 "I hope the strike will be called off: S Narsing Rao")
Apart from the usual criticism of not being able to meet the country's fuel demand, the world's largest coal miner Coal India (CIL) has been under immense pressure from the investors' community as well for its inability to utilise its cash reserves. Chairman and Managing Director S Narsing Rao dispels the concerns on both fronts in an interview with Probal Basak. Excerpts:
How do you see the fiscal from the production and supply aspects? How much will CIL import this year to meet the shortfall?
Currently, we are about marginally short of the offtake and production target. Our asking rate for the annual offtake growth is 5.8 per cent and for production it's 6.6 per cent. As of now, our offtake and production growth rate is 3.8 per cent and 3.6 per cent, respectively. In the second half, we can ramp up production and offtake, which should grow in tandem. We are very confident.
Coal India is staring at a three-day strike and unions are threatening of an indefinite strike, which might further hamper production. Is there a possibility of a delay in the stake-sale process?
Regarding disinvestment, I cannot offer any comments. We have some comments and inputs, to a limited extent, which we have passed on to the government. I have come to know through the media that the coal ministry has said it is not the right time for disinvestment. The finance ministry has to decide in consultation with the coal ministry.
I met the union representatives, but the meetings were inconclusive. But in the meeting with the unions, we have not offered to delay the disinvestment proposal, as we are not the one to decide about that. It is up to the ministry. There will be further meeting with the unions. I hope the strike will be called off.
There is a lot of buzz about the share buyback proposal. Is that a possibility in the current fiscal, given the huge cash reserves of the company?
Technically, the share buyback is possible as the articles of association of the company were amended in the last year's annual general meeting. The matter has been discussed in the board informally. Once a decision is taken in favour of a share buyback, it will take another four-to-five months to complete the process. At the end of the day, the view and policy of the government, which holds a 90 per cent stake, would obviously get reflected in all the decisions. But, yes, CIL has cash reserves of about Rs 62,000 crore. To earn interest on that is the least priority.
But CIL's plan to acquire foreign assets is on hold, as it may not ensure the 12% internal rate of return mandated by the government.
We will have to adhere to the norms. We had zeroed in on some assets and signed a non-disclosure agreement. The acquisition is a long-term process. We have to follow the rules. If in the process, some of the assets we had zeroed in on, are being offered to other parties, we cannot do anything about it.
Lower realisation from e-auction had adversely impacted CIL's net profit in the last quarter, upsetting investors. Has there been any improvement on that front?
If someone is upset over production, I can understand. We can improve on that point. But e-auction is not in our control. We offer, but it is the market which determines. I do not know the current numbers exactly. I am told there has been a slight improvement in demand in the past month in the sponge iron industry. Cement and sponge iron are major customers for this e-auction category. But we may not be able to better last year's performance. Besides, international coal prices are under pressure, which has a bearing on e-auction sales.
Apart from e-auction, higher fuel costs and an increased wage bill are still taking a toll on profitability. Is a further price hike an option?
We have modified the prices in May. At this moment, there is no proposal. I don't see this happening, unless there is a substantial hike in fuel and other costs.
Corporate India, including major PSUs, have voiced concerns over the new land Bill as it might delay projects. What is your take on this?
Like it or not, we have to follow the law of the land. Certainly, the new Act has introduced some new stages, which will take more time. But it is premature to say whether there will be a delay or not. You never know, since there is a provision for higher compensation for land-owners, the whole process may be easier to handle if land-owners are cooperative.
How do you see the fiscal from the production and supply aspects? How much will CIL import this year to meet the shortfall?
Currently, we are about marginally short of the offtake and production target. Our asking rate for the annual offtake growth is 5.8 per cent and for production it's 6.6 per cent. As of now, our offtake and production growth rate is 3.8 per cent and 3.6 per cent, respectively. In the second half, we can ramp up production and offtake, which should grow in tandem. We are very confident.
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Our delivery to the power sector is 89 per cent as on August 31, on an aggregate. If we have satisfied up to 89 per cent, on an aggregate level, we do not need to import. But there are some individual power plants, which might get less than the committed 80 per cent supply. If they want us to import, we have no choice but to do it. Anyway, preparation is already afoot for imports. The original estimate was 24 million tonnes (mt) of import for the year. But if import happens, it will be much lower than that. More clarity will emerge by the end of October.
Coal India is staring at a three-day strike and unions are threatening of an indefinite strike, which might further hamper production. Is there a possibility of a delay in the stake-sale process?
Regarding disinvestment, I cannot offer any comments. We have some comments and inputs, to a limited extent, which we have passed on to the government. I have come to know through the media that the coal ministry has said it is not the right time for disinvestment. The finance ministry has to decide in consultation with the coal ministry.
I met the union representatives, but the meetings were inconclusive. But in the meeting with the unions, we have not offered to delay the disinvestment proposal, as we are not the one to decide about that. It is up to the ministry. There will be further meeting with the unions. I hope the strike will be called off.
There is a lot of buzz about the share buyback proposal. Is that a possibility in the current fiscal, given the huge cash reserves of the company?
Technically, the share buyback is possible as the articles of association of the company were amended in the last year's annual general meeting. The matter has been discussed in the board informally. Once a decision is taken in favour of a share buyback, it will take another four-to-five months to complete the process. At the end of the day, the view and policy of the government, which holds a 90 per cent stake, would obviously get reflected in all the decisions. But, yes, CIL has cash reserves of about Rs 62,000 crore. To earn interest on that is the least priority.
But CIL's plan to acquire foreign assets is on hold, as it may not ensure the 12% internal rate of return mandated by the government.
We will have to adhere to the norms. We had zeroed in on some assets and signed a non-disclosure agreement. The acquisition is a long-term process. We have to follow the rules. If in the process, some of the assets we had zeroed in on, are being offered to other parties, we cannot do anything about it.
Lower realisation from e-auction had adversely impacted CIL's net profit in the last quarter, upsetting investors. Has there been any improvement on that front?
If someone is upset over production, I can understand. We can improve on that point. But e-auction is not in our control. We offer, but it is the market which determines. I do not know the current numbers exactly. I am told there has been a slight improvement in demand in the past month in the sponge iron industry. Cement and sponge iron are major customers for this e-auction category. But we may not be able to better last year's performance. Besides, international coal prices are under pressure, which has a bearing on e-auction sales.
Apart from e-auction, higher fuel costs and an increased wage bill are still taking a toll on profitability. Is a further price hike an option?
We have modified the prices in May. At this moment, there is no proposal. I don't see this happening, unless there is a substantial hike in fuel and other costs.
Corporate India, including major PSUs, have voiced concerns over the new land Bill as it might delay projects. What is your take on this?
Like it or not, we have to follow the law of the land. Certainly, the new Act has introduced some new stages, which will take more time. But it is premature to say whether there will be a delay or not. You never know, since there is a provision for higher compensation for land-owners, the whole process may be easier to handle if land-owners are cooperative.