Coal India needs urgent increase in prices as subsidiaries gasp for survival: Chairman

Coal India Ltd could bump up production in 2021-22 despite challenges but needs to increase prices urgently, said chairman Pramod Agrawal.

The company faced an uphill task to scale up production and dispatch coal amid disruptions due to the pandemic and heavy rains in the fiscal as demand picked up. And no price hikes in the face of rising costs has pressured the firm which has huge receivables pending.

“Price hike should take place immediately; it has become very urgent for Coal India. For certain subsidiaries, it has become so important that without that it will be difficult for them to survive,” Agrawal told investors on Thursday.

This comes as shares of Coal India rose nearly 3 percent intraday on February 18 after analysts pointed to likely improvement in profitability in March quarter due to surging e-auction premiums.

Coal India remains under pressure to increase output as Indian utilities face a severe shortage in the second half of 2021, leading to outages. 

The state-run coal major had set a target of Rs 17,000 crore for capex in the current fiscal. While it is scaling up production, it has been unable to increase prices as it requires renegotiating long-term contracts which will require approvals from all stakeholders and support from the government.

The company is also under pressure from trade unions that have demanded a 50% increase in wages which will also spike expenses for the firm.

“We had the third round of wage negotiations yesterday; I don't see it concluding in the next three-four months. But we are definitely trying to conclude it by the end of FY23,” Agrawal said.

Although the firm has been able to recover dues, outstanding net receivables continue to remain high. 

“Receivables are constantly going down. On January 31, they were at Rs 13,000 crore and on December 31 Rs 15,000 crore. I think we should get back to that stage at which we were in March. Some state governments have requested us to bear with them till end-March after which they will clear the payments; we are quite hopeful that this will bring receivables in the range of minus Rs 10,000 core by the end of March,” Agrawal said.

In a seaport statement on Friday, Coal India said that in FY22 the company has dispatched more than the quantity clocked for the whole FY21. It has supplied 575 million tonnes (mt) of coal during FY22, as against 574.5 mt in FY21.

“The 9.4% growth rate in power generation till December FY22 was the highest in a decade on the back of a strong post-COVID economic revival. Coal imports are down to a nine year low due to a sharp increase in international coal prices. This put the onus on the firm to step in with increased supplies to ensure uninterrupted power generation which it did,” the company said.

Coal India aims to scale up supplies to the regulated power sector to 548 mt for year ending 2021-22 as per projection of the central electricity authority. This would mean an increase of 103 mt in power sector dispatch over FY21. 

Average dispatch to the non-power sector has been 3.32 lakh tonnes per day so far in the current fiscal, in line with normal average. The firm said that it is confident of meeting the demand of the non-power sector on the back of a sufficient buffer stock.