CIL mines have not halted production; demand weak: Swarup

Contrary to news reports, Coal India has not stopped production at any mine even though production has been cut back in the wake of low offtake, Coal Secretary Anil Swarup today confirmed to CNBC-TV18.
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Mar 05, 2016, 08.38 AM | Source: CNBC-TV18

CIL mines have not halted production; demand weak: Swarup

Contrary to news reports, Coal India has not stopped production at any mine even though production has been cut back in the wake of low offtake, Coal Secretary Anil Swarup today confirmed to CNBC-TV18.

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CIL mines have not halted production; demand weak: Swarup

Contrary to news reports, Coal India has not stopped production at any mine even though production has been cut back in the wake of low offtake, Coal Secretary Anil Swarup today confirmed to CNBC-TV18.

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Contrary to news reports, Coal India has not stopped production at any mine even though production has been cut back in the wake of low offtake, Coal Secretary Anil Swarup today confirmed to CNBC-TV18.

In an exclusive interview, Swarup said the state-run mining monopoly is gradually increasing its production and added that he expects it to grow dispatch by 9-9.5 percent interview in FY16.

He added that weak demand is likely to pick pick up in another three to four months.

"[The central government's] UDAY scheme will play an important role in reviving demand for ailing power distribution companies," he said. "Once discoms undergo debt restructuring, their financial position is bound to improve." 
The other positive is the govertment’s promise of investments in infrastructure sector. This will help demand revival in cement and steel sectors, he said.

Below is the verbatim transcript of Anil Swarup's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: After a fairly superb 2015, I February Coal India had to shut output for sometime because of want of demand, is that report correct?

A: I don’t think it is correct to say Coal India shut output. In a couple of buyings, where accumulation had grown beyond a certain level some production was brought down but generally the production is going up, every day you have an increase in production.

This year we are growing at the rate of 9.2 percent of the previous year. So it would be wrong to say that the production has been cut down or it has been stopped.

Latha: Year-to-date (YTD) production or growth is not at all in doubt as you say, 9.2 percent. I am only asking if in the month of February, you are noticing increasing instances of demand strike, power companies not taking coal as much as they used to?

A: No, they are taking coal more than what they did last year. The problem is that the coal production has gone beyond what their requirement was at this point in time.

As you understand that the absorption capacity of the distribution companies (DISCOMs) in terms of buying power has gone down because of their financial position. We are very hopeful that the way UDAY is kicking in, they would be in a position to demand power.

Basically, there is a demand for power at the end level. However, the intimidation happened through DISCOMs who are in a very bad shape at least some of them. That is where UDAY is playing a very important role and it won\\'t be very long before that demand picks up.

So, it is a very temporary phase in terms maybe a few days that in some of the mines, production may not be increased to the levels that we would want to but to say generally that the production has been cut down is not painting the correct picture.

Sonia: Give us your expectations for the month of March and April because in February, the production increased only 6.3 percent because of the reasons you alluded to versus about 13.5 percent in January and about 11 percent in December? So in March and April what do you think the production could be, the growth?

A: When you say 13.8 percent in January, you have to look at the January production in 2015. Percentage growth is on the basis of what happens during the previous year. If you would recall last year in January there was a strike. So the production had collapsed that month.

So month-on-month it appears that it has grown. So we should not look at each month's production per se. What I would say is that we should grow anywhere between 9 percent and 9.5 percent this year.

Sonia: Let me take some absolute numbers then. For FY16, the targeted production that the ministry had laid out was 550 million tonnes and I think till February you have done about 86 percent of your target at about 477 million tonne. What is the end FY16 target? Will you meet what you have targeted for the start of the year?

A: As per the existing trends, we would believe we should be anywhere between 535 million and 540 million tonnes. That is what we are looking at right now.

Latha: Since you said that there is a dullness in the demand from DISCOMs, are you looking at new buyers for the coal?

A: As I said, this is an absolutely temporary phenomenon. Let us look at two major developments that has happened in the recent past. One is in the context of the way UDAY is going so we would believe that once the debt gets restructured, there would be demand from the DISCOMs and the demand will grow.

The second is the announcement made by the Finance Minister in the Budget speech with regard to investments in the infrastructure sector. So if the road and other such sectors pickup, there will be increased demand for cement.

If you look at the growth of cement this year, it has been around 3 percent. Steel has been in the negative, so that being the case, if the infrastructure sector picks up which it should given the thrust that has been provided by Budget, in the steel, cement as well as the power sector, we foresee an increase in demand and we have to be prepared for that.

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