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Coal India Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Results Call of Coal India hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.I would now like to hand the conference over to Mr. Vishal Chandak of Emkay Global. Thank you, and over to you.
Ayesha, thank you very much. Ladies and gentlemen, welcome to the Q1 FY '21 earnings call for Coal India. It is a pleasure to host Shri Pramod Agrarval, Chairman and Managing Director of Coal India, for this call. Sir, thank you very much. And I would -- before much ado, I would hand over the call to Shri Pramodji for his opening remarks, which would be followed by a Q&A. Over to you, sir.
Thank you, Vishal, for hosting the con-call. I was expecting that in this month, at least, I would be able to travel to Mumbai and to meet all of you physically, but then this COVID situation doesn't look like improving, but I wish that after third quarter, we should meet and meet physically so that, there is more -- means, more prudent interaction with all the investors.Q1 was rather tough in the country. As we know that from 20th March onwards, things have started deteriorating. And from 21st March in West Bengal and many other areas of the country, local lockdowns were declared and local curfew were declared. On 22nd, there was Janta Curfew and from 25th onwards general clampdown was declared and general lockdown was declared. So our dispatches started getting affected from the last week of March, but then in April-May, it was severely affected.Cumulatively, overall, in first quarter, our dispatches were reduced by 22%. But if we take -- compare it with the degrowth in the GDP, GDP was also down by 23.9%, and power demand also reduced by somewhere near 20% -- 25%. Coal-based power reduced by 25%. So naturally, the demand of coal also reduced by 22%. Though our production did not reduce that much, and our production reduced only by 11.67%. This was mainly because we were carrying a large stock of about 75 million tonnes. So we were trying that the coal stocks should not increase any further because that leads to deterioration of the quality of the coal and that has got negative impact otherwise also because there is likelihood of local oxidization and catching of fire by the coal. And it has happened in the small places, 1 or 2 places, small places, not in a larger manner, but then there was risk of coal catching fire. Hence, we tried to keep our production subdued. But our OB removal increased by about 11%. So overall excavation even in first quarter was up by 5%.Situation has started improving in July. But unfortunately, in July, we faced a general strike of 3 days. And because of that, our production and offtake slightly suffered. And in July, the production was down by just 3.9%, and offtake was down by 6%. This trend completely reversed in August, and our production started increasing at the rate of 7% and offtake also improved by 9%.In August, OB removal increased by about 36%. And overall, if we see from January to August, the overall excavation has increased by 11% because our OB removal has been substantial. And this will help us to ramp up our production in coming months.I am quite hopeful that all the demand of the coal of the country will be -- to a large extent will be met by Coal India. And our production will definitely increase in coming months, and we will see a very positive turnaround -- positive results in the third quarter because the demand the way it has increased in August and September, the way it is -- again, in the last 2, 3 days, the demand has increased. So I'm quite hopeful the results will be much better.Because of all this thing, our profit was reduced from -- PBT reduced from about INR 6,000 crore to INR 2,800 crore, and PAT reduced by (sic) [ to ] INR 2,077 crore. Thus, in PAT, there was a decrease of about 55%. But I'm happy to note that our cost per tonne reduced from INR 1,393 per tonne to INR 1,360 per tonne. This 3% reduction, despite the fact we paid all the contractual labor, despite the fact that we didn't reduce the salary of our general workers. So we borne all the expenditures, but at the -- and the production was less, yet the cost of production per tonne reduced substantially, that indicates that our cost-controlling measures were slightly effective.We further try -- we will further try to improve our costing so that profitability can be increased. In this regard, we have already taken a decision that about 23 mines, we have instructed that these mines, which are very unproductive and where the cost of production is very high, should be closed down. And I hope if these mines are effectively closed, even if we see the labor and all their due without asking them to work, you will save something like INR 500 crore to INR 600 crore. But net impact will be much bigger because many of these labors will be transferred to places where they are required instead of continuing at the same places. So something like that, we will keep on doing so that -- similarly, we have closed down 3 -- we have instructed that 3 watchlists which are very unproductive and which are very old, should be closed on in coming months. We are in the process. So the impact will finally be available in the next quarter.So that is the physical and financial achievements. Besides that, last time, I had indicated that by September end, our 35 FMC projects will be tendered out. I'm happy to inform you that out of the 35, 31 -- 32 have already been tendered out, and the other 3, as I have promised that by September end, they will be tendered out, so they will -- sorry, they will put to tender. So they will also be put to tender. One will be done another 2, 3 days. And the rest -- I will try that next 2 are also put to tender in next 15 days. Besides, we have identified 14 more projects on phase 2, and they will be put to tender in due course of time.We have prepared time lines for this project. And all these projects will be completed by '23, '24, and this will help us in meeting a lot of -- to increase the efficiency of our production in evacuation; and secondly, in reducing the -- whatever environment pollution, et cetera, are created and whatever criticism that Coal India is facing will be reduced substantially.Today, the mechanized evacuation is done only of 150 million tonnes, but if all these projects are completed, we will reach -- the mechanized evacuation level will reach to 650 million tonnes, and which will be a very quantum jump. This will be one of the most effective and fruitful investment that Coal India has made.We have identified 21 railway lines, which will cost INR 3,515 crore. And these lines will be completed in a time-bound manner in next 5 years. We are planning that most of this would be tendered out in next 6, 7 months.We have always been talking about the rail projects. We are closely monitoring those rail projects and Tori-Shivpuri line that third line has been sanctioned by DPR, with estimate of INR 894 crore under the approval of CCL. Once it is approved by the Board, the project -- for treatment of this project will start. Jharsuguda-Barpali-Sardega line, the DPR is under preparation by the Railways. And once -- I expect that within this month or 45 days, they will submit their DPR and once that is done then that doubling of line will start. We have already given the in-principle approval. And we have deposited INR 58 crores with South Eastern Railway to prepare the DPR. So this is one project, which is -- and in this project, all the land-related issue has been resolved and some of the enactment works have also been completed. So completing the railway lines should not take much of time.Another issue was related to CERL, in which there was some problem with [indiscernible] and there were some objections from Chhattisgarh government and Mahagenco. We have resolved the issue. Now all have agreed that [ this is sure ]. And another alternate -- if required, alternate alignment will be found, so that this project can be completed in another 1.5 years.There was some issue with IRCON in CEWRL, which was again resolved and financial closure has been done. And in this railway line, 2 packages of civil engineering work for the complete length of the line of 135 kilometer have been put to tender by IRCON. And so now this project will also move on.About the projects, I wanted to inform that we have approved 52 projects costing more than INR 500 crores each or having capacity of 3 million tonnes. Out of these 52 projects, 41 projects are following their time lines and 11 projects are slightly delayed, but delayed projects or online projects, most important thing is the most of the projects, the total output today which -- is as per plan. And I don't have right now the figure that how much they are going to produce ultimately, but then when they are completed, they will produce -- whatever they are producing today is basically -- that is as per target. So production-wise, we are not delayed in this -- these things.These are the 2, 3 project-related issues, which I wanted to highlight. Then safety. I don't want to take much of credit, but [Foreign Language]. Last year, we had 29 fatalities. This year, it has reduced to 19. This is a substantial achievement. And in a year or 2, we'll like that -- because of mine accidents, nobody should die. We -- for creating awareness among the workers, we are now preparing small video clips. And to all the workers, we are trying to send these video clips and once or twice in a month, they get these video clips about the accidents, how the accidents are happening and what can be done to avoid the accidents. And I feel that this is generating a lot of awareness among the workers. We are targeting about 150,000 workers right now. We want to achieve all the workers within another month. And this safety awareness will definitely help us in reducing our accidents and fatalities.For environment work, which is very critical because we always face some criticism that in the environment front, we are not doing adequate, but I'd like to inform that last year, we planted about 19 lakh plants over 800 hectares of the land. This year, our target was to plant 18 lakh more samplings over 735 hectares of the land. And out of this 18 lakh, 14 lakh have already been planted. And so we will definitely -- these plants will definitely help in improving the environment in the area in which we are working. These plants are over and above what we do for forest -- for -- in form of compensatory afforestation. We have installed 23 continuous ambient air quality monitoring station, and we are installing 20 more these CAAQMS. So with the help of this, in most of the areas, we can continuously monitor the air -- ambient air quality, and we will know that if there is some problem somewhere we can take effective steps to control them.Besides that, we have hired NEERI Kolkata to study the benefits of the mechanized conveyor system and silo loading system and coal loading and transportation, et cetera. So that -- this -- we can come -- we can know how the money that we are spending on first-mile connectivity of the creating CHP, et cetera, what would be the impact of that on the environment. We know that it will have a very positive impact, but then it will help us in quantifying the results -- quantifying the impact that it will have.In this COVID situation, CIL and its subsidiaries have been working very hard to help the state governments and central government to mitigate the impact and to help the people who are in distress. In this context, CIL has deposited about INR 221 crore in PM CARES Fund. Out of this, INR 60 crore was the contribution from the employees. Beside, NCL has contributed INR 20 crores to Madhya Pradesh CM Relief Fund, SECL has contributed INR 10 crores, CCL has contributed INR 20 crore to Jharkhand State Disaster Management Fund, CIL has supported INR 20 crore to West Bengal Disaster Management Authority, and CIL has also contributed INR 20 crore to Maharashtra State Disaster Management Authority.Besides, CIL and its subsidiaries have distributed at the time of distress about 3 lakh packages of food to the migrant labors and other people. And we have tried to support -- to provide drinking water and food to almost all the trains that were passing through our area of operations, so that the people who are traveling could get some food and drinking water.For medical support also, we are very proactive and in 35 hospitals that we have in our areas, we have identified about 1,200 beds only for COVID. Central hospital in BCCL Dhanbad is supporting the district hospital there. Similarly, CCL Ranchi, Central Hospital at Ranchi, Gandhinagar hospital and the hospital at Nayasarai is providing continuous support to the state government in fighting the COVID-related issues.Mahanadi Coalfields Limited has created 500-bedded hospital at Bhubaneswar. SECL has supported in creating -- upgrading 2 district hospitals at Bilaspur and Surguja to support the state government in fighting the COVID. Besides, we have taken many more steps in distributing the face mask and sanitizers and the things had earlier started, now that things have become very common and people don't need all those supports. But at that time, all the support that SECL provided -- sorry, Coal India provided was very critical for the society, and it was appreciated by all.For improving our working mechanism and/or improve the processes in the last 6 months, we have held many conferences with vendors and our customers, and we have continuously improved our system. Actually, in the last 6 months, we have rewritten our -- all the 3 working manuals that is work manual, the CMC manual and -- the purchase manual and contract management manual. And this will help us in implementing our projects more effectively.Similarly, on the side of the customers, we have introduced the concept of [indiscernible]. And in that also, we have made the systems very simple and straight so that customers don't face any problems.One problem that we have been facing was related to receivables. Although the receivables are very high compared to what it was at the March end, but in July and August, we are seeing reversal. In July, our receivables reduced by INR 500 crore. And in others, it further reduced by INR 1,700 crore. So positive trend has started emerging. And as I had mentioned in the last conference, that from October onwards, situation should improve significantly. I am quite hopeful that from October onwards, our receivables will start reducing drastically.Thank you very much. I have taken quite some time in introducing the subject. But then many things were done, so I thought that I should brief the house before I take the question.Vishal, can we start with questions?
[Operator Instructions] The first question is from the line of Amit Dikshit from Edelweiss.
I have 2 questions. The first one is on the sales target. As per the annual report, the production target for us is 710 million tonnes for FY '21. But I believe -- I mean, have you revisited this target? And if possible, can you let us know the subsidiary-wise target for FY '21?
You are right. We are thinking of revisiting. We have proposed to the ministry that the target should be revised because the way things have been in the last 5 months of this fiscal year, it would be very difficult to achieve 710 million target. So we have revised the target to 660 million. I don't have right now the target subsidiary-wise, but I'll get them, and I'll tell you in due course.
Sure, sir. I will get them off-line. The second question...
[indiscernible] and SECL is 172, MCL is -- sorry, ECL is 52, this BCCL is 29. This is -- I'm just trying to recollect from my memory. And this BCCL is 29, CCL is 74, NCL is 113, WCL is 60, SECL is, as I said, 172 and MCL is 160. So this is the revised target.
Okay. Very helpful, sir. The second question is on e-auction premium. I mean I understand that till September, we have actually foregone any premium that would -- we would charge, but now things are on an uptick, so is there a plan to revisit this particular strategy?
See, the e-auction, we are not forgetting the thing. The issue is the market there was hardly any demand. So we reduced the base price in order -- so that we can be more attractive and there is at least some offtake. As you know, there was -- offtake was less than -- less by 22% in the first 3 months. Even if we -- if there is a demand and we keep the base price at low level, it doesn't mean that we are making any sacrifice because if there is demand in auction, the prices will go higher and then we will get that premium. I'm happy to inform that in August, there was an average premium of 9%. So that demand is increasing, so the prices will definitely increase. I mean auction price will definitely improve.
But we are keeping the base price at the similar level?
No, no. Just, we will review it in September, and let's see how the things pan out because in July, there was more -- we were more hopeful that the way the economy was picking up. But in August, then again, there was slight slowdown in the pace that was created in July, could not be sustained. I'm talking about the general economy, although coal demand has increased in August further from July. And in September, it is still higher. So let's see how the demand comes. If there is adequate demand, so we can even think of increasing the base price. So we had decided that by September end we'll take a call and that we are -- we will review it.
The next question is from the line of Rahul Jain from Systematix Shares & Stock Brokers.
Sir, one is on your contingent liabilities. So for example, I was just going through the annual report, so we have seen a surge in the income tax-related contingent liabilities. And there, the total number is now quite large, much more than our net worth. Just wondering, what are your thoughts on this?
Contingent liability is not on account of income tax, mainly not an account of. There are 2, 3 main issues on contingent liabilities. First is, there was some violation of mining EC, et cetera, because in certain places, we produced slightly higher coal than it was, and it is long there. So the contingent liability because of that has been created. In state of Jharkhand, they raised the demand. In Chhattisgarh, they didn't raise the demand, but that is there.But we are quite clear that it is unlikely to have impact. But since the orders are there, we are fighting it out and competent authority has put a stay on whatever the demand that Jharkhand government had raised. At the highest level, this discussion -- there was discussion between the -- our minister and the Jharkhand Chief Minister. And I think that in coming months, something should sort out -- should get sorted out.Secondly, there was issues related to income tax also. But then income tax most of the liability which we feel are due have been cleared in the last tranche of Vishwas Se -- Vivad Se Vishwas scheme, but there are certain cases in which they have completely disallowed the cost incurred on removing the overburden, which I feel is completely unreasonable. So we -- in many cases, we have won that cases, but some cases, they are still pending. So we are trying to sort out. So -- but the liabilities are not something which are -- to my mind, are likely to create any problem for Coal India.
Right. Right. Sir, how much was the amount paid in the Vishwas scheme?
INR 4,750 crore, but that is more like advance rather than -- because we feel that even that much is not due.
Right, right, right. And sir, we also are diversifying significantly. So how much is the amount expected to be spent on fertilizer projects and also on the NLC JV this year?
NLC?
On the solar and, I think, thermal JV that we have proposed?
I'll give that. First thing is on fertilizer projects. In TFL, we are supposed to invest something like INR 1,000 crores?
We have 29.67%.
[Foreign Language] INR 1,000 crores [Foreign Language] TFL [Foreign Language] HURL [Foreign Language] in that range, I don't remember exact figures, about INR 1,000 crore in that range.
So INR 1,000 crores each, basically, right, yes?
Mostly around that much. If you want I can...
Yes, yes. Sure, sir. Fine.
But -- and NLC, whatever we are proposing is basically for -- right now, we have signed a contract to develop solar projects. And it has picked up the thing. But about -- we proposed that about 700 to 800 megawatt of projects should develop. If that much develops in that then -- so the expenditure will be in the range of INR 3,500 crore each. And even if 30% loan is taken, so it will be in the range of INR 1,000 crores. So about INR 500 crore-type expenditure should take place for this solar venture. But that is something which will give us regular income.
The next question is from the line of Abhinav Bhandari from Nippon India Mutual Fund.
I just wanted to understand on some of these diversifications that you are making and you said, INR 1,000-odd crores of investment in fertilizer and INR 1,000 crores, INR 1,200 crores in HURL, what could be the payback period in some of these investments? And what kind of ROE, ROCs in this business that you are expecting?
We are expecting a return of about 12% IRR because that much is government -- and in HURL, government has given guarantee that, that much of return will be given. And in TFL, that process is on. And by the -- soon the cabinet should give this commitment that IRR of 12% will be given. So that is likely -- that is the return that we are likely to get. And besides payback periods, it will be 6 to 7 years.
Sure. I had a couple of questions from the annual report, sir. In both WCL and SECL for FY '20, there has been an increase in volume sold, but the profitability has significantly declined. And WCL, it's has come down to about INR 12 crores from INR 194 crores. And in SECL, it's come down to about INR 2,500 crores from INR 5,600 crores. So what primarily is the reason here for this sharp decline in profitability in these 2 subsidiaries?
I will take SECL first. SECL, the reduction has been both in profit and in sales. In total quantity sold, I think the total quantity sold was less by about 14 million tonnes. And the quantity production was less by about 7 million tonnes. Offhand, this is the figure that I'm remembering. So there was -- because of this, there was a loss because the total quantity sold was less.The second loss aspect was -- loss was because e-auction was -- e-auction total quantity was less in SECL. The e-auction quantity, total quantity was less. And secondly, the premium was also less. So all these 3 things combined resulted in a reduction in the profit.In WCL, the -- means, [Foreign Language] -- WCL, I'm forgetting. There was -- one reason was in the last year, there was reversal of the mines closure fund about 200 to 300 -- about INR 100 crores, INR 150 crores or something of that, mine closure fund was reversed in WCL because of which, and this didn't happen this year because of that.Secondly, and all the places in most of the subsidiaries, my e-auction quantity reduced and the premium also reduced in '19/'20 compared to what has happened in '18/'19. And because of that, it has reduced. I can't quantify all these elements right now. But basically, these are the 3 reasons because of which WCL happened. And in SECL because the sales was less and both of these things were there.
Got it, sir. And just one last bit on this INR 1,100-odd crores of loans given to NLCIL. So for what purpose these loans are given? And is there any interest that we are charging on this?
NLCIL [Foreign Language]? That they have returned long back. I think -- I don't think there's any loan remaining there.
It's there in the FY '20 annual report.
So they have returned. They have returned. And it was given on loan only because there is a law which says that intercorporate loan cannot be given below certain interest rate.
Sure. Sure. But for what purpose was this loan given, just to understand if you can...
NLCIL actually is spending in a big way. So they must have faced some operational crunch, et cetera, because of that for short term, it was given, and it was taken back. And they have taken only INR 500 crores. There was initially request for INR 1,100 crores, but then -- INR 2,000 crores, but then ultimately, they took only INR 500 crores, and that too was returned. This is what my Director of Finance, who's sitting with me, and Company Secretary are informing me.
Got it, sir. And just one last bit on, in your initial remarks, you mentioned on closure of some mines. So if you can just elaborate as to what kind of time line you're looking at? And what could be the mine closure cost in these cases?
See, there are 23 mines, which we are going to -- where the operations are likely to be suspended. So these mines, we are going to suspend their operations within -- means, I have indicated them. It will take another 2, 3 months to close down because it cannot be done immediately. But it will result in savings of about INR 600 crore, even if I pay all the dues to the labor without taking any work from them. Closure will not cost much. Whatever closure costs will be there, will be met from that fund that has been created. So it will not impact the cash flow of the company.
The next question is from the line of Indrajit Agarwal from CLSA.
I have 3 questions. Can you help us with the power and nonpower ratio and the expected volume for this quarter? And how it has changed quarter-over-quarter? The reason I'm asking is, even if I take out the incentive income, our FSA, excluding incentive income, the prices have gone down, the realization. So what could be the key reason for that?
You will have to repeat your question because there's echo in your...
Yes. In FSA, what was the power and nonpower mix this quarter and last quarter?
This first quarter, actually -- I have taken that report. Actually, there has been slight increase in the power -- nonpower supply in this first quarter and in the second quarter also 2 months, but just wait in a while, I have calculated, but that paper is not with me right now. I will give you.I'll come to this question whenever that paper comes to me.
Sure. Sure. The reason I'm asking is FSA, even if I take out the incentive income in fourth quarter, has still gone down. So how should we look at FSA realization going forward?
I couldn't get your point. Are you asking about quarter 1 or quarter 4 of the last year?
[Foreign Language] I'm comparing quarter 1 of this year with quarter 4 last year.
So what's your comparison -- point of comparison?
FSA realization.
Means, per tonne?
Yes, per tonne.
Per tonne FSA realization has reduced this quarter. Because sales price last quarter was higher because there was -- e-auction thing was there, and there was some premium on e-auction. This time, we have not got that e-auction price.
I was actually referring to FSA only, the fuel supply agreement, the contracted one, there also the realization has gone down.
Contracted one would have remained constant. Now I don't have that figure. That would have remained constant because we supply -- fuel supply agreement is at a particular level, and that has not changed.
Sure. Okay, sir. Sir, my second question is, can you help with the receivable number for June quarter?
The receivables at the end of last quarter, that is March end, was INR 17,800 crore. By June end, it was INR 23,349 crore. At August end, it was INR 21,000 crore.
Sure. This is helpful. And last question, the payment or the advance that you have paid for the Vivad se Vishwas, this has happened in the June quarter?
No. It was done in March.
March quarter. So it reflects in the accounts in March quarter?
Yes.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
Sir, one question on the part of this e-auction. So how much volumes we are targeting in this year? And like say in this quarter, the realizations have plummeted, as you had pointed out. But given the -- like say, because these all e-auction realizations are lagged in that...
Can you just repeat your question because it was low...
Sir, I'm saying that in e-auction, how much quantity we are targeting for this year? And secondly, what e-auction realizations would be there for this year? Because in first quarter, it has fallen. But now with this dispensation, which we have that base prices are low or capital or like say, low level. So the impact is going to come in the coming quarters. So what realizations are we looking at? Are they going to further fall from this Q1...
The thing is we target to do about 20% of our total production on e-auction. We wanted -- we aim at selling at least 20%. So about 13 million to 14 million tonne we should be able to sell on -- out of 660 million, about 130 million to 140 million tonne we should be able to sell on this e-auction.In first quarter, we were selling all the product at 0 premium almost, effectively 1% or 2% came. And in certain products only, that is of CCL some special mine, we've got some premium. But in August, I'm told that there was a premium of 9% that we realized.And in coming months, I think that it will further increase. It will be very difficult to -- for me to quantify or to give any number to this because we don't know [Foreign Language] how the market is likely to behave. In September, we will review. If the market is positive, we will try to increase the base price. But giving a particular number that how much we are likely to achieve will be difficult at this point of time.
Okay. And sir, lastly on this, your first-mile connectivity. So can you quantify, like, say, how much quantity or how much percentage of your volumes would be through first-mile connectivity? Or like say, what projects are coming up in that particular segment because that could be a big improvement as well for the company? So can you give us the timeline or the demographics going forward? Like say, how the -- what sales would be there for Coal India in terms of, like, say, next 2 to 3 years on that particular project side?
Okay. I had mentioned that today, we are transporting about only 150 million tonnes through these projects -- I mean, through first-mile connectivity. If all these projects which are 35 plus 14, that is 49, that's completed, about 600 million tonnes, 650 million tonne of the coal will start moving from there. And we are targeting by '23-'24, all these projects would get completed. About the 35 projects, I'm quite sure that all these projects will get completed by the calendar year of '23 because we have already put them to tender, and I am quite sure that by the end of this year, inside December -- [Foreign Language] not by December, but by March, all the works will start in all these projects of 35 projects. So they are -- taking constructing period of 2 years and maybe some slippage here and there, they will definitely get completed by '23 December. So by '23 December, if this first -- all these projects will get completed in the first phase of this 35, so 650 million minus 150 million, 406 million tonne extra, that is 550 million tonne of the coal will start getting transported through them.
Okay. And sir, lastly, how much savings can we expect from these projects? Because there would be a lot of theft on account of this -- because this mechanized mining is not there. So roughly around like based on some CAG reports and all that, that roughly around 9% of the material in Coal India gets all, like say, washed out because of this nonmechanized mining. So how much yield improvement or the savings can we expect?
See, I have not quantified the amount on this, but all these projects are likely to give me a further IRR of more than 12% to 13%, that much we have checked. About theft, there will be some reduction in theft but the theft is taking place, particularly in 1 or 2 pockets and which are not the highest coal-producing area of the state -- of the Coal India because in Odisha or in MCL or NCL or SECL, which are the largest coal-producing area, there is hardly any theft.So on account of theft, there will be some changes in CCL and BCCL, but it will not majorly affect the quantum there. But we will get a return of more than 12% IRR that much we have quantified seen. And secondly, it will have a much larger impact on the environment. And this environmental impact will help us in getting further EC, et cetera, and will create a much better image of the company. That is much more critical in FMC rather than getting money out of it.But secondly and the most important thing is [Foreign Language] if we produce and don't have evacuation infrastructure, how will the coal reach the sidings. So from that point of view also to have a smooth evacuation, we need this project.Thirdly, the impact that Director of Marketing is mentioning, quality of the coal will definitely improve because of this because siding problem, the losses that we are incurring in overloading and underloading charges because in this -- all these silos there will be preweighed coal that will be loaded on the wagons, so INR 1,000 crores we are paying either underloading charges or overloading. Overloading is being paid by the customer, and we are paying underloading charges. More than INR 1,000 crores -- means, I don't have exact figure, but then substantial money is paid on these charges, which can be saved either on a -- by the customer or by us.
The next question is from the line of Ashutosh Chaubey from Centra Advisors LLP.
Sir, I have 3 questions regarding this. First is, like you mentioned earlier that the mines are being closed down. So I would like to know, is there any new mines coming up that will be allotted to Coal India from the government? Or what is the procedure for getting these new mines, if you may just shed some light on it?
See, we have got [Technical Difficulty]. So as of now, we don't need any block allocation. [Technical Difficulty] at the 2 front. One is, we, ourselves, are doing these projects. Like I mentioned that there are about 51 projects. [Technical Difficulty] more than INR 500 crores in each of mines producing more than 3 million tonnes each. So these mines are there. When they are completed, they will yield a lot of [Technical Difficulty].Besides, we have identified 15 mines, which we will give on MDO mode. And those 15 mines are likely to give us a production of 160 million tonnes at the peak rate capacity.This -- thirdly, we are trying -- there are many mines at which we are not operating at the optimum level. So we are trying to improve the production from those mines and improve their EC clearances. Once they are achieved, so those are the mines in which we can increase our production. So we don't require, as of now, new block allocation from Government of India.
Okay. Okay. Okay, sir. And my second question is with regards to CapEx, I would just like to know, out of the total capital expenditure that we incur annually, how much goes towards maintenance CapEx, and how much goes towards expansion and growth?
See, maintenance CapEx in our parlance is called revenue expenditure. That is not counted in CapEx.
Okay. So the total CapEx that you provide in the annual report or in the quarterly results is totally towards expansion and growth, right, not maintenance?
No. There is some component of replacement. [ As I spoke ], some of the machineries are replaced by new machineries, then there is a replacement, that will count as maintenance CapEx. But the maintenance, as such, is taken as a revenue expenditure.
Okay. And sir, my third question is on -- a little conceptual question regards to this OBR provision. Sir, could you just help me understand what exactly is this OBR provision, and why do we provide such provision?
See, there -- in every mine, it is assumed that -- it is not assumed, it is calculated, means, it is in the project report, it is clearly defined, taking into account geological conditions, the way the seam is dipping or what is the angle of the seam, et cetera, that how much totally, OBR will be removed to produce that much of the coal. Suppose in a mine, it is calculated that X amount of this -- X amount in tonnage will be produced and Y amount in cubic meter will have to be removed. So Y divided by X is taken as OBR -- OB removal, stripping ratio, which is called stripping ratio. But in the initial phase of the mine and in certain circumstances, when the production has to be ramped up and there is not sufficient -- this OB removal takes place, then what we do is -- what happens that the angle of -- the angle required to maintain the proper mining condition is not followed and in certain cases, this roads, et cetera, are at steeper gradient. So less amount of OB is removed and more amount of coal is removed. These are the 2 factors.But the main factor is, as mines grow old, the OB requirement -- OBR requirement increases. Because of the dipping of the seam, more OB is required, too. So in an initial phase, more -- lesser amount of OB is removed. So if from the average, less amount of OB is removed that much amount -- based on the coal abstracted, that much amount is provided in the books as OB removal [ referral ]. So that whenever -- when after 5 years or 6 years when the mines become older, then perhaps more OB will be removed at that time, profitably does not get adversely affected. And at that time, the company does not [ come in this offering ].
Okay. Okay, sir. Sir, one last question. With regards to -- as we know that the captive miners have to pay some amount of premium on each -- the coal that they produce. So is it that CIL also pays some amount of premium to the government?
No, we don't say premium, but...
Premium or royalty, anything, sir, like anyhow...
Everybody has to pay. What the premium we are talking about is an extra royalty that the private miners are required to pay, and we are not paying that premium.
Okay. So that is only for the captive miners, right?
That is for captive mines and that is likely to come for the commercial miners as well.
Okay. So Coal India is out of that purview?
As of now, it's, yes. For the new -- so we are not taking any new mines.
The next question is from the line of Vineet Maloo from Aditya Birla Sun Life Asset Management.
Sir, just wanted to know, out of the total expansion projects that we are undertaking, how much money is being spent on greenfield projects and how much money is being spent on brownfield projects in terms of expansion of existing mines?
Right now, I don't have that figure. So we are totally -- I can say that in the next 7, 8 years, we will spend something like INR 70,000 crore on this total projects, but this distribution, depending on how much coal is required. If that coal is not required, then expenditure will come down, but this distributed amount I don't have right now. I will send it...
That's okay. Do you have the flexibility to calibrate this expenditure depending on coal demand?
Definitely. If the coal demand is not there, then what will we do?
I know, sir. I mean, that is what my concern is, I was coming to that. I mean we're seeing globally coal demand is actually facing a lot of hurdles and actually coming down in a lot of geographies, right? And if we invest a lot of money right now, especially greenfield projects take a long time to come online and take a lot of CapEx also. What is the kind of payback they are offering you? So my intention is, sir, to understand between the 2 kinds of projects, what is the difference in payback period?
Any project that we -- either expansion project or greenfield projects, we see that the IRR is not less than 12%. And most of the projects that we are doing in outsource are the -- most of the projects that we are doing in SECL and MCL, the IRR is very high, and payback period will be 2 to 3 years in certain cases, that is so high. But then there are certain projects in which the IRR is 12% to 13% or 14%, 15%. But the actual capital thing will depend on how the demand comes. Suppose there is no demand, then we'll not spend money on new projects.
Sure, sir. Maybe I can connect with our office later and take these details...
That, Director Finance -- Company Secretary will connect -- maybe you can connect with Mr. Viswanathan, and he will give this breakdown -- breakup.
Yes. I appreciate that.
Most of the projects that I was talking about, these 51 projects, which are QPR projects, in all these -- most of these projects, maybe about -- out of 51, 35 to 36 are already producing mines. It is not that they're not producing anything. They are incomplete projects, they are running projects. But to inform you further that we have planned that more projects will be taken, which have not yet started.
Right. Okay. And sir, my next question is on -- do we have major mining leases coming up for renewals? And what is the kind of response the state governments are having for those renewals? We've seen for other mining companies, especially PSC mining companies, state government seems to be asking for large premiums for renewal of mines.
See, the coal situation is completely different. We acquire land under CBA Act, Coal Bearing Area Act. And in that act, there is no concept of leasing. We take the -- when the land is taken over by the central government, it gets vested without any encumbrances. And thereafter, the vesting is done in the coal companies. So we are getting mines through that mechanism. And in that mechanism, there is no concept of leasing, that is our perpetual property. So we don't take any lease from the state government. Whatever royalty we pay is actually amount equal to royalty. It is not exactly royalty. So these are the technical difference. But then, we -- there is no concept of leasing of the mine from the state government for Coal India.
Okay. So the mining rights are not on a lease basis? I'm not talking about surface rights, sir. I'm talking about the mining concession...
Yes. Mining right is not on the basis of lease. It is basically the property and the coal below that, that's vested. We don't take surface rights also. It gets vested in us, and that is for perpetuity.
And that is specific to Coal India?
That is specific to any coal mine given to any government company.
The next question is from the line of Rakesh Vyas from HDFC Mutual Funds.
Sir, I have a few questions. First, can you just throw some -- sir, can you just throw some light on your medium-term strategy around this closure of unviable mines? So as you indicated, 23 mines is what you have started with. Can you throw some light, what is the plan for next 2, 3 years around that? Have you worked out any strategy?
See, there are 2, 3 concepts that we are working on. We have already closed down about some 80 mines in the last 4, 5 years. So it is not something very new that we have started. So 23 mines we are closing down. Maybe in these mines, 1 or 2 or 3 mines, the subsidiaries may come up and tell that they are going to make it viable by increasing the production in these mines. So we will exclude those mines. It's not that mines closure is -- but these are the mines, 23 mines, these are the mines which are producing less than 50,000 tonnes per year.And secondly, these are the mines in which even if we stop the production and keep on paying the labors all their dues, even then we will save a lot of money. Next year, we are planning that we will identify mines with 1 lakh tonnes.So there is a plan. We will try to reduce the cost, but the basic point is the whatever losses, means loss in production, is happening there, we should compensate by increasing production in other mines. So I won't be able to tell you how many mines we have identified right now, but we have taken a stock of it. There are many mines in which we are losing heavily, we -- especially the underground mines. We are working on them. Either we will improve their profitability or either we will improve their productivity by increasing the production so that the losses per tonne gets substantially reduced, or we will find some strategy to do something so that our losses can -- in underground mines gets reduced.
Okay, sir. My second question is actually around your earlier comments in the previous calls related to reassessment of OB by doing extensive economic feasibility study of mines, et cetera, to determine how the OBR provision should look like. So if you can just throw some light around that? Or has it got impacted because of COVID, if you can give some color?
We are working on that. We have issued some -- we have cleared some things today only, in which the -- some OB calculation will further improve, means some extra costs, et cetera, we were taking in OB, we have reduced that. Secondly, if the mines are -- if there were -- some special geological condition, et cetera, appears, then they can -- the subsidiaries can do at a smaller share, review that at -- quickly and they [ have to have the necessary ] time period. And the third thing was 1 million tonne worth of [indiscernible]. Then the third -- another thing we are working about that when the extension of the mines comes, then at that stage, what should be the formulation, that we could not conclude today. But within 10, 15 days, we'll do that also before the end of the September.But the most important thing is, what is beneficial for the company, we have to take into account, not for in the short term, but long-term. The long-term solution is to improve our OB removal factor. If we -- whatever OB removal is required -- like, in the last quarter, we did a lot of OB removal. And actually, there was write-back of the OB provisioning rather than increasing in the OB provision. So actually, there was a reduction of about INR 250 crore -- about reduction of 280...
From the positive of INR 200 crores, we came through -- there was a reduction of INR 1,150 crores.
There was a reduction of some INR 1,100 crores on OB. So if we keep on this thing, then maybe we will not be able to write-off INR 30,000 crore or INR 40,000 crore, which is there. But that is -- working on that is more critical because that happens, say that helps us in both the things. First thing, we can ramp up the production whenever required; and secondly, because the proper slopes, et cetera, are mined, then the -- so the extra north material or the foreign materials, which gets into the coal will not happen, and hence it will improve the quality.So we are working on both the front. We have made certain provisions, which will reduce the provisioning. And at the same time, we are working continuously on that, how to do it. And secondly, we are trying to improve our OB removal, so that if you -- so that the quality and quantity both improves tremendously. If you see in the last 4 years, our OB removal has remained static at the level of the 1,100 million tonne, 1,200 million tonne type. Despite the fact that the production has increased from 500 million tonne to 600 million tonne or even more, OB removal has remained constant, which is not a very healthy indicator. So we are working on it.And this year, we have kept a target of about 1,500 million tonne removal. We are thinking about 25% to 30% jump.
Okay, sir. And my last question is around, if you look at the nonpower sector, effectively, a lot of them have started to ramp up manufacturing, et cetera. So -- and we were planning to have a large proportion of import substitution across both power and nonpower. So if you can throw some light as to on that status of the same? And what is the target for this year and next year?
I'll request Director of Marketing because he has got exact figures, so he'll be able to tell you in detail.
Thank you for asking this question. Government of India has given us a mandate of substituting 100 million tonnes imported coal for overall country. For NRS, we are planning more than 75 million tonnes because the powerhouses are -- had imported 22 million tonnes of coal for blending. So that's why I'm saying, more than 75 million tonnes for NRS sector. We are trying to give coal as per their requirement, which can match with, in terms of heat value. What they're importing, we are trying to give it from places where they would like to have this coal.For example, from SECL, there's a field called Churcha; from ECL, where we have got coal with a high heat value of, say, 5,000 to 5,500 kilocalories. And till date, we are on a positive side, almost 35 million tonnes to 40 million tonnes we have done something. We are -- for blending of coal, we had gone into giving them quantified -- that means assured quantities. In addition to what I've told you right now, the fuel supply agreements were designed in a way where 10% of the annual contracted quantities were to be imported, we are now taken this on us, and we'll be supplying domestic coal for that 10% also.For hinterland and for coastal plants, there was a provision of 30%, which was to be imported. We are also taken into us that we will be supplying that 30% to the coastal plants, and this has been approved by Standing Linkage Committee, and we are working on that, and we are sure that we will be keeping the mandate of Government of India. Thank you.
So is it fair to assume that this kind of target, at least, would be achieved by next fiscal in terms of physical delivery of the coal?
Yes, definitely.
The next question is from the line of Gopal Nawandhar from SBI Life Insurance.
I had a question on the cost per tonne. I recollect if you mentioned INR 1,360 per tonne cost?
I think, yes, INR 1,360.
So how do we calculate this? Because ex of OBR, if we see, the cost is around INR 1,296 per tonne.
OBR is INR 1,296 per tonne? No, no. OBR is...
No, no. Ex of OBR, right, you're mentioning ex of OBR, right?
Ex of OBR, what do you mean by that? I have provided for the total cost in the sense that whatever the expenditure that we incurred...
So you include depreciation and interest also or what?
Everything.
Okay. Okay. So I was just comparing ex of depreciation and other stuff. So if I see, the cost actually year-on-year has gone up and -- excluding OBR, obviously, and the large portion is because of contractual expenses. So that the cost per tonne, I know it may not be a right way to calculate, but the way we calculate every quarter is that INR 291 per tonne is the cost in this quarter versus it has been, say, INR 243 in the same quarter last year. And if I recollect the initial discussion, which we had during COVID time, we suggested that these costs are, like contractual costs are more -- like more variable kind of cost rather than fixed kind of cost. So can you just give some light on this?
I am unable to understand your question. I stand by what I said that contractual cost is mainly variable cost. And when I say that INR 1,360 is the cost of coal production, it includes everything, hence depreciation, interest, everything. We hardly receive any interest. But then whatever the revenue expenditure is taking place [Technical Difficulty]. So what about our contractual costs, et cetera, you are talking about, I am unable to under -- gauge what you are saying, maybe...
So I'll just simply put to you. So what we are doing, basically, we are dividing the contractual expenses with the volume.
Hold on. Hold on, just a minute. Our major expenditure is basically on our employees, which includes...
Yes, yes. So that, I think, is not linked with the production. So that per tonne, obviously, will be higher because of lower production.
Slightly higher than what it was. Our employee cost also has come down, means, low by 1% or 2%, that bucket -- and it has -- so per tonne bucket has increased because from last -- compared to the last -- the same quarter last year, the production has been less. But...
Yes, yes. That I understand, sir.
Contractural cost, otherwise, over time and some other costs, which we could control, we have reduced. And because of that, it has come down.
So just on contractual cost only, so if I calculate, this is INR 291 per tonne in this quarter versus, say, INR 243 in the same quarter last year.
But contractual cost will include also the extra OB that we have removed. When we calculate the cost, then we -- because OB adjustment takes place automatically in that OBR removal provisioning. Because we have removed extra OB, that much provisioning we have reduced from the balance sheet, and that much we have taken out from there. So that will not be counted in profitability or means cost calculation.
So how much is that amount, sir?
I won't be able to tell you offhand, but I will tell Mr. Vishwanath to give you that figure. But offhand, I understand [Foreign Language] about INR 1,100 crores [Foreign Language] and instead of provisioning, we have reduced it, withdrawn amount.
So that is -- that comes under OBR head or contractual expenses, sir?
See, when this -- for the contractual expenditure, it includes every expenditure. Isolation [Foreign Language] has coal removal fully because there are many contracts, which are contractual things. I mean they are composite things, so that things will be difficult to calculate. But what I am -- if we are removing OB beyond the limit that is described, then that is not taken into calculation of cost production -- cost of production, okay?
The next question is from the line of Vineet Maloo from Aditya Birla Sun Life Asset Management.
Sir, this is a follow-up on one of the previous participant's question. When you are trying to replace and substitute imports into the country, so basically there will obviously be areas where it is not viable for us to send material, right, because of the freight costs, et cetera. And if you want to compete with cheaper imports today, I mean, it would not be fruitful for us to do that, right? So even then you would still pursue this target of eliminating import completely?
There are many areas in which -- where we can easily substitute. Basically, when we talk about import substitution and demand in the country, last year or the year before that, it was not the problem of demand, it was a problem of supply. Many of the consumers were importing not because they were getting cheaper coal from there, but because they were the getting -- they were not -- CIL was unable to meet that demand.So in the Eastern sector also, where our things are located, there are many sponge iron plants, there are many cement plants, which were importing. So we are trying to target them and to provide them higher quality of coal, which is available in ECL or some parts of CCL or SECL, which can be -- which will meet their demand. So we've identified that the coal of better quality, that is G8 or better that we will try to give to NRS sector because there we get 20% extra premium -- cost also. And secondly, that helps in substituting the coal -- import also.And secondly, we are trying to ramp-up production in WCL, which will meet a lot of demand in western sector as well. So we are working on this strategy so that we are able to meet the demand.International market, we presume that will not remain as subdued as it is now. But coal prices in India are not likely to increase tremendously in the coming months. So at that point, we will definitely able to meet this -- whatever demand is prevailing.And what we are targeting is only 100 million tonne, out of about 170, 180...
247 million tonne.
247 million tonnes. But out of 247 million tonnes, 52 million tonnes is non -- -- coking coal, which we are not targeting, but then out of that 200 million tonnes, we are targeting only 100 million tonne. And in that 100 million tonne, again, whatever we supply 100 million tonne, that would be only equivalent to about 80 million tonne of imported coal because imported coal GCV per tonne is slightly higher. But if we supply at lower cost and we are meeting the demand, because in the central part of the country, the transportation cost of the imported coal will be more than the transported coal (sic) [ cost ] of our coal. So we are getting this response. And as somebody had asked, what is the percentage? Means, the percent of this has increased slightly with an uphill to August when most of the NRS sector was not operating, whereas the power sector was operating, the demand -- our supply percentage to NRS sector has increased to 23% from 20% last year in the corresponding period.
Sure. So sir, I mean just to understand it clearly, when we are comparing our prices on delivered to the plant basis, right, for the customer, we will still be competitive whenever, let's say, coal prices normalize? Currently coal price is around $50 for API4 coal, et cetera. But if we were to assume that coal prices were around $60, $65, do you believe that our prices delivered to customer plant would be competitive, adjusted for NAR, I mean, calorific value on NAR basis, this is what we're seeing. And we don't lose any profitability while doing that?
We won't lose any profitability value. Wherever we lose -- see, we cannot target to deliver coal to some port -- some plant located at the ports of South India or Western India. There, we are not trying even to go there. But rest of the India is -- there are plants in the northern country where they were taking a lot of coal for blending. Those plants will not take from -- they will not take any coal now from other countries. They will take coal from CIL also -- only.So all this -- there will be still some areas, but we are targeting only 100 million tonne out of 200 million tonne. So that should be possible.
The next question is from the line of Pinakin Parekh from JPMorgan.
Sir, first question is, can you give us an update on the receivables situation? How has it trended? What are the total receivables? And what is the outlook for receivables in the second half of the year?
I had given this reply earlier also. Receivable at the March end was INR 17,800 crores; at June end, it increased to INR 23,000 crores; and in August end, it is INR 21,000 crores. So in July and August, we've seen slight decrease in receivables. This will, to my mind, from October onwards, it should further increase -- should further decrease. And I can't tell you exactly that what will happen at March '22. But we will try that at March '22, the receivables are not higher than what it was at March '21.
Understood. Sir, second question is that to push through coal volumes, the company had made it more market favorable conditions. The trigger level of supply of coal for power producers was increased to 80%, performance incentive was waived for the first half, increased the usance of LC for power consumers and a lot of things. And most of it was till the second quarter of FY '21. Now, sir, as the inventory at the power plants reduced, how -- are each one of this being reversed? Or will these conditions remain in place for the second half of FY '21 as well?
See, I can't tell you exactly what we'll be able to do because we are -- we will resume in third week of September, and we'll try to take back certain things. But whether we are able to take back everything, it will depend on how the demand pans out in September because stocking the coal and having a very high coal stock is more damaging to the company rather than giving all these small concessions.
So just to clarify, sir, has there been any movement -- positive movement in the e-auction premium at this point of time in September versus what the company has seen in the June quarter? Or broadly, it remains -- e-auction prices and realization of the premium to FSA coal remain even today where they were in the first quarter?
In first quarter, there was hardly any premium. We were trying to push. In August, we got a premium of 8%, and I presume that it should increase further. Once rainfalls takes place -- if there is heavy rainfall in September, October, November, then the demand will get reduced.
The next question is from the line of Nishit Gogri from Prudence Capital.
Sir, I wanted to know what is the dividend, which can be expected for this financial year?
Very difficult question. But my all attempts will be to maintain at least what we gave last year, but it will be -- we can't say anything, but then...
Sir, the reason, actually, why I was asking this, if you just look at the last 5 years, FY '16, we gave a dividend of INR 27; FY '17, we gave a dividend of INR 23; then FY '18, we gave a dividend of around -- just 1 minute.
I have got those figures, don't worry. But then...
Yes. It's been reducing every year. So I just wanted to know, at least we can maintain the last year dividend, what we have given of INR 12?
I told you that it will be very difficult for me to commit anything. But we'll try to maintain that level.
The next question is from the line of Gopal Nawandhar from SBI Life Insurance.
Yes. Sir, just wanted to understand the revised target, you said 660 million tonnes is for production or offtake?
For both.
Okay. So sir, if you just calculate this, this requires 65 million tonne monthly run rate for the remaining period of this financial year. How confident are we in terms of producing the same? And looking at the demand environment, do you think we'll be able to -- even if we produce, we'll be able to sell it?
See, how the demand pans out, it will be difficult, but if you see the last year's last quarter production, it was 205 million tonnes. So producing something extra in that quarter from 205 million tonnes will not be difficult. Similarly, if you see October production, it was in the range of 60 million tonne. So that is there. So whatever target we have fixed, we are quite confident about achieving those targets, maybe 5 million tonnes here and there, that will be a different story.If the demand is there -- if there is no demand, then nothing can be done. But I believe as the demand will be there because we are looking at replacing the imports, so -- means, if the country, there is not negative growth and if there is some improvement in the GDP growth, we will definitely be able to achieve this target.
And when we talk about this 100 million tonne of import substitution, so we are considering the only places where we can substitute because there will be a lot of import -- imported in these plants, right?
There are certain places which -- where we cannot compete with imported coal. So there's no point in targeting them. There are certain plants in which they can run only on imported coal, so we cannot target those plants.
The next question is from the line of Amit Dixit from Edelweiss.
I have -- this question is regarding CapEx. So we have a target of INR 10,000 crores of CapEx for this year. I just wanted to know that how much has been incurred in Q1? And how much will be -- I mean, out of total INR 10,000 crore, how much of it do you intend to incur in land acquisition and how much in equipment procurement?
See, I don't have right now exact figure, but in -- till August, we have spent something like INR 3,000 crores. And in September, we think that another INR 1,000 crores we will spend. So achieving this target of INR 10,000 crores should not be difficult this year. About land, about 30% of this will go in land. And about 25% to 30%, that is in the range of INR 3,000 crore, will go for machineries and equipments.
The next question is from the line of Rahul Jain from Systematix Shares.
Sir, our -- basically, sir, cash flows have improved since March? Or do we see that -- because -- I am asking this question because our cash as of end of March was around INR 20,000 crores, whereas your provision is around INR 45,000 crores. So you have dipped significantly below the provision for OBR. So do we think that the provision is kind of just for face value?
It is not for fair value. See, in certain years, we have given a lot of dividend. The cash has to be used. So there is slight -- and secondly, our receivables are very high. At March end also, there was a receivable of about INR 18,000 crore. So with that, it balances out. We assume -- we are trying hard to get back that thing. But then there is no connection between provisioning and cash in the company.
Right, right. And sir -- so basically, you are trying to say that it's only required when you have cash, right? I mean in the sense it's not compulsory to maintain cash to the extent of provision that you have?
No, no. It's not required.
Right. Right. And sir, with respect to -- on the FSA pricing. So sir, do we think that -- because I just want come on this from the amount of inventory do we have, so do we think that if you reduce the FSA price, you can see more liquidation of your inventory?
I don't think that will affect because we are supplying to the coal -- most of the power plants who can take coal from us are taking coal. They don't have any alternative. And so they cannot import the coal, most of the power plants. The power plants who are importing, they will import, whether we reduce the cost or not because they are based on certain technical parameters where our coal are not sufficient. It might change some NRS sector, means, 1% or -- 1% here and there, but then that's not going to substantially alter the -- this. Whatever plants...
Yes. Sir, why I'm asking is that because we're seeing increasing competition from solar. And going forward, sir, there are hardly anybody setting up any thermal plants, so essentially, we are running into a tough situation in that respect. So if we become more competitive on pricing, it will only help our longevity, right?
See, pricing can -- I don't know what will happen 2, 3 years down the line because by that time our employee costs will reduce. But one thing is quite clear to the Coal India also that we have to improve our efficiency, and we have to reduce our costs also. They cannot -- we cannot take costs for granted. But there are certain conditions, which we cannot change. So we are -- within those parameters, boundary conditions, we are trying to change whatever we can.But coming to solar, as of now, it would be difficult to say that solar is getting certain benefits like we have to support solar for having 24-hour electricity. Solar alone cannot provide that. For -- so in India, competition will definitely increase. But for coming many years, at least for 10 years, coal will be the main source of energy.
Right. No sir, but increasingly if we are priced out, then it really -- we can make much -- a lot less cash for our incremental output. So we're kind of on a slippery racket -- slippery rope, right -- slippery slope, right? So I mean, that's where I'm coming from. Rather you would want to reduce your FSA price and be more competitive beforehand rather than the market forces you to reduce the FSA price?
At this point of time, I don't think there is any necessity of it.
The next question is from the line of Pulkit Patni from Goldman Sachs.
Sir, my questions have been answered.
The next question is from the line of Indrajit Agarwal from CLSA.
This is regarding the wage revision. Sir, 5 yearly wage revisions for nonexecutive employee is due from June next year, is that correct? And are we progressing on the negotiations already? Or is there still time?
July '21 is the date for revised wage revisions.
And when do the negotiations start?
I think March-April, it will start.
Sure. And do you think, given the current market condition, if there is a wage revision, as we had seen in the past instances, we will be able to take price increases to offset that or will it leak into our profitability?
It is a very difficult question to answer right now. Let's see. If the market conditions are very tight, one cannot expect that the wage revision will be in the same line as last year. But that will be very difficult for me to make any comments at this stage.I think -- how many people are left or should we close?
Sir, we don't have anyone in the queue.
Okay. So...
Sir, would you like to add any closing comments?
Closing comment. We are work -- the only comment that I can make is that we are working very hard on the ESG front on which coal companies always get a bad name. And I hope that in the coming months, that is one thing on which we will see a substantial improvement. Thank you very much for attending this con-call, and thank you for everybody for asking these questions. There are 1 or 2 questions, which we could not reply right now, especially the components that we are spending on through brownfield and greenfield projects, we'll send that across. Thank you very much.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.