, but now IRCON has indicated that it will get completed by September or by some middle of October, definitely. It is in advanced stage of completion. All the land related problems have been solved.
The bridge is under construction. The bridge has been constructed, only the approach, earth filling is required. It will take a while because that cannot be done during this monsoon period. That's affecting their work. By October end, definitely it will get completed. By middle of October or in the October month, it will definitely get completed. That is the time when we'll require it the most. The third thing is coal gasification. We have tendered not many times. We are going for coal gasification on BOO model, because we don't want to take technology risk. This will be a new thing for Coal India, and because of that, not much of response have come.
We have tried to modify the contract document or tender document in a way it can become slightly more effective, but we are trying. As of today, it will be difficult for me to say, okay, who will be technology partner because it will depend on the tendering and who quotes the best rate.
Okay. Just one clarification. Sir, both booking and lifting of e-auction volumes. Both the volumes were similar in the last five months? Could you just give us that volume for booking and lifting separately?
That, I don't have. I have got booking figure. Lifting figure should be also in the same range, but I don't have figure right now. I will give these figures separately.
Thank you so much.
Ansuman from? You are Ansuman from ICICI?
ICICI, yes.
Thank you. The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much. Sir, you mentioned about the difficulty in price hike and the inflationary pressures and the profitability. Sir, is it fair to assume for the wage hike when it happens, the offsetting price hike will happen? Because that in any case, it's I believe it's a small amount of price hike that you'll have to take. That component can be offset. Is that fair assumption, sir?
I think we should be able to do that, Dhruv. Committing anything will be slightly difficult for me. At least I'm trying that everyone should agree to compensate us for wage increase, petrol, diesel increase and explosives increase that we have incurred based on this explosives. So that at least the increase in the inputs of production gets compensated. We are trying for that. I think it should be doable.
Sure, sir. Sure. Thank you. Sir, this, the IQ number is the cost base that we see on contractual expenses and cost of material now on a quarter basis. Should we think that this has peaked now in terms of the overall because diesel cost further is not increasing contractual. Does it represent the full inflationary impact now from a quarter basis? I mean, as a benchmark for the quarter.
For second quarter, I can say that it will not be higher than the first quarter because the prices of diesel has not increased. The prices of explosives have also remained constant. Wage increase has not been there. To my understanding, a quarter basis, the contractual cost should not increase.
Sure, sir. Thank you so much, sir. All the best.
Third or fourth quarter, whether the diesel price will remain constant or not, I don't know.
That may be variable. We understand. Thank you so much, sir, and all the best.
Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.
Sir, my all question have been answered. I have one only technical question. Sir, typically, we understand that, H2 our production is much higher than the H1 because of H1 had large part of having a three to four months kind of a monsoon. If you look at, I mean, month-on-month, April and May production why it declined from the March substantially?
This year we have tried to restrict it. See, in March, everybody rushed to achieve the target, and that type of rush and pressure cannot be maintained. Our machines were deployed in coal production. We shift the machines also from overburden production to achieve the targets. Overburden removal becomes essential, and in April and May, all those housekeeping things are bringing the mines back to the shape, et cetera, are required. That type of pressure cannot be sustained for long. The third thing which is important is high temperature. See, in April this year the temperature was 40-45 degrees, and in the mines it was touching 50 degrees. To operate in such a high temperature is really difficult, and to maintain that pressure in that high temperature may be counterproductive.
March, April, May, we have tried this year to keep the pace, but then maintaining that type of pace will be difficult.
Okay. Thank you very much, sir. All the best.
Thank you. The next question is from the line of Mohit Kumar from DAM Capital. Please go ahead.
Yeah. Good evening, sir. Sir, I only want clarification. What is your cost of production under the new MDO contract on an average, and how does this compare with your current cost of production from your opencast mines?
See, in MDO contract, it will depend largely on many factors. One is what is the stripping ratio. If you compare the total excavation cost, it is slightly higher, 10%-15% higher than the cost of total excavation from what we normally do. Because here the capital investment from the MDO is expected and is required to solve many problems which otherwise the company solves. The coal production cost, if you see per se, it is different in different pockets. Like, in Siarmal, it is almost comparable to what we charge. Same is the case of CCL. In CCL, the rate we have got is slightly higher than, maybe 15% higher than what otherwise it will cost.
Broadly, are you saying that there is no advantage of going through the MDO? Is that a fair assessment?
I won't say that because many of the problems get resolved faster so that we can achieve that production this target earlier. Secondly, wherever the MDOs are being appointed, the quantum of production remains what we predict. Whereas in our mines, when the problems are there, so the quantum of production is not there. What we say as the cost of the production is, cost is based on the assumption that that type of production will come, but actual production is slightly much lower than what is projected.
Are you looking to award any more MDO tender in this fiscal year? Can you please quantify it?
There are two mines, MDO large mines, which I will like to award. One is Sanmitra and another Kalbhadra. We are going to the Sanmitra i is already put to tender. Kalbhadra in MCL is likely to put to tender in the first week of October. These are the two major mines. If we award that, perhaps about 130-140 million tons of coal production will definitely come after two years.
There are only two mines which are lined up for MDO this fiscal year?
There are the big mines, then there are small mines. In case of underground mines, actually we have got the cost of production lower than what we otherwise incur to even employing continuous miners, et cetera, on higher, even in higher. We are getting cost of production less than that.
One more question, sir. If you look at coal gasification, when we expect, you know, that we'll get more clarity on the way forward? Is 12 months down the line or, you know, is a couple of years down the line when you see that you'll have more clarity on, you know, producing some of the chemicals or hydrogen? Because I see that a lot of action has been taken by the ministry. There are a lot of papers out there in the public domain, but there is nothing concrete as of now.
You are right, but it will be difficult for me to say, give any timeline because we have.
Just broadly, sir, the expectations. Your expectation is that we'll get more clarity whether you want to go ahead or not go ahead.
We are tying up with the other PSUs so that our offtake is ensured. We have tied up. We are tying up with other PSUs so that offtake can be ensured. Once this is tied up in next couple of months, maybe we can thereafter to put it to tender. I think within next seven to eight months, something will come out.
Are you exploring blue hydrogen by any chance, sir? Or is it still some time away?
Not as of now.
Nothing yet. Understood, sir. Thank you, sir. Thank you and all the best, sir. Thank you.
Thank you. The next question is from the line of Nilendra Sinha from ICICI Venture. Please go ahead.
Good evening. My question was related to evacuation plans and longer term evacuation constraints and longer term coal production plans. What I understand that by FY 2026 when 1 billion ton is expected to come, some of these evacuation projects, which are currently constrained, they will come. In near term, these projects, evacuation projects may face delays. How confident you are of achieving 700 million tons in FY 2022 or FY 2023 or 800 million tons next year in view or if these evacuation projects like the current project happening in Chhattisgarh or Odisha or Jharkhand, if they get delayed?
See, for FY 22, 700 million tons, there is no evacuation. The existing lines with a slight improvement that railway is doing, they will be able to take this much of coal. If you are talking about the railway lines, there should not be any problem because that much adequate arrangements have been made. Because if you want to talk about the area-wise, Ib Valley, there are certain things which will come. Sonnagar has the Jharkhand Sonnagar line is operating at the not at the maximum capacity. The capacity is still there. In the Jharkhand also, the capacity is there. In Korba line, the fourth line between Champa and Bilaspur is being laid, and this will come up this year only. That will help in evacuation further.
They are trying to introduce automatic signaling that will improve this. By incremental things, this Angul-Balram line will come, which will help in evacuating another 10 million tons. I don't think there is any problem for evacuating 700 million tons. Although Railways have to work slightly. They will have to work under pressure the way they are working right now. Next year, I'm quite sure that this third line of Tori-Shivpur and Sonnagar line will come up. With that, we will mostly be able to handle whatever production comes next year. I won't say there is lag between the two. These FMC projects will help us in loading the wagons in much faster way, and that will re-create some more capacity.
With all the projects in line, there should not be any problem in the next two to three years to evacuate the coal.
Okay. Thanks. Thank you for the question. Thank you.
Thank you. The next question is on the line of Falguni Dutta from Jet Age Securities Private Limited. Please go ahead.
Yeah. Good evening, sir. I just had one question, which is, whenever this wage revision happens, would there be any increase in the contractual expense because of that? Or, there is no such contractual laborers who are employed to whom we have to give a hike?
See, our contractual labor price is also linked to the wage.
Okay.
The HPC prices, High Power Committee price, as we call it, has to be paid to the contractual laborers also. That is whatever minimum price fixed by the Government of India and the lowest of the wage that we pay to our worker, and average of these two. That is there. There will be some impact on contractual things as well. Since the labor there is not so much, the impact on this, our labor will be much more than this.
Okay. Okay, sir. Thank you. That's all from my side.
Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa & Co. Please go ahead. Faisal Hawa, your line is in the talk mode. Please go ahead. As there's no response from the current participant, we'll move on to the next participant. That is on the line of Alok Nath, an individual investor. Please go.
Yeah. Am I audible?
Yes. Please go. Yes, sir. Please go ahead.
My question is regarding the solar, this one. Like, what is the update on that one? As we know now, the green energy is increasing, and government is also pushing for producing more in the form of green energy. The demand for coal will definitely go low. Currently, the demand is high because the energy consumption is also increased. But I'm talking about near future. They want us to reduce the consumption of coal. For that, how is the company looking into the alternative, this one, business models?
See whether the coal will lose its value. I think my voice is getting repeated. Somebody's mic is on. Please mute it.
Sorry to interrupt, sir. That is on the line of Alok Nath. Mr. Nath, may we request you to mute your audio when you're not speaking.
Yeah. Yeah. I'm gonna mute it.
Thank you.
Okay. See, it will be difficult for anybody to predict. Two years back, it was, there was a thinking that perhaps the coal demand will never come back, but it has bounced back this year. My understanding is that, and it has always been, that for next 15-20 years, coal requirement will definitely be there. The percentage in the total energy basket may reduce, but coal demand per, I mean, in tonnage terms, will keep on increasing. In next three-four years. Are you able to hear us?
Yes, sir. Please proceed.
Okay. My understanding is that for the next 15-20 years, the demand of coal will definitely increase. Maybe the percentage term in the whole energy basket, it will reduce, but the quantum will definitely increase. For that we have to be prepared. Saying that the demand of the coal will not be there, I don't think that is the right thing. At the same time, Coal India has to develop another green energy thing, as I had replied to one more question. Because of two reason. One, to neutralize whatever energy we are consuming so that we can become a zero energy consumption company. Secondly, to invest in the areas which are more futuristic. Because of that, we are investing in this.
Coal India has been trying in last one year to get more contracts to win the tenders, et cetera, but somehow we have not been successful. We are quite hopeful that we are talking to the different state governments so that we can establish power plants, solar power plant for their consumption of the discoms. We are working on that. We'll be successful soon.
Thank you. Ladies and gentlemen, due to time constraint, that was our last question. I now hand the conference over to the management for their closing remarks.
Thank you everyone for coming to this conference call. I'm really thankful to you for asking the questions. I think I was able to reply most of the questions. In case there are any more issues, you may write to Mr. Viswanathan. He will be able to communicate to you the other details. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.