Coal India announces Rs 1,700 cr performance-linked reward to employees

 State-owned Coal India on Friday said it had declared a performance-linked reward (PLR) of Rs 68,500 per employee to all its non-executive cadre workforce for 2019-20 which would have an estimated financial implication of a little over Rs 1,700 crore.

This is linked to the attendance of the employees during the period, Coal India (CIL) said in statement.

The payment would be made before October 22, it added. “The total estimated financial implication is a little over Rs 1,700 crore on account of the PLR,” it said.

Around 262,000 employees of CIL and its eight subsidiary companies who were on the company's roll in 2019-20 will stand to gain from the PLR.

Coronavirus lockdown: Coal India extends payment deadline till April 21

Aiming to lower the payment burden on its consumers amid the ongoing lockdown, Coal India Limited (CIL) has further extended the time limit for payment of coal booked by its customers, by two more weeks till April 21 from the earlier deadline of April 7.

"We are reaching out to our customers with the most friendly initiatives that we can in this difficult period. The aim is to ease the stress of our customers," a company official said.

The long-pending demand for Deferred Payment Letter of Credit has now been implemented as an additional mode of payment along with Irrevocable Revolving L/C for the coal supplied to power producers, especially independent power plants. This will help cash-strapped power producers avail credit facility through their banks to tackle the liquidity crunch.

Earlier, in view of the lockdown owing to the Covid-19 crisis, the Centre had approved a relief package for the power sector that grants state-owned electricity distribution companies (discoms) a three-month moratorium to make payments for the electricity bought by them from the generating companies (gencos). The payment security amount was also halved for upcoming power purchases.

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Apart from these, late payment penalty has also been waived.

These measures could potentially stress the financial health of gencos. As a concentrated effort, CIL has decided to continue with coal supplies despite payment defaults. According to provisions of contracts signed between gencos and CIL, the power producers make monthly payment for the coal purchase in three installments.

A CIL official said that despite payment defaults, coal supplies to gencos are assured although dues from gencos stand at around Rs. 14,000 crore. CIL has also decided to extended the validity period for lifting of coal under all auctions without any penalty. Earlier, failure to lift the ordered quantity of coal within a stipulated time period attracted forfeiture of earnest money deposit under auction schemes.

“Now, this clause has been done away with till the closure of lock down period to non-regulated sector (non power sector) as well”, the CIL official said.

Coal stocks in the country now stand at 120 million tonnes (mt) with pitheads of CIL heaped high close to 75 mt. The rest 45 MTs of coal stock is at thermal power plants sufficient for 28 days consumption.

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A CIL official said that currently there are no power plants in the country in critical or super critical situation for want of coal.

Power companies importing coal are being encouraged to substitute their requirement of imported coal with domestic coal of CIL by regular monthly allotments.

India's coal stocks breach 100 mt as demand weakens in coronavirus crisis

Coal India officials said the company continues to produce around 2.5 mt of coal daily, but less than 2 mt was dispatched to the power sector in the past 15 days which led stocks to pile up drastically in its pitheads.

While the coal stocks in the Maharatna company peaked to around 60 mt, coal stocks in power plants rose to 41.41 mt – the highest ever inventory level in the country till date.

Despite the overstock situation, coal output had peaked to a new high of 3.17 mt on 20 March 2020 - the highest ever single day production so far - overtaking the 3.14 mt production recorded on 25 March 2020.

Officials estimate that another 4 mt-5 mt of stock will be piled up at the pitheads by the end of the month. Before the Covid-19 outbreak in the country, around 4.5 mt of stocks was getting added every month on the average, however, in March 2020, the net stock addition is expected to be around 11-12 mt.

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“It is happening because of a cascading effect. Lower industrial activity results in lower demand for power which in turn leads to lower coal demand”, a senior Coal India official said.

In fact, during the first 15 days of this month, when the scare around Covid-19 surfaced, electricity consumption stood at 51 billion units (BU) which is 3.6 per cent lower than the demand in the same period in 2019.

According to data from Central Electricity Authority, the coal stock is enough for plants to produce power for 24 days without any supply from Coal India.

Company sources suggested that power demand, until the first week of March had grown on a year-on-year basis, but it started to decline thereafter.

The official suggested that measures to contain the Covid-19 outbreak, included work from home, implying lower power demand from offices as well as schools, colleges, malls, cinema screens, parks and other public places shutting down temporarily.

"Now with the lockdown in place, demand for power is expected to go down further and hence the demand for coal as well”, the official at Coal India said.

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Despite the outbreak, Coal India hasn’t suspended mining operations as it feels production and supply lines of coal needs to be kept open so that power generation remains unaffected and any exigency can be addressed.

According to a Central Coalfields Ltd (CCL-a Coal India subsidiary) official, almost all power plants linked to CCL are directly or indirectly refusing to accept more coal supply.

“The hurdles faced by the company have reached to an unprecedented level, so much so that the power consumers have stopped making payments”, the CCL official said.

On the other hand, Coal India has suspended calculation of its annual stock measurement from April 1 to April 15 after the Centre and several state governments enforced mandatory travel restrictions.

Coal India's fuel supply to power sector drops 9% to 291 MT in April-Nov

The supply of coal by state-owned Coal India to the power sector registered a decline of 8.9 per cent to 291.4 million tonnes in April-November this year.

The world's largest coal miner had supplied 320 million tonnes (MT) of coal in April-November period of the previous fiscal, according to latest government data.

The fuel supply by Coal India (CIL) during the month of November also registered a decline of 9.9 per cent to 38.8 MT, against 43.1 MT in the corresponding month of previous fiscal, the data showed.

Coal dispatch by state-owned Singareni Collieries Company Limited (SCCL) also dropped marginally by 1.7 per cent to 34.4 MT in the April-November period of the ongoing fiscal, against 35 MT in the year-ago period.

The fuel supply by SCCL during the month of November also dropped by 6.1 per cent to 4.6 MT, against 4.9 MT in the corresponding month of previous fiscal.

Stating rain as the 'enemy of the coal sector', a government official had recently blamed extended monsoon for the loss of coal output for a few months from July onwards in the current fiscal.

CIL saw its production decline by 7.7 per cent to 330.4 MT in April-November period, over 358.3 MT in the year-ago period.

The state-owned firm had earlier said that it will produce 750 million tonnes of coal in the next financial year.

The firm will further produce 1 billion tonnes of coal by FY2024, Coal Minister Pralhad Joshi had said.

The the public sector undertaking is currently given the target of producing 660 million tonnes of coal amounting to 82 per cent of the country's coal output.

Joshi had said that with the demand for power rising steeply, there is enough opportunity for both government and private sectors to produce coal without adversely impacting each other.

Coal India allows 10-day credit period to customers for non-power sector

Coal India has decided to allow credit period of 10 days for its customers from the non-regulated sector like steel, cement, aluminium and others who had to pay the full amount upfront before any despatch could be made.

This will, the company believes, not only help Coal India increase its offtake, but it will also address working capital constraints of the consumer firms.

According to a Coal India official, working capital blockage in coal movement by railways had been restraining the consumers’ financial health, which now could be addressed by allowing a credit period.

Earlier, a significant amount of money deposited by non-power sector consumers against coal, despatched by the rail mode, was locked up in the form of an advance and the same could not be utilised by the steel and other non-power companies in subsequent coal purchases.

Under this mechanism, coal consumers from the non-regulated sector (NRS) need to furnish a bank guarantee of the amount of purchase and it has to be replenished from time to time as despatches are made. In this case, an Irrevocable Revolving Letter of Credit will be issued for coal supplies through rail mode under Fuel Supply Agreements (FSA) executed through linkage auctions to the customers and this can be used to avail credit.

“With the introduction of this relaxed norm, NRS customers can breathe easy and this move will help in sustaining their growth as well”, a Coal India official said.

Previously, this facility was available only to the power generating companies which enjoyed a 10-day credit period.

During 2018-19 around 73 million tonnes (mt) of coal was supplied to NRS sector under FSA out of a total coal off-take of 608 mt.

The move comes in the wake of the Maharatna company registering a dip of 7.6 per cent in its total sales volume which some officials attributed to lower demand from the power sector.

In fact, power generation in the country fell by over 12 per cent to 98,887 million units (MU) during October this year primarily owing to the reduction in demand from agricultural activities and cooling requirements in the commercial sector. During October 2018-19, power generation in the country had stood at 1,13,507 MU.

In another step, Independent Power Producers (IPPs) have been allowed Inter-Plant Transfer of Coal which allows them the transfer of coal provided the plant is a wholly-owned subsidiary or wholly owned by the common holding company.

This facility too was earlier confined only to central and state-owned generating companies.

According to a Coal India official, it effectively means that if an IPP entity owns two different plants and has two separate FSAs in place, they can transfer coal from one plant to another plant, owned by them, to improve efficiency in generation and reduce the cost of coal. This would also reduce the transportation cost and take the load off on the railways during peak season.

The transferee plant, however, is required to provide an affidavit to Coal India affirming that the additional coal supply beyond the annual contracted quantity of coal shall only be used for generating power for distribution under long term PPAs with power distribution companies.

Coal India output sinks to 6-yr low in September as monsoons flood mines

Coal India Ltd.’s monthly production dropped to a record low as the heaviest rains in 25 years flooded mines and hindered shipments.

The Kolkata-based state miner produced 30.77 million tons of coal in September, down 24 per cent from a year earlier and the lowest in data back to 2013, according to a stock exchange filing Tuesday. Shipments dropped 20 per cent to 35.18 million tons, the lowest in five years.

The slump in output and shipments at the world’s biggest coal producer is squeezing supplies to customers, including power plants, aluminum smelters and cement companies. Coal inventories at the country’s power plants have declined to a nine-month low, spurring higher imports.

“This year, the monsoon has been unusually long and that has affected output at mines,” said Rupesh Sankhe, an analyst at Elara Securities in Mumbai. “The workers’ strike last month also caused output disruption. The target of 660 million tons production this fiscal looks steep.”

Output at Coal India’s Talcher coalfields in Odisha is yet to return to its full potential, as its Bharatpur mine remains closed since an accident in July, according to Dikken Mehra, spokesman for Mahanadi Coalfields, a unit of Coal India that runs the mine.

One day strike against 100% FDI cripples production in Coal India

The strike in Coal India hit a significant part of the Maharatna company’s daily output of around 1.2 million tonne (mt) of production after five major trade unions called for a one-day strike against the centre’s decision to allow 100 per cent foreign direct investment in coal mining.

Officials at Coal India said that around 30 per cent attendance was registered in the first shift which mainly comprised of executives and officers.

“A significant portion of the workers were on strike and production has been hit. However, we are in the process of estimating the production loss”, a company executive said.

Preliminary estimates suggest that the company might have suffered losses to the tune of 1.1 mt. At the fuel supply agreement sale rate, 1 mt of production translates roughly into Rs. 137 crore in value terms.

“Response to the strike has been overwhelming. Workers have realised that FDI in coal would destroy Coal India and have opposed it whole heartedly”, S.Q. Zama, secretary general of the Congress-backed National Mine Workers’ Federation said.

The largest impact of the strike was felt in Mahanadi Coalfields and South Eastern Coalfields – the two largest subsidiaries of Coal India, followed by Eastern Coalfields and Western Coalfields.

Union leaders believe that allowing 100 per cent FDI in the coal sector would render Coal India uncompetitive and the Maharatna company will lose a major portion of its consumers as well as pricing power.

The workmen are wary that as Coal India loses its consumers, its earnings will be impacted and as a result, it will have an adverse effect on its labour policies.

This fear is also allayed by sector analysts who believe that to render itself competitive, Coal India will eventually control its employee costs which alone account for Rs. 38,000 crore per annum.

The workers are of the view that once foreign mining firms enter the country under a liberalised coal mining regime, the miners are most likely to opt for increased mechanised mining and thus jobs may not be created in the sector although there may be production growth.

On the other hand, Bharatiya Mazdoor Sangh, which is not a signatory with other federations to the one-day strike notice, has decided to observe 5-day ceasework from September 23 till September 27 on the same issue.

Coal India to hire merchant bankers for buying stakes in Australian assets

State-owned Coal India plans to hire merchant bankers to carry out financial due diligence for acquiring equity stakes in identified mines and companies in Australia as part of its plan to meet the growing dry fuel demand in the country.

The company has identified coal assets in Australia for acquiring equity stakes along with offtake rights in an asset or a company, Coal India said in a notice inviting proposals from investment bankers.

"CIL intends to avail the services of internationally reputed merchant banker/investment banker to carry out financial due diligence and render transaction advisory services with respect acquisition of stakes along with offtake rights in a coal asset in Australia held by a company for the purpose for arriving at an enterprise valuation of the company and framing of a non-binding Offer initially and followed by a final and binding offer," the world's largest coal miner said.

"A tender is being floated for engagement of merchant banker/ investment banker for assisting CIL in acquiring coal assets in Australia," it said.

Coal India looks to acquire assets abroad as it expects that domestic production would not be sufficient to meet coking coal and high-grade fuel demand from various sectors. The demand-supply gap in India is high due to enhanced requirements from various sectors, including power and steel.

To meet the projected gap between demand and supply, while the efforts are on to enhance coal production from the indigenous sources, it will not be possible to bridge the entire gap of demand of coking coal and high-grade low ash thermal coal.

"In light of the above background Coal India Ltd...intends to set up coking coal and/or high-grade low ash thermal coal mining business overseas with a view to acquire coal resources, produce coal and import the produces to India by way of either opening new mines or equity participation in working mines on production sharing Participation Interest basis," Coal India said.

Coal India accounts for over 80 per cent of domestic coal output.

The state-run miner produced around 607 million tonnes of coal in 2018-19 against the target of 610 million tonnes (MT).

Coal supplies to the consuming sectors rose by 4.8 per cent to touch a new high at 608 MTs in 2018-19 but lower than the target of 610 MT.

India's coal import increased by 8.8 per cent to 233.56 million tonnes in 2018-19, according to a report. Non-coking coal imports were at 164.21 MT in 2018-19, about 13.25 per cent increase over 144.99 MT recorded in 2017-18. Coking coal import was almost flat at 47.73 MT last fiscal compared to 47.22 MT in 2017-18.

Coal India is targeting more than 8 per cent growth in production at 660 million tonnes in 2019-20. PTI SID MR