There is a “strong case” for increasing coal prices, which has remained rather stagnant over the last five years, and Coal India Ltd (CIL) is in talks with stakeholders for the same. According to Pramod Agrawal, Chairman, CIL, the recent round of wage negotiations that have happened is likely to have an impact on the company’s financial condition and there is a need for increasing coal prices.
“There is a strong case for increasing coal prices, as that has not happened in the last five years. This year, the wage negotiation has taken place as well, which will have an impact on CIL’s financial condition, especially for a few subsidiaries where the manpower cost is very high…..There will be a lot of problems if prices are not hiked. Discussions are underway with stakeholders... It will happen very soon,” Agrawal said at the Indian Coal Markets Conference organised by Mjunction here on Monday.
Breaking the stalemate on wage negotiations, CIL and the four central trade unions BMS, HMS, AITUC and CITU, had, in January this year, inked an MoU recommending 19 per cent Minimum Guaranteed Benefit (MGB) to its 2.38 lakh non-executive employees as part of the ongoing National Coal Wage Agreement –XI (NCWA-XI). MGB of 19 per cent is on the emoluments as of June 30, 2021 which includes basic pay, variable dearness allowance, special dearness allowance and attendance bonus. The actual impact of the wage agreement is yet to be worked out, industry sources said.
Coal prices were last revised in January 2018, and since then there has been a significant surge in input cost, particularly diesel and explosives. The representative prices of different grades of coal based on January 2023 were ₹13,329 a tonne for G1, ₹7,860 a tonne for G2, ₹7,586 a tonne for G3, ₹7,933 a tonne for G4 and ₹7,640 a tonne for G5.
It is to be noted that CIL registered a nearly 69 per cent rise in net profit for the quarter ended December 31, 2022, on the back of higher realisation, particularly from sale under the e-auction platform. The steep rise in profit came on the back of higher add-on over the notified price in e-auction sale of 14.65 million tonnes (mt) of coal during the quarter under review.
Rising demand and increasing production
Amid talks of a possible surge in power demand, Agrawal said that CIL and other coal miners are in a position to “take care” of the power demand.
“As far as India is concerned the energy demand is likely to increase though it may not be like the way it increased last year. This is because the per capita consumption of energy is very low and accounts for one-third of the world average and one-fifth of Chinese average and we cannot continue to live in that kind of an environment for long. Even if we presume we will double our economy by 2030, our energy consumption will increase by 70 per cent and if we take all options I do not see coal witnessing any decline….. So requirement of coal will be high and if the question is whether CIL, government-owned and private miners can meet the demand, then I would say yes,” he said.
CIL, which has been growing at around 12-13 per cent so far this fiscal, expects to maintain the growth momentum moving forward and is confident of achieving the production target of 1 billion tonnes by 2025-26, Agrawal said.
The company is aiming to raise underground coal production to 100 million tonnes by 2030 from around 25-30 million tonnes at present.
“CIL is working on increasing production and productivity and so are other miners. We expect the non-coking coal demand to be met through domestic sources. In the last one or two decades underground mining was largely ignored but now CIL has taken up a task to increase underground mining as it is much cleaner and also offers better quality,” he said.
According to Coal Secretary Amrit Lal Meena, since the economy is growing there is a huge requirement for power. Though focus is on increasing the share of renewable energy, the dependence on coal currently is enormous and in a growing economy like India it will continue to be there, he said while speaking virtually at the conference.
Coal Ministry, he said, is working on balancing coal production so as to ensure not just the power sector, but all other sectors have adequate supply of coal moving forward. “CIL, SCCL and other captive and commercial miners are taking enough measures (to increase production),” he said.
The share of captive and commercial mines is likely to contribute to close to 15 per cent of overall production, he added.