ADVERTISEMENT

To look at long term supplies from abroad for imports: Coal India CMD

Zohra Chatterji, Chairperson and Managing Director of Coal India said that the company will have to evolve a new strategy to deal with the PMO decision.

Irate passengers at a closed Kingfisher Airlines counter, Mumbai airport - Source: AP
Irate passengers at a closed Kingfisher Airlines counter, Mumbai airport - Source: AP

While the directive from the Prime Minister’s Office (PMO) to sign the fuel supply agreements (FSAs) with power firms might have come in as a jolt for Coal India, power companies cheered the move which has come in as a huge relief for the sector, which is currently reeling under raw material shortages. 

The PMO has directed Coal India to arrange to meet coal demand in case of shortfall. Also, the company will have to provide coal for 50,000 MW of power capacity and supply around 200 MT coal in the next 3-4 years.

Shares of Coal India were down more than 5 per cent on concerns of falling margins over assured coal supply to power producers on Thursday.


Speaking to NDTV Profit on the PMO decision, Zohra Chatterji, Chairperson and Managing Director of Coal India said that the company will have to evolve a new strategy to deal with the decision.


"We will now need to be efficient with our workforce to ramp up production. We will start looking at long term supplies from abroad for imports. However, we haven’t got any communication from PMO that we will be penalised,” she clarified.
 

Below is the complete interview. Also watch the accompanying video.

The PMO decision comes in as a huge negative for you, what's your understanding of this entire development? 
 
The message from the PMO is very clear and strong that the power sector has to get the coal it requires .We appreciate that this is central for the growth of the economy and Coal India would have to rise to the occasion and evolve a strategy, which it would discuss in its board to fulfill this mandate. So with close monitoring and support of the PMO, I feel confident and hopeful that we will have full support for fast-tracking the decision and projects that impact coal production and evacuation would also be speeded up simultaneously. So, we can expect tangible improvement.
You spoke of new strategies to ramp up production – give us a sense of how you will go about this? 
 
As I said, we will have to discuss this and put it in place in a very short period of time. Before ramping up production, it is better than we improve efficiency in terms of utilization of manpower material and equipment and then track the new project. We also have to meet the requirement of imports.
For imports, will you expedite your search for tie-ups or JVs for long term supplies abroad?
 
This has to be discussed. You would appreciate that there are lot of technicalities involved in it along with the pricing aspect, there is also loading and unloading at the ports, the transportation, etc. So, it has to be carefully sought through. Ideally, we would look for long -term contracts, which would supply coal at a discounted import price.
 There is still no clarity on pricing, will prices go up for power producers? 
 
It is too early to say yes (or not) whether the prices would go up or not. It will depend on the pricing model to be adopted.
But if they do, will you pass on the hikes or will you take a hit?
 
We will have to examine the nature of the contract, which are available to us. How do suppliers respond to it, what are the terms and conditions, considering the quantities involved. If we get a good price, it would be one situation, if not, then another situation.
 
You haven't signed a single fuel supply agreement since 2009 - will you fully commit to the earlier FSAs you had signed or sign fresh ones? 
 
After 2009, some FSAs have been signed. The only thing is that we have not been able to assure 80 per cent quantity so far and anyone who is willing to supply at 50 per cent indigenous coal supply with the 50 per cent trigger level, we have signed FSAs for that. However, we will have to see how much we can improve that situation.
How will this impact your profitability, will you have to divert coal from your E-auctions?
 
We would be able to maintain current levels of E-Auction in terms of quantity. We are looking at the figures.
Can you give us a sense of how many plants you’ll totally have to service with 80 per cent commitment?
 
We are still to get a list of number of plants to be serviced by this. We haven’t got any communication from PMO that we will be penalised. I would not like to comment on this.
The stock has taken a beating; how are you assuring your investors?
 
We will be holding an investor conference to address their concerns.