Hailing from a village in Mithila district of Bihar, Mr N.C. Jha has come a long way to become the Director (Technical) of Coal India Ltd in 2007 and finally assuming the additional charge of Chairman and Managing Director of the company in March 2011.
On January 31 he will retire on superannuation. Mr Jha is credited with the paradigm shift in company's pricing mechanism and the resulting controversy. In a free-wheeling interview to Business Line , just before he retires, Mr Jha shares his side of the story.
Will you be able to achieve the promised production growth in this fiscal?
The target of 440 mt appears tough to scale. However, I am pretty sure that last year's production level will be crossed. As on today we are about 7 mt behind last year's production. I think it would be covered during February and March. The daily production is currently hovering somewhere between 1.45 mt and 1.5 mt. I am expecting it to touch the desired 1.7 mt.
Despite zero production growth your inventory grew by 10 per cent (6.5 mt) to 69.5 mt in 2010-11 indicating lower availability to the consumer than production. Will this year be any different?
As on today we have an inventory of 51 mt as against 53.8 mt during the same period last year. Chances are high that as on March 31, 2012 we may end up with the same level of pit-head stock as in 2010-11. Assuming no change in coal production, it would mean that we will be able to sell whatever is produced in 2011-12. So the net availability to the consumer should increase by 7-8 mt.
But, demand should have grown much higher than the increase in availability.
Right. Demand has grown at a much higher rate. But, when I look at my stock, it went down to the lowest level of approximately 44 mt during this fiscal. So though coal was available it could not be reached to the consumer. In the rainy season road conditions became very bad and coal couldn't be reached to the railway siding. Now in the peak season, availability of wagons has become a problem.
How is the rake (a goods train) availability position now?
It has improved compared to last year. On December 17, we received 202 rakes – the highest during the year. The average daily availability of rakes so far during the month is 185.7 as against 172.1 during the corresponding period last year.
However, when compared to the requirement (210-215 rakes a day), we are still short of nearly 20 rakes a day. In other words, now coal is available but we are unable to reach it to the consumer.
There is a complaint that during the recent move to gross calorific value (GCV) based pricing, CIL has enhanced prices, rather sharply for some grades of coal.
We were mandated to switchover to the internationally accepted, GCV-based price of coal. GCV is a true representative of heat content of coal. In such a mechanism, the price must vary in proportion to the heat content of coal.
If you convert our pre-existing UHV-based prices into GCV (by available calculators) you will find A and B grade coal (over 6,050 kcal a kg GCV) were sold at 26 per cent discount to international price. Whereas the discount was as high as 65 per cent for the C grade (5,597-6,049 kcal a kg).
In other words, had we simply adopted the previous prices, a slip of 1 kcal a kg in heat-value would have cost us Rs 2,000 a tonne (from Rs 3,600 a tonne for B grade to Rs 1,600 for C grade) in prices.
Now, on the one hand you are asking us to move to GCV-based price and at the same time you are asking us to keep the price unchanged. How is that possible?
Naturally we had to remove such sharp fall in prices while adopting the new system. CIL coal is still sold at heavy discounts over global prices. We only stopped the discounts. We also had to ensure that the coal companies should not lose money. Earlier, the same grade of coal fetched varying returns, that could not be continued in the new system.
Overall, there is hardly any change in prices for coal which is going to the power sector (like F grade and below). In fact the new prices have negative implication on companies like ECL.
There is some increase in mid of earlier C, D and E grades. But, it was done to ensure rationality in prices or discounts. We have little quantities to offer in these segments.
Did the forthcoming wage agreement play any role in the price rationalisation?
No, we did not take it into consideration while devising GCV based prices.