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Hope to clock 560MT coal production in FY16: Anil Swarup

Coal India , the world's biggest coal miner, is targeting a 20 percent rise has seen a 12.4 percent growth year-on-year and this growth will be sustained in the days to come, says Coal Secretary Anil Swarup.

In an exclusive interview to CNBC-TV18, Swarup said the surge in production is due to intensive engagement with state governments and adds that the company is now targeting a total of 560 MT coal production in FY16. According to the Ministry of Power, in July, coal stock at power plants stood at 30,457 thousand tonnes versus 12,374 thousand tonnes a year ago. This increase helped restore the normative inventory levels at power plants. The coal-based power plants’ consumption, however, remained unchanged at 219 MT on a year-on-year basis. This lack of demand, Swarup says is a temporary phenomenon and the surge in production will aid bring down the high imports seen in the past. The import volume growth in April-June period was at the lowest level in nearly a year as Coal India ramped up its supplies. This is significant as higher production will directly result in gradual lowering of imports.

 Below is the edited transcript of Anil Swarup’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

 Latha: Coal output in the country is rising at 8 percent and we have never seen that kind of output rise in the past 10 years, ever since at least we have started tracking Coal India as a listed stock. Is this likely to be bettered in the remaining part of the year? Will we reach double digits?

A: Coal India in the first quarter has more than 12 percent growth over the previous year and this is over the record growth last year which was 32 million tonne more than the cumulative growth in previous four years. There are good reasons why this production has increased and it is on account of those reasons that one believes that this would be sustained. Coal India acquired more than 2,000 hectares of land last year. They have got 41 environment clearances and as a consequence of these clearances and acquisitions of land and the effort that has been put in by the people in Coal India the production has gone up consequent to which most of the power plants are in a very comfortable position today. Most of them have more than 20 days of coal.

Latha: Give us an idea of how output might pan out for the remaining part for FY16? Will 12 is what we have to stick with for Coal India? I was referring to national output which on a month wise basis stand at 8 percent however, in Coal India is 12 the number that we have to work with for the reaming part of the year or would it be even better?
 
A: It could be even better. We have targeted for 550 million tonne this year. Out hope is that we should hit 560 million tonne the way we are going. 550 million tonne is about 11.50 percent more than previous year. You are talking 12.3 percent and if we grow at that rate we should hit 560 million tonne.

Sonia: So 560 million tonne what would that mean in terms of a monthly run rate and what been leading to such a good growth that you have seen as far as coal production is concerned?

A: This would mean about 12 percent growth over the previous year and since we have clocked that in the first three months there is no reason not to believe it wouldn’t be that in the coming months. What has happened in the past 10-12 months is the intensive engagement that we have had with the state governments. You will understand that most of the coal mining activity happens in the states and we have been engaging very intensively with the state governments and we have got maximum cooperation from them. States like Chhattisgarh, Jharkhand, Odisha all have been extremely cooperative and that is the reason so much land has been acquired; that is the reason environment and forest clearance have come through. We are opening a new mine very month and expanding the existing mines. The whole mood is quite upbeat in terms of getting things moving. Probably that has made the difference in terms of increase in coal production and we do believe that this will be sustained over the next few months and few years.

Latha: What we now understand is that the absorptive capacity of power plants has reached its limit. If you were to do even better than this there is no absorption capacity, the normal inventory level of 20 days inventory has already been reached. If you were to get it to even higher than that then you will actually be producing coal which the power plants are unable to absorb. You see that situation panning out?

A: There are periods in a particular year when the demand gets low. It doesn’t mean that demand is going to be low. Even today despite this high production we are unable to fulfill the entire requirement of power plants, our commitment. So there is still, we are short of the entire demand. The lack of demand at this point in time is a very temporary phenomenon. Imagine last year India imported more than 200 million tonne which means that there was a demand-supply gap. If you are able to plug that and bring down the imports that will be a big deal and that is what we are aiming at that there is indeed demand for it. As far as the power plants are concerned the demand will certainly pick up as manufacturing picks up, as demand in the agriculture sector picks up this demand is going to go up. Let us not go by the temporary lack of demand in the power sector at this point in time. A lot of good effort is being put in by the power ministry to see if there are any problems, at that end it is sorted out. They are engaging with the state governments in terms of getting this state electricity boards (SEBs) going. So there is no shortage of demand for power. There is a bit of a problem in purchasing power at the end of SEBs in terms of buying power. That has been taken care of by the power ministry. Next 2-3 months we will see a change there so we cannot rest on our laurels and say that supply has gone up. In fact we have got to do much more and get more supply going, this is just a beginning.

 Latha: On the contrary, the power companies as well as the discoms, we have spoken to at least 4 or 5 very large power distribution companies nobody is asking for a PPA. All we got was one minor PPA from Andhra Pradesh in the last one year or so. The amount of power that has come into the system is about 20,000 megawatts and the PPA signed over the last three years are only 8,500 megawatts. There is a genuine problem of over-supply vis-a-vis the current ability of discoms to buy power. That is precisely why I am telling you that if you produce more coal, there may not be takers.

A: You were asking me a very different question six months ago. So, if we do not produce coal, you ask me a question, if I do produce coal, you ask me another question. I would suggest that you ask this question... (interrupted)

 Latha: I told you we are reaching a situation.

 A: Please try and understand. Why do you not get to the power secretary and ask him these questions. My hope is that the power will improve. You live by hope. I cannot say that there is no power, so I should stop coal production. Would you suggest me to do that?

Sonia: Has the situation of rake availability improved? I mean when you spoke with us last you said that 230 odd rakes are supposed to be available currently and you are looking at another 200 odd rakes. Can you tell us what is the rake availability per day is? How much was it in the June quarter and how much of things improved?

A: There has been a dramatic improvement in terms of availability of rake. Last year we had around 190 odd rakes. This year on an average we are doing more than 200 rakes. More than 10-12 rakes are already become available. Coal India has already placed an order for supply of another 34 rakes as soon as possible. We are looking at in all 200 rakes in the next 4-5 years because we believe as the coal production gets ramped up we will require additional rakes to transport them. We work it out in the manner in which the coal production is going to go up in the coming years. Right now we have around 200 odd rakes coming from railways. To double the production from the existing levels of 494 million tonne to a billion tonne we will require to double the capacity of rakes as well. That is what we have planned. Fundamental, primary decision has been taken in terms of procuring rakes. Order as I said for 34 rakes has already been placed and as we go along we will place more orders for rakes.

Latha: The reason why I brought the power angle in was primarily because power companies at the moment are in a very weak state. Those that are producing power, do not find enough buyers and there are people sitting with capacity and unable to generate because they have committed to buy coal at a certain price and they may not be allowed to pass it on. I meant those who did the reverse bidding. Is there any rethink on that?

 A: Let me explain the whole thing to you. As far as the reverse bidding part is concerned, there is absolutely no rethink on that. We were very clear, we still are very clear, we will continue to be clear that the tender document was absolutely clear that there was no question of going back. But, coming to the question as far as the demand for power is concerned, I agree with you that at this point in time, there are no PPAs coming. Let us understand why they are not coming. They are not coming because of the financial health of most of the state electricity boards (SEB). Now, I understand that I have been part of some these discussions. The power ministry is engaging with the state governments very intensively to see how this demand could go up. Now, a similar question was asked of coal ministry about 10 months ago when nothing was moving in the coal ministry. We managed to move that. I am sure we will be able to manage the power sector as well to get the state electricity board in a better financial position where they could be in a position to demand more power. Now, you will appreciate the fact that there is indeed demand for power. It is not the demand that is missing. It is the purchasing power of the SEBs that is the problem because there are still areas where there is no supply 24/7 which the government is attempting at this point in time. And hence it is important to rejuvenate these SEBs and it is at that objective that the power ministry is engaging very intensively with the state government. A clear detailed paper is being made out, discussions are underway, you have to believe us, you did not believe us 10 months ago when I talked to you about coal. Please believe us about power as well. The power secretary is engaging that discussion. It is being discussed at the highest level. And the government is extremely concerned about the financial health of the SEBs and they are engaging with them and we are very hopeful that like in case of coal sector, power sector will also revive and there will be a revival of demand.

 Latha: Reverse bid coal, a lot of power companies are now worried that if they have to supply, not be able to pass on any coal price to the power discoms when they sell power then their finances get rocky even more. Is there any re-think on that condition that you all are putting?

 A: Can I ask you a counter question? You used a term lot, lot of companies what is this number?

 Latha: Almost all the power companies, there are hardly any healthy power companies.

 A: There are more than 60 power companies in the country which are producing power. When you say lot they have to be more than 30. How many power companies bid for the reverse power? They are only nine; nine out of 60. Let me tell you very clearly I have been stating that on your channel very clearly, that we were very clear in what we were saying. In each of the interviews that you took of mine I stated very clearly what is the objective of reverse bidding. Now if someone wants to deliberately dig its grave and jump in to it what can the government do about it? You keep asking me this question in every interview. If they did whatever they did with their eyes wide open. If they did, whatever they did with their eyes wide open they have to suffer what can government do about it. Government cannot be asked questions about everything. If you were not clear, everyone was clear. You please look at the previous interviews you took of me I very clearly said that the whole objective of reverse bidding was to bring the tariff down. I had also explained how it will come down. Now by simple understanding of economics and English language what exactly was I saying? How can you smuggle the whole cost into a fixed cost? Can you? Please ask anybody. If you ask the interested party obviously the interested party will say, no, some injustice has been done to us we were not clear. They were not clear we were absolutely clear.

Latha: I am just getting that on board that you are not going to change you stand on that.

A: Absolutely not.

Sonia: Let us move on and talk about, before we go across to issues like coal linkages, etc. just wanted to come back to that point you made about the 12 percent growth in production that you are looking at and you have given us a figure of 560 million tonnes. But what about dispatch because finally it boils down to how much the dispatch growth will be? In the month of June, it was just about eight odd percent, how much higher can we expect going forward?

A: As I said, though the number of rakes has improved, there would be requirement of more rakes and that is why we have ordered rakes and that is how we are going to move more coal. So, once these additional 34 rakes come which should come in another 5-6 months, again the dispatch will also improve.

Sonia: One more question on the auctioning of coal linkages. Has there been anything finalised on that? The last we heard that there was some representatives from Coal India who were not in favour to it and there was some legal issues that cropped up. But, in terms of a timeline, can we expect things to flow through?

 A: Let me explain this to you. For any proposition that you make whether in the public or the private domain, there would obviously be some people who would not be very happy with it, especially those that have benefitted from the existing regime would obviously not want it to be changed, that is okay. We have taken them on record. Now, let me explain this to you. For the regulated sector, we have opened two fresh windows of e-auction. This is not auction of linkages this five million tonnes for such entities that have medium-term and long-term PPA and it will restricted auction amongst those entities so that more coal becomes available to them. The second window is for such entities which do not have PPA because we want them also to access coal and this again will be limited bidding for such entities which do not have PPA. The idea here, as we have more and more coal becoming available, we should make coal available to such entities who do not have a fuel supply agreement (FSA) or who do not have a linkage. So, that is one. As far as the unregulated sector is concerned, there are two parts to it; one were such unregulated linkages that were for such entities that had got block earlier and got cancelled. Their linkages were tapered and these supplies will cease by September 30. However, we will see to it that we earmark coal for e-auction for such entities that had a block earlier and that block was cancelled. Now, coming to the last point of e-auction of linkages for unregulated sector in general. We had floated a paper, we have got certain responses, we have examined them and maybe in 15 days time, we will come up with a policy and announce what is the next line of action on that.

 Latha: Just a point of detail, as the captive mines which were auctioned, starts producing is it likely that the amount of auctioned or market linked Coal India quantum will increase?

A: I couldn’t get your question, can you come again.

Latha: If more of the companies start using captive mines which have now been auctioned and are available to them is it possible that Coal India will have excess over their FSA commitments and therefore, at the moment they have auctioned 10 percent will they be able to increase that auction amount?

A: You look at what we are doing already; we already have an e-auction 10 percent laid on that.

Latha: Will that amount increase is what I am asking?

A: We have already created two windows of 5 million tonne each over and above that. As more and more coal becomes available our first option will be to fulfill our commitment with regards to FSA and whatever additional coal is available will be put on auction.

Latha: So you think that this year it could be 20 percent or may be in the next 12 months?

A: Frankly speaking I don’t believe in numbers. We are going through a process. You will see the numbers for yourself.

 Latha: The other policy decision that was taken is that commercial mining will be allowed in course of time. Is there any time table, any procedures that we should start expecting?

A: As I had said during my last chat with your channel. We are going step by step. There was a workshop organised by Federation of Indian Chambers of Commerce and Industry (FICCI), they are working on that document consequent to the suggestions that emerged during the workshop. Once they submit the paper, we will look at it, we are working towards it, but we do not want to jump into it because there are a number of nuances that have to be understood before we actually start going for commercial mining.

Sonia: You were telling us that 2,000 hectares of land has been acquired by Coal India. So on that front, there is quite a bit of work that has been done. In the next, say 6-12 months, in terms of land clearances and the evacuation infrastructure, how much more developments or progress can we expect?

 A: As I have been repeatedly saying that we believe in putting in lace processes. What is the ultimate outcome, you have seen in the past. We have refused to divulge numbers per se because we do not believe in such targets and numbers. We believe in processes. We have put processes in place where land acquisition will continue to happen. I mean the classic example is those three railway lines that had been pending for so many years; they have got moving. And now we are fairly convinced that we are going to have these three railway lines by December, 2017. Why and how did this happen? Because we put in place processes where land acquisition has started happening. Land is getting transferred to railways for construction. Similarly, clearances are coming through. So, we are totally focused on processes. The actual numbers you will get to know yourself, do not worry about it. We will review them as and when they come. But it is difficult for me to give you a number by this date, so much land will be acquired, by this date, so much environment clearance will happen. No, we do not do that way, we do it in a manner that we go through the process, we push these processes and numbers are there for you to see.

 Latha: Just give us a broad ballpark in terms of the time for commercial mining. Should we expect that auctions for that could start in the current financial year?

A: We are trying to see if it could happen within this current financial year. I can't say for sure it will happen by then. We are moving in that direction.

 Latha: You usually achieve your targets so I want to know what are your targets.

 A: That is why I don't mention them to you.

Latha: Even if it is a hope that commercial mining can start in FY16 that will be something very positive for the policy landscape which is why I am asking you? You are hopeful it is FY16?

A: We are moving in that direction.

source: http://www.moneycontrol.com