Coal India buys peace with ministry, settles for 7% e-auction

Coal India Ltd (CIL) has agreed to keep its e-auction sales at 7% of its total sales from 12% done in FY14 following a backlash from the ministry. The company is also on the verge of settling a dispute with NTPC, which had sparked a controversy alleging that the former over-charged it for supplying poor quality coal.

Out of total sales of 471.58 million tonnes (MT) of off-take in the previous financial year, a total of 58 MT of coal or 12.29% was sold by Coal India through e-auctions.

Coal and power minister Piyush Goyal recently asked it to cut its sale by half or to 25 million tonnes this year to make more coal available for the fuel- starved power sector.

Both the parties have agreed to a settlement for 7% of total sales through e-auction.

"It is a compliance of a 2010-11 order that said e-auction has to be brought down to 7%. For the past 2-3 years it wasn't reduced and we will now comply with it," Coal India chairman A K Dubey told reporters after the annual general meeting of the company.

Coal India has also settled its dispute with its biggest customer NTPC over poor quality of coal supplied and billed for, which almost turned nasty with the latter requesting the government to appoint an arbitrator.

"The dispute was over the difference between the price booked and the price of actual grade of coal supplied. Reconciliation is going on. Only subsidiary Central Coalfields (CCL) is left among the three subsidiaries. It's being negotiated across the table between our concerned subsidiary and NTPC. (The money payable by) CCL is about Rs 124 crore and the rest about Rs 600 crore," financial director A Chatterjee said.

The annual general meeting was held in the backdrop of the resignations of three independent directors raising questions over the quality of the board and its independence.

"The resignations were a personal decision. They have resigned and its their call. There is a set procedure (for filling up the vacancies)," chairman said.

Dubey, an additional secretary in the coal ministry, who is now doubling up as the chairman, was asked about the impact on Coal India on possible cancellation of mines by the Supreme Court, a judgement which is likely to be delivered on September 27.

"Court has reserved its judgement and we must wait. Only thing I would say is that the court has very elaborately considered the issue," he said.

On production, Dubey said the government has recently given clearances on a fast- track basis for expanding existing mines which will help Coal India raise output by 10-20 million tonnes.

"There would be incremental production from existing mines and this will hold us in good stead. To raise output from our existing mines we need clearances afresh and in that the environment ministry has permitted us on certain considerations. Incremental production would be 10-20 million tonnes for which clearances have been received."

Factors like delay in getting statutory clearances, heavy monsoon and cyclones are "not being flagged off as mere excuses for trailing behind the target but they persistently plagued us" (during FY14), Dubey told shareholders.

On Coal India's effort to involve private sector in mining through Public Private Partnership model, he said the Model Contract Agreement is in the final stage of approval by the board.

An on date, Coal India has 148 ongoing projects with ultimate capacity of 484.06 million tonnes with a capital outlay of Rs 39,821.50 crore. Of these, 95 projects have received both environment and forest clearances.

Green nods are awaited for 4 projects, forestry approvals for 27 projects and for balance 22 projects, both forestry and environmental clearances are awaited, the chairman said.

During FY14, these projects contributed 239.97 MT and the envisaged contribution from 134 ongoing projects during FY17 is 335.93 MT.

At present Coal India operates 17 washeries with a capacity of 39.4 million tonnes. It has initiated action through global tenders to establish 16 washeries with a capacity of 100.6 million tonnes.

"Construction jobs for three was here's are in progress while contact for two have been awarded. Jobs of other washeries are at various stages of evaluation," Dubey said at the AGM.