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 for its inability to utilise its cash reserves. In an interview with Probal Basak Chairman and Managing director of CIL, S Narsing Rao dispels concerns on both fronts and speaks about his outlook for the year. Edited 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% and for production is about 6.6%. As of now, our offtake and production growth rate is 3.8 and 3,6%, respectively. In the second half, we can ramp up production and offtake, which should grow in tandem. We are very confident.
Our delivery to the power sector is 89% as on August 31, on an aggregate. If we have satisfied upto 89%, 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% 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 MTs import for the year. But, if import happens, I think, it will be much lower than that. By the end of October more clarity will emerge.
Anyway, preparation is already afoot for imports. The original estimate was 24 MTs import for the year. But, if import happens, I think, it will be much lower than that. By the end of October more clarity will emerge.
Coal India is staring at a three-day strike and unions are threatening of an indefinite strike, which might further hamper production. Is there any 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 ministry of finance has to decide in consultation with the coal ministry.
I have met union representatives, the meetings were inconclusive. But we have not offered in the meeting with unions to delay the disinvestment proposal, as we are not the one to decide about that. It is upto the ministry. There will be further meeting with unions. I am hoping that 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% 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, where the company planned to invest heavily, is on hold as it may not ensure the 12% internal rate of return mandated by government.
We will have to adhere to the guidelines. 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 last one 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 cost and an increased wage bill is 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 happeing, 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.
