With the approval for commercial mining, the coal mining industry is set to experience significant structural changes in the future as it moves from being a monopoly to a competitive industry. Amidst this changing scenario, Coal India Limited (CIL), the world’s single largest coal producer, is working towards strengthening its leadership position.
CIL, which has played a key role in meeting India’s coal requirements over the years for different sectors, has been pushing production in recent times. It ended the last fiscal year with a record production of 567.37 million tonnes (mt). The company even beat its own capex target for the first time, investing a significant Rs 86 billion. The miner has been making concerted efforts to augment availability to end users through new mechanisms such as the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI), improve quality and enhance productivity and ensure sustainable mining practices as it works towards the 1 billion tonne coal production target by 2020.
CIL was set up in 1975 as a state-owned coal mining corporate and was granted Maharatna status in 2011. The coal major operates 413 mines through its eight coal-producing subsidiaries, of which one is in Africa. The seven in India are Eastern Coalfields Limited (ECL), Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), South Eastern Coalfields Limited (SECL), Northern Coalfields Limited (NCL) and Mahanadi Coalfields Limited (MCL). Coal India Africana Limitada (CIAL), a wholly owned subsidiary of the company, is a mining company that was established in 2009-10 in Mozambique, to promote bilateral cooperation in the development of coal resources. CIL also controls operations in the planning and consultancy space through Central Mine Planning and Design Institute Limited (CMPDIL) located in Ranchi, Jharkhand.
Production and supply performance
CIL produced 567.37 mt of coal in 2017-18, thereby recording an increase of 2.4 per cent over its production of 554.14 mt in 2016-17. This figure was, however, 5 per cent lower than its target of 600 mt for 2017-18. Overall, during the period 2013-2018, CIL’s coal production registered a compound annual growth rate of 5.25 per cent. Of its overall coal production in 2017-18, non-coking coal accounted for 94.1 per cent and coking coal for 5.9 per cent. Technology-wise, the majority of CIL’s production comes from opencast mines (536.82 mt) with only a small share coming from underground mines (30.54 mt). So far in 2018-19 (till May 2018), CIL has produced 91.99 mt as compared to a target of 97.9 mt.
Subsidiary-wise, the highest contributors to production in 2017-18 were SECL with 144.71 mt of coal produced, followed by MCL with 143.06 mt. NCL recorded the highest increase in production during 2017-18 over 2016-17 at 10 per cent, with a production level of around 93.02 mt.
Meanwhile, the coal offtake for 2017-18 stood at 580.29 mt, marking a growth of about 7 per cent as compared to 543.32 mt in the previous year. During 2017-18, CIL supplied a record 454.3 mt of coal to the power sector and 126.3 mt to the non-power sector, registering a 7 per cent increase in annual growth for both sectors. Amongst its various subsidiaries, SECL recorded the highest offtake of 151.1 mt, followed by MCL (138.26 mt), NCL (96.77 mt) and CCL (67.5 mt). Besides augmenting production levels, a significant highlight for CIL during 2017-18 was a 16.88 mt reduction in its inventory levels to around 55.49 mt as of April 2018.
In the past five years, CIL has witnessed a consistent increase in its revenues but a declining trend in its net profit. CIL’s consolidated revenue for 2017-18 stood at Rs 919.26 billion, marking a marginal 3 per cent increase over the Rs 893.22 billion registered in the previous fiscal year. The consolidated profit after tax (PAT) declined by over 24 per cent, from Rs 92.79 billion in 2016-17 to Rs 70.2 billion in 2017-18. The decline was primarily due to increased expenses on account of employee benefits and executive pay revision. For the first time, CIL also exceeded its planned capex target for 2017-18 and invested around Rs 86.97 billion as against its Rs 85 billion target.
In order to alleviate fuel supply issues in the power sector, a key initiative introduced last year was the auction of fuel linkages under the SHAKTI programme. In the first-ever auction, carried out in September 2017, CIL allocated long-term linkages of 27.8 mt of coal to 10 private power plants with an aggregate capacity of 9,044 MW.
CIL has also been undertaking coordinated efforts with Indian Railways (IR) to increase rail loading from CIL’s own sidings. During April-May 2018, CIL loaded 243 rakes per day, registering an increase of 23 rakes over the corresponding period in the previous year. CIL is also collaborating with IR to undertake the construction of railway lines on a deposit basis in the states of Jharkhand, Odisha and Chhattisgarh. Two such projects became operational in 2017-18: the Tori-Balumath section and the Jharsuguda-Barpali-Sardega section. Besides enhancing dispatches through rail, power stations within 50-60 km of the mines having a fuel supply agreement are being offered coal through road and rail-cum-road modes to be lifted by their own transport.
In addition, CIL has recently launched various apps to improve the customer experience. Uttam, a coal quality monitoring app, allows consumers to monitor the process of third-party sampling of coal across CIL’s subsidiaries. CIL also operates the SEVA app for power utilities, for the quick tracking of coal dispatch, and the Grahak Sadak Koyla Vitaran app for consumers who are supplied coal by road.
CIL has also started working towards the exploration and exploitation of coal bed methane (CBM), following the approval of the Cabinet Committee on Economic Affairs.
A key initiative undertaken by CIL has been the use of eco-friendly surface mining technologies in a big way. In 2017-18, almost 50 per cent of the opencast production came from surface mining as opposed to 46 per cent in 2015-16.
CIL and its subsidiaries are targeting higher capacity mines with heavy mechanisation to take advantage of economies of scale. As many as 26 mega projects (with capacities of more than 10 mt per year) are under implementation and another 13 mega projects are at various stages of palnning and approval.
To augment production from opencast mines, the company is undertaking several initiatives such as the introduction of high capacity equipment. To enhance underground coal production, continuous mining technology is being deployed on a large scale in 10 mines and is already operational in 10 mines, while long wall technology is being proposed at four mines.
Further, manual loading is being phased out and replaced by side discharge loader and load haul dumper loading, manual drilling is being replaced by universal machine drilling, and the haulage transport system is being moved to conveyor systems wherever feasible. The construction of silos with rapid loading systems is being taken up for faster loading. For survey/check measurements, technology like terrestrial laser scanner is also being used.
As part of other sustainable mining practices, water sprinkling systems have been installed for dust suppression. Further, coal transportation is being done using covered trucks conveyors. Massive plantation drives and the reclamation of mined-out areas are also being carried out by CIL. Further, effluent treatment facilities have been installed to tackle mine, workshop and combined heat and power (CHP) effluents such as oil and grease. The requisite infrastructure to store treated water and enable its reuse has also been set up for all major projects.
For 2018-19, CIL is targeting an annual output of 630 mt. Back in 2015, the company had released a roadmap to increase its production to 1 billion tonne (908 mt) by 2020. According to the roadmap, around 165 mt would be contributed by existing projects, 561.5 mt by projects under implementation and around 182 mt by future projects. Regarding its subsidiaries, MCL and SECL were given significant targets of 250 mt and 240 mt respectively.
However, discussions have subsequently taken place between CIL and the coal ministry to recalibrate these targets in view of the tapering demand. In fact, the coal ministry had engaged KPMG as a consultant to assess the future coal demand in the country, and the indications are that the 2020 target may be revised and the timeline relaxed. As per the Coal Vision 2030, the draft document prepared by KPMG this year, coal demand is estimated to be 900-1,000 million tonnes per annum (mtpa) by 2020, and could rise to 1,300-1,900 mtpa by 2030.
In a major boost for CIL last year, the coal ministry allotted 11 coal mines to the company (with a view to make all of its subsidiaries 100 mt capacity units). These are expected to add 225 mt to the company’s annual production capacity by 2022.
Apart from augmenting coal production, CIL is reportedly considering a foray into power generation. The company is planning to set up a 1,600 MW thermal power plant in a 51:49 joint venture (JV) with NTPC Limited in Sundergarh, Odisha. The project would be executed by MCL. Another project may be set up in a JV mode by CCL in Bokaro, Jharkhand, for which the capacity is yet to be decided.
CIL is actively expanding its renewable energy project portfolio as well. Last year, the Solar Energy Corporation of India (SECI) on behalf of CIL issued a tender for engineering, procurement and construction (EPC) services for two 100 MW solar photovoltaic projects in Madhya Pradesh. Power from the project is proposed to be utilised by CIL subsidiaries NCL and SECL. This is in line with the MoU signed in 2015 with SECI for CIL to install 1 GW of solar power plants across India.
Aside from these, CIL is planning to introduce a new pricing policy for coal, in line with global practices, which is expected to come into effect from July 2018. As per the policy, coal pricing will be based on a per unit gross calorific value of coal instead of the grade policy followed until now. The move would enable an upturn in sales volumes for CIL, as coal prices would be lower under the new mechanism.
Issues and challenges
One of the key issues for the company is technology adoption. According to the draft Coal Vision 2030 document, about 50 per cent of CIL’s total production comes from 15 mines (all opencast) having a total production capacity of 279 mtpa. The remaining 452 mines produce only 274 mtpa, approximately 0.6 mtpa per mine. The company’s operating performance is also lower than that of its global peers. For instance, a similar class of shovels in international mines is operated for 40–50 per cent more hours annually than they are at CIL.
Furthermore, the stripping ratio in India is worsening, leading to an increased cost of production. It is estimated that the weighted average strip ratio for MCL would increase from 0.9 to 1.4 under the 1 billion tonne coal production plan. Similarly, the weighted average strip ratio for NCL is estimated to increase from 2.8 to 4, and for SECL, from 1.2 to 1.9.
A number of CIL mines are also either running in losses or generating low profits. In order to reduce operational expenses, CIL has been planning to shut down unviable mines. Even though attempts have been made to do this previously as well, given the impact of closure on the workforce, CIL has not been able to go ahead with its plans.
Despite these challenges, CIL has come a long way, and its turnaround in production performance has been remarkable. “CIL’s output has increased from 462 mt in 2013-14 to 567 mt in 2017-18. What used to earlier happen in seven to eight years has taken place in four years. This 105 mt increase in production in four years took almost seven years to achieve before 2013-14,” said Piyush Goyal, union coal minister, recently. With its vigorous efforts to increase output, CIL is expected to continue playing a key role in commanding market dynamics.