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Coal India Ltd
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Good day, ladies and gentlemen, and a very warm welcome to Coal India Limited Q1 FY '22 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Chandak from DAM Capital Advisors. Thank you, and over to you, Vishal.
Thank you very much, Ali. Ladies and gentlemen, good afternoon, and welcome to Q1 FY '22 earnings call for Coal India Limited. I would like to thank the management of Coal India for providing us with the opportunity to host them for this call. From the management, we have the [indiscernible] Shri Pramod Agrawal; Director Marketing, Shri Tiwari; and [indiscernible]; and Company [indiscernible], Viswanathan. Without much ado, I hand over the floor to Shri Pramod G for his opening remarks, following which we will open the session for the Q&A. Over to you, sir.
Thank you, Vishal. Good evening, friends. It's a pleasure to interact with people again. So our first quarter results are out. Our dispatches, our production, despite all the constraints of COVID, have been good. This was particularly difficult week -- a difficult quarter for Coal India because in all these 3 months, COVID affected our every stage of operation. Despite that, our production was almost the same as it was last year and it was despite substantially higher compared to last year, and it was even higher than '19, '20. Though we were expecting some better results in the first half I was expecting that profitability from where [indiscernible] somewhere near 3,600 and 700, but because of some provisioning for gratuity, et cetera, [indiscernible] for the medical. Most retirement by medical benefit, which we have not provided for a few years. So for that, 400 -- 600 crores was what we provided. And because of that, our profitability got reduced slightly. But from next -- this quarter onwards, I hope that our performance will be even better. So without going in much of detail, we have to place everything on our website, and our presentation is there on the website. So it will be better for me to answer your questions rather than giving longer our opening remarks. Thank you.
[Operator Instructions] The first question is from the line of Pinakin from JPMorgan.
So my first question is on e-auction, realizing e-auction prices. Can you give us a sense where our e-auction prices at this point of time in August versus the June quarter average?
June quarter average was slightly less. It was because whatever we were -- there are 2 things. One is [indiscernible] thing and another is booking thing. If you see that the June quarter despite figure, that was slightly less because whatever we dispatched in June quarter was mainly what was booked in December of the [indiscernible] third quarter and fourth quarter of last year, and the figure was something like INR 1,569 per tonne. So the average realization was about 10% lower than the multiplied side. But in August, et cetera, now we are repping 30% over our notified price. And these will now get reflected when the dispatches take place.
So sir, when you say 30% over notified price, would it mean an e-auction price of roughly INR 1,700, INR 1,800 a tonne?
I confirm. Yes.
Understood. And sir, my second question is on the wage expense bill. How should we look at the quarterly run rate for the remainder of the year versus what it is right now?
In this quarter, the wage bill, et cetera, has increased by 8%. And as I mentioned in my opening remarks, this was mainly reported increase was there because of that some provision of CPRs and medical facilities -- those medical retirement medical facilities for the nonactive. So if we don't do -- I mean this was one-off. And so I don't expect any provisioning. So my wage bill should remain technically in the same range as it was last year, already one of the [indiscernible] ministries.
The next question is from the line of Meera Midha from Edelweiss.
I have just 2 questions, sir. What is the current state of receivables?
Okay. And the other question?
For the second question is on the cash flow from operations and CapEx. What is the CapEx for this quarter? And what do we anticipate for the year ahead?
Okay. The first question, the receivables at the end of the last year of INR 19,600 crores, which reduced to INR 18,500 crores by the end of June quarter. But by the end of July month, it has come down to INR 17,100 crores, that is a net receivable. So it has come down by about INR 2,500 crores in this last 4 months. And we see -- we think that we will try to reduce it further in coming months. And we are putting constant pressure on our pricing bias. And then CapEx this year, we have a target of about INR 17,000 crores. That includes the CapEx to HURL and the TFL, which is Talcher Fertilizers Ltd. and Hindustan Urvarak & Rasayan Ltd. And in that, some part will be our contribution as equity and another part 60% if we invest about INR 1 and INR 2, it will come from the bank. That will be included in this CapEx. So that is the CapEx we are planning.
And sir, what about CapEx for the coal companies? What are the numbers over there?
The INR 17,000 includes everything. So I think about this HURL and TFL will amount to about 3,000 -- I can't give you the direct figure, but it will be in the range of INR 3,000 crores. So the rest of the INR 13,000 crores, INR 14,000 crores should come from oil companies. But that I think INR 14,000 crores is also improved around INR 1,500 crores is to be spent on the rail line that are being constructed with [indiscernible] by joint venture companies.
The next question is from the line of Noel from Ashika Group.
I just have one question relating to coal prices. So far, I think you have already mentioned that the auction premiums for August have been quite firm. So the thing is that -- but globally speaking, still coal prices have remained quite elevated. I mean even that matters [indiscernible].
Yes, please repeat your question.
Okay. Yes. So the auction premiums, I mean, as you have mentioned, they come back a little bit in August. But for certain segments, even for that satellite coking coal, they're still lagging the international benchmarks. So is this for any particular reason? Or is this normalized as that?
The question is not well.
If I have understood correctly...
Director Finance was speaking.
Yes, if I have understood currently who are one thing to you are asking whether this the auction price realization determent is due to the international benchmarking or due to normalization of the domestic market?
No. Can it improve further? That's what I was quantifying.
Ah yes. That is 1 question. So I think you're asking about the premiums, which has been touched during this quarter is a [indiscernible].
Yes, this quarter as well as the coming quarters.
Yes. This quarter, as I mentioned, it was nearly 30%. And in coming quarters, it will be, in the second quarter, it will be -- I think it will be in the same line, but in third and fourth quarter, servicing remains normal, it will further increase.
The next question is from the line of Indrajit from CLSA.
If I remember correctly, in the last call, you mentioned about the chance of price increase in the FSA segment. So where are we on that? And what is the kind of increment that we can look for in the next few months?
We are working on that. And because of the first 3 months we lost in the COVID, so we could not, at that time of administering of increasing the price, but now we are working aggressively on that. And I can't say what will the figure because we have not decided and could not be disclosed either. But we will see some decisions being taken and we'll try to maintain the EBITDA at roughly in the range of 30%.
Sorry, EBITDA at the range of?
28% to 29 -- 28% to 30%, actually.
Okay. That's helpful. And secondly, sir, this quarter onwards, we'll have to start making the provision for the wage [indiscernible]. So what is the kind of increment we will be factoring in? Just for accounting purpose. I know actual numbers could be different, but when you make provisions, what is the kind of hike we will be building?
We have not seriously thought about it. But it will not be anywhere near what it was the last year, the last time. So probably will be very less competitive. So it will be very less next but I think let's wait for a few days for us to decide on this, please.
The next question is from the line of [ Falguni Thacker ] from Jet Age Securities.
I just wanted to know what is the production and sales guidance for this year?
The target, we have kept it at 670 and 740. But to my mind, if we achieve some production of 630 to 640, kind of patch up about 700 that will be the most practical thing.
Okay. And sir, how do -- how should we look at that stripping adjustment line item in the PL account for this year?
I think there will not be any withdrawal or no more any provisioning. So stripping ratio we will try to maintain, which is required as per the design so that it doesn't affect the production and quality in the coming year.
So will we have a -- so stripping activity adjustment that line, will we have a positive figure? Or how -- if you can give some sense on that?
There will be hardly any provisioning or any withdrawal from that.
Okay. And sir, any view on the contractual expense? How should that be looked at for this year?
It will very much depend on what is the price of the diesel. In this quarter, we lost about INR 700 crores because diesel price increased by about 25%. It was in the range of INR 66, INR 67, and now it is in the range of INR 89. So there has been substantial increase in the diesel price. So if the price remains constant and whatever we have done in the last quarter, we'll maintain but if diesel price increases further, which is to my mind, is completely unlikely, but maybe we can't comment on that.
[Operator Instructions] The next question is from the line of Rahul Modi from ICICI Securities.
Congratulations on good volumes. Sir, a couple of questions. Just wanted to check with you on how the demand situation has been overall for both coking and non-coking? Obviously, we've seen a good set of volume numbers in Q1. How are -- how is the volume looking forward in the next few months as per your estimates in terms of offtake? And when do you look at stepping up the pedal in production? Because a couple of months back, we had a situation where we had to also slow down production because of inventory. So how is that now panning out overall?
Thank you, Rahul. Demand is very good today. Actually, in the first 4 months, we have reduced our inventory by 45 million tonnes, and our dispatches to this day is about 46 million tonnes more than last year. And it is much higher than the '19/'20 figure as well. So the demand is very huge and it is likely to continue. Unless something related to COVID happen, my demand will likely to continue, and we have created space for another 50 million tonnes. For the production reduction that we reported to last year, I don't think that there will be any situation like that in coming months. And this year, it is unlikely to come. We will have to gear up our production and increase it as much as possible because we have already created a space for about 50 million tonnes. And as you know, in August -- remaining days of August and few days of September, the stock is likely to reduce further. So there is a huge demand in the market. [ Execution ] systems are quite geared up. And so it is, for us, how much we produce.
Also in terms of -- you've seen a very strong elasticity, typically when your e-auction volumes went up to 30 million tonnes, obviously, there was a correction. So is it more to do with the time lag of when the quantity was booked and dispatched? And you see better months coming ahead on the auction side? Is your -- as you mentioned, there's a 30% premium, do you see this see this continuing or improve going forward?
In August and September, the premium may not increase, but after this quarter, third and fourth quarter premium is likely to increase because international price [indiscernible] unless it is very expensive, people would like to purchase from us. Now coming to the other part of your question, whatever we move in the first quarter, 3 months, mostly that coal, which was booked -- which was in first quarter, whatever dispatch has taken place is basically the coal that was booked in the last quarter of last year and the third quarter of the last year. Because during the COVID situation, we extended the time period by about 3 months until almost 20th of July. So almost until 20th of July. So that affected -- because of that, the rate in the last 2 quarters was not as good as it was in the first quarter. This is that reflected from now onwards, I think, from September month numbers, whatever listing takes place, it will be because of the new booking. So we should see better price realization.
Right. That's helpful, sir. Secondly, sir, now how do we stand in terms of is the ministry supportive of a price hike? Because in terms of a lot of discounts to be offered has been already given by us. For example, the performance incentive has been let go off, which we used to get for supplying higher than the [indiscernible]. We've also -- we had reduced the base price of auction. So now that your end user industries are increasing their prices, how -- is ministry okay with that basically for allowing you to take a hike because that becomes an important thing? What is your view?
We, coming to the base price of auction now it has been restored in most of the cases. And we are providing some premium [indiscernible] we are adding some premium at the [indiscernible] only. And there is no opposition from any quarter whatever acquisition is there. We are tackling that. Coming to the price side, we are in discussion with all the stakeholders. And in general, everybody is on boat because our costs have increased [indiscernible]. So there's no reason that [indiscernible] should not include the price.
Sure, sir. Sir, so now if you could throw some light on the solar manufacturing that we were looking at. So anything that we firmed up yet on that? And the 3 gigawatt of solar utility installation that you were talking about, sir, how are things progressing on that side?
We have got order for 100-megawatt in [indiscernible] with that. And in our own area, we are targeting to install about 450 megawatts, out of which 100 megawatts has been tendered out. So we are working actively on that, and we will be -- in the coming months, you will see Coal India participating in whatever opportunity come. We are quite sure that by '23/'24, we should install about 3,000 megawatts of solar power.
Right, sir. And manufacturing?
Solar there for manufacturing, that thing has been firmed up. We are working on that. [indiscernible] has been launched. But there, as I've told many times, that we'll grow only if we get a very strong partner along with us. Otherwise, it will be difficult for us [indiscernible] to venture into it.
Okay, sir. And lastly, from my side, it's a very, very cliche question. We always keeping on asking you. Your thoughts on your dividend policy going forward, sir? How do you see with the balancing act between the CapEx and the payout?
If the things as they are moving, if they go as such, then we will have adequate cash for both dividend. And for this CapEx, there will be no shortage of customers [indiscernible] cash will help, we have got INR 17,000 crores in market, which we are realizing very fast. There were deposits and such, the profitability will rise in coming quarters. So the liquid cash will be generated. But our dividend policy since new Director of Finance has done, I request him to comment because I have been replying this [indiscernible].
Sir, just a request to just stay connected. It seems the line for the management has got disconnected. I'll just reconnect them. [Technical Difficulty]We have the line for the management reconnected. Sir, you may please go ahead.
Now the second part of question, I requested the Director of Finance to answer.
Yes. So I think Pramod has already stated that going by the current status of our production uptake and the reliability that we are having, so we are expecting much better profit stability than the previous year and going back to that normal position of what needs to be fulfilling about 28% to 30% of EBITDA margin. And having said that and because the cash position looks also good, so there is no reason why we should not be able to actually maintain a good dividend rate that we have in the past also mentioned and better than what we have in the last financial year.
The next question is from the line of Aniket Mittal from Motilal Oswal Financial Services.
And my first question was on this, the production decrease that we have seen. I think like you mentioned, it's largely because of the high levels of inventory that we had. Just wanted to understand, from an FY '21 end perspective, what sort of inventory levels would you be targeting? Or what sort of inventory levels would you be comfortable with?
Comfortable number for inventory should be about 70 million, 75 million tonnes -- anything between 70 million to 80 million tonnes. But in case the listing is not [ proper ], we can go up to 100 million tonnes. But beyond that, it will not be good to store. So this year also, if you see, in first 4, 5 months, we had 4 months, we have reduced inventory by 45 million tonnes. That too, in the situation and up until by June, COVID situation was prevailing and the demand situation in the country is not -- slightly below normal. So in case the demand situation remains normal tight, then even 100 million tonnes is something which I consider comfortable. Because in the 3 months, with all the efforts that dispatches do not reach go beyond 2 million tonnes. And during the rainy season, again, the movement of the coal, that's affected. So actually, it is advantageous to have slightly better.
Okay. Sure. So from a, let's say, FY '22 end perspective, inventory levels that we'll be targeting to be roughly 70 million to 80 million tonnes?
That's right.
Okay. And our current inventory, I think, at the end of July would be 54 million tonnes at our mine, right? So going forward, we will...
Please continue, sorry.
I mean, correct me if I'm wrong, I think at the end of July, the level at our mine could be close to around 54 million, 55 million tonnes? So going forward, I think we would look to increase the production versus dispatches. And how easily can we do that?
I couldn't hear you well. How?
I would think, at current inventory levels, I think at the end of July, we'd be close to 54 million, 55 million tonnes. So if at the end of the year, we want to reach the number of 70 to 80, but essentially [ talking ] of the production outpacing the dispatches, right? Which means the production at our mines will have to increase going forward, at least for the next few months?
That happened because in the last quarter, we produced almost 30%, 35% -- 35% of our total production if I'm not wrong. And in March alone, we produced about 12% to 13% of our production, so that will not...
Sure. That will happen then in March, okay. And just to get a sense, sorry to harp on this, but if I were to look at Coal India as a whole, what would you say would be the annual production that you can reach for all your mines without incurring any further CapEx?
Without incurring any CapEx, maybe this year, we can achieve whatever we are desiring to, but next year it will not be possible to sustain that because one of the major component of CapEx acquiring land and rehabilitation, during rehabilitation work. And third thing that we are looking at our evacuation system. Unless we invest properly in these seeds for some 3 or 4 items, maintaining this production will be very difficult. One certain fact, going down very fast.
Okay. So I think our target was 630 to 670. So if I look Coal India as a whole, we can easily do 630 million to 670 million tonnes. Beyond that is when we -- where we would face some difficulty? We require to acquire land and that's why we're doing the incremental CapEx?
Maintaining this thing will require [indiscernible] It is not something that we have acquired complete piece of the land. We acquire land every year. Like last year, we acquired something like about 3,000, about 3,000 hectares of land at the cost of about INR 3,000 crores. So that type of a -- we have to keep on acquiring the land.
Got it. That's understood. And just on the OBR front as well. I think what's happened over the past 1 year is because the inventory levels were high, we were sort of focusing more on the OBR front rather than the production of the mine. So how do you see that going forward? Any sort of OBR production numbers that you have in mind for FY '22? Or OBR more numbers are?
OBR partly was because of the fact that you mentioned the Part C was also because of the fact that in the last 3, 4 years until '19/'20, despite the increase in production of the coal, OBR number has remained in the same industry level index of 1,130, 1,140, and that has affected the mine dramatically tremendously. If we want the quality of the coal to improve and we want that production could be slow, then OBR removal at the rate of about 2.5x of the tonnage is [indiscernible]. So it supports we are doing production of 600 million tonnes. So roughly in the range of INR 1,400 crores to INR 1,500 meter million cubic meter of OBR removal is [indiscernible] to maintain the mine geometric. So I think in this year also, we'll target for something like 5 15 metric [indiscernible] 15 in cubic meter of OBR removal.
Sure. That is helpful. And just 1 question on the e-auction front going forward, once our inventory levels, I think, keep on declining. I think the realization on the auction will also go up. So how do you look at the overall mix? I mean, what sort of -- in terms of your overall dispatches, what would the ideal percentage be in terms of the auction volume that you're looking from a full year perspective? Because Q1 was a pretty good number in terms of hitting 20% of our dispatches at the auction. Would we be able to maintain that if realizations start going up?
In that, actually, 53 million tonne of oil stock is not a low stock. This must be one of the highest to stock on [indiscernible] as of this date in any of the last year. So there will be no shortage of coal at the mine level. And from October onwards, the accretion starts happening in the stock. So there will be no shortage of -- because then what I would mean to say that e-auction volume will not get affected because of what is affected. If there is a demand, we'll try to maintain the 20%, 25% level.
And just 1 follow-up on that. Could you tell me what are the overall e-auction levels for the e-auction volumes that we booked? And out of that, how many have we dispatched?
I didn't get, is that your whole question?
Sir, I was asking how many -- how much volumes of e-auction coal have we booked or contracted? And how much of that have you dispatched?
It is not that the 1:1 relationship. The auction that taken place in the last quarter basically got dispatched in the first quarter. So the auction total was about 22 -- 23 -- about 23 million tonnes, and the dispatch was 13 million. But this 23 million tonne has got nothing to do with 23 million tonne. Only a part of the 23 million tonnes we have got dispatched in this 30 million tonnes. Most of it was what was the auction in the last year. We did about 125 million tonnes last year. And I'm pretty sure that we will achieve that number this year.
The next question is from the line of Indrajit from CLSA.
Sorry, I just missed your production and sales guidance numbers for the year. If you can repeat that, please?
I was saying that the PAT should be in the range of 710, 720. Then some more than 700. And the production fee where, if it is more than INR 650, I would be happy. It should be in the range of 645.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
Sir, one question on the part of the auction. So I'm just considering this [indiscernible] auction...
[indiscernible] bring your mobile over to your mouth.
Hello?
Yes. That's clear enough.
So I was asking on the part of e-auction, sir. If I see July month, your e-auction realization on the basis of numbers which were reported on the Ministry of Coal, it was roughly around INR 2,100-odd. And if I compare it with like, say, Jan 2020, it was similar, like say INR 2,200 with the same notified price of roughly around INR 1,500-odd. And if we see the global coal prices, it has almost more than doubled or 2.5x. But our realizations in the spot reauctions continues to remain the same. And even if we see the quantity at, let's say, in July, we have offered hardly around 5-odd million tonnes. And we were able to get interest for only around 50% of quantity. So what is the reason behind that? Sir, when there is so much buoyancy in the global coal prices, even coke prices, they are almost at like the all-time high levels, but we are not able to realize that in the spot reauction. I'm not comparing with other auctions, tax power and all that because there will always be weak realizations or soft realizations in those segments. But particularly on the spot reauction, like say, it continues to remain very tepid, even like the output have increased in the global pricing.
I will put that to marketing. Sitting with me to [indiscernible].
Very good evening to the callers. Basically, you understand that spot market is for short-term lifting. But as Chairman said, we have already told you, the lifting, which was being taken, was from the booking of the previous years, previous quarters. So that is why the poll, which was being held until say, 20th of July, that was getting lifted and the interest for fresh booking was not there because the coal was there in the hands of the traders. Now once this expansion time is being taken out, you will find that this is -- it shoots to a level of around 75% or 80% of premiums. Have I made my point that earlier, we were still there in the market. So there was a less interest in booking the fresh quantity.
I was only talking about the July month.
Yes. It is there July -- up to 20th of July, there was an extension of debt. So the -- once this tool, which was booked earlier, goes away you will find the interest rising much beyond what we have seen right now. But let me tell you spot auction, if I see on an average thing for the April to July it is [indiscernible]. And in a similar quarter when we offer coal to our special production for importers, the premium is 54%. So on average, what Chairman have had said, it is hovering around 24%. But if I take the sector, which is almost in the same price range of spot auction for imported, the premium is 54%. So what I'm trying to tell you is if this coal has been lifted for the last quarter. Now you will see from next month onwards, production premiums will be much, much higher than what you are seeing right now for July or even for the average of April to July.
Okay, sir. And second question on the employee costs. So I was not able to hear that properly. So how much about the onetime this quarter in employee cost, sir?
There was increase of -- okay. Director of Finance will answer this.
You see, in this quarter, you have seen an employee benefit cost of total INR 10,390 crores. Now we have already said that within that is embedded that INR 600 crore, one of actuarial valuation, noncash charge that provision we have made. So even if you knock that off, it comes down to something below INR 10,000, something around INR 9,500-ish or 800-ish, which you have seen even in the 1 year back period. So if you multiply by 4, that we continue something around INR 36,000 crores, INR 37,000 crores, which is more or less on the same line as it was in the previous year. As you know, that almost INR 15,000 goes off, it gives us -- at the present rate of salary structure, almost INR 1,400 crores to INR 1,500 crores of savings. So after recovering that, whatever the increment at there for 3% annual increment and the BA, that more or less keeps the salary and wages intact with the previous year. Now this year also, we are witnessing that the BA has been quite less. I mean the [indiscernible] and the reflection to the [indiscernible] alone has also been less. So we don't expect that it would go, on an overall basis beyond what you had seen in the last financial year.
But would there be any impact regard of the increase in the BA that's being done by the government of India for the Central PSC employee?
Yes. For officers, there have been increase in BA levels by about 5%. But you know that in Coal India, there are like 50,000 employees. Out of that, only 17,000 or 18,000 are officers and the top 2 lakh, some-30,000 are workers. So the impact that it will make will be not very significant. It will be there, but it will not be [indiscernible] not frozen. That was continuing. And the BA of [indiscernible] was not frozen. It continued. So because of that, there is unlikely of any much -- great impact.
[Operator Instructions] The next question is from the line of Pulkit Patni from Goldman Sachs.
Just harping on the previous question and just so that I understand this correctly. So Samiran had explained that employee costs are going to remain in the same range as last year given the adjustments, the readjustment. But if one factors in the provision for wage revision, then obviously, this number is going to be higher, right? Is that understanding correct?
That's right. That's right. Without [ major reason ], it will be in the same range, what Samiran said that it was last year in the first quarter, it was 9,600. This year, in this quarter, it is about 10,400. So out of that increase, 600 was a provisioning thing, what is -- which was one-off. So if that is now gone, then it is almost in the same range, 9,600 to 9,400. And that's likely to continue in the coming months. So if there is a frozen product that provision will be extra.
Yes. I just wanted to clarify that.
The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.
I have 2 clarifications and 2 questions. Sir, first one on the employee cost itself, so when we are guiding for a flat kind of a number on Y-o-Y basis without impact of wage hike, I believe even in last year, in fourth quarter, we had made certain provisions for actuarials, et cetera. So are we accounting for those numbers as well? Or we are negating the 2, the provision made in this quarter versus fourth quarter?
Our numbers should be 9,700 on average per quarter. We have paid a provision of about INR 1,000 crores in the last quarter for that [indiscernible]. This fall, this has come up about INR 600 crores for postretirement. So it will knock off that those things, then it will be almost same. -- whatever onetime one-off provisions are made, if those are removed, it will be a mistake.
Got it, sir. That helps clarification. The second question is on the spot reauction. Just want to clarify something that Director Marketing was highlighting. So essentially, July also saw a muted response because there were a lot of offtake available with the already booked quantity with the players, which was taken off. And what we are essentially highlighting at since then since 20th July? Because that window is closed, the incremental spot auction is seeing a much higher premium of 70% odd. Is that a correct understanding? Is that what...
To strip to 70%, what you mean to say that in July, we had given [indiscernible] all the trader. That's because the coal situation was still [indiscernible] June. So we get them 15, 20 days, 20 days extra. But after July, from the low [indiscernible] whatever quantities are left with them is over. So now onwards, coming forward, we must see a much higher premium on this.
Okay. Got it. And 2 questions that I have, sir. One is on the -- you are talking about almost 640 million tonne of production kind of number and 700 million of offtake, which essentially means that you will probably be having a reasonable moderate inventory at the end of the year. So given that demand remains strong, how prepared are we for a much higher production number and offtake number in FY '23? Or are there some bottlenecks which we still need to address to achieve those?
For FY '23, the constraint that I [indiscernible] is mainly related to evacuation. About production, we can say that we have created capacity, which is much higher than this. Now we have contracted about 130% of our requirements. So that even if 1 or 2 contractors win here, and we have created some flexibility in our contract system also. So it's 1 or 2 contractors here and there, it should not affect our production number. Evacuation is definitely one of the big challenge but we are following it up very seriously. As you know, that almost all [indiscernible] projects are under construction. Some of them will come in the next financial year. So that will help us in evacuation. Many of the lines that are in small line sizing, et cetera, that were under construction, we are following them up. So some of them will get constructed, but that will also help in increasing some dispatches. One major improvement that is likely to take note is our completion of[indiscernible] line computed that about 20, 25 rate but the talking about 1 lakh is passed from MCL will become possible. Similarly, from [indiscernible] they are widening the [ midform ], and there, creating -- like assume line has started construction. Construction has started in that line. So we have taken up some small batch of work immediately, which are very critical for improving the dispatches. And with that also another 40,000, 50,000 tonnes will come by then. We have started construction on Tori- Shivpuri line. So some of these patches may come, and that will help us in improving the dispatches. So I don't -- there may be some problem here and there, but then -- there has been no such constraint that we will be not in a position to meet the demand.
Got it, sir. And my last question was related to this part only. Of the first-mile connectivity projects, if you can just also highlight as to almost 400 million tonne kind of number that you are targeting in Phase 1. How is the commissioning of these likely given that we are already talking about CapEx on those numbers in '22 and probably '23 as well? So what proportion will come in which year? If you can just highlight that as well?
It will come in FY '23.
'23? Okay.
And then coming this year also, about 45% will come in this year, another -- but most of them will come in FY '23. March '23, most of them should be there. But 3 million or 4 million -- billion and one doesn't know how the COVID situation will come. That happens when everything is stopped.
The next question is from the line of Ajay Jain, an Individual Investor.
Sir, my query is, can you throw some light on the Jharkhand demand, which we were having? And what is the progress in this? If you could quantify it because in the last meeting, you had informed that they're going to take the rate based on present circle rate of the land. Could you just quantify a little on the coal liability which we are having on this?
There is a problem with Jharkhand then before. The land, we have acquired, but many of that land has not been given position to. We have not won the position. Secondly, a lot of plans for which we have already paid for individual but that is in the way of [indiscernible] government. In some order call and whatever payments we have made is after the verification done by the land about [indiscernible] that is the level at all. So there is no some seasonal [indiscernible]. We have paid last year September 30 with Jharkhand borrowing [indiscernible]. A large lot of land that they have provided a lot of land that have been up to day process. So whatever figure that is coming, I don't think there are any realistic or anything on the [indiscernible] all those fees are not based on any [indiscernible] we made that much of land alone to us [indiscernible] our mining strength will go to a little a phenomenal growth in our production. So there's more -- there is no linkage between realty and [indiscernible].
Fair enough. I understood that. But coming to my next, could we quantify from the company's point of view, what you feel could be the liability which we look at? Some ways we had worked out the INR 2,500 crores figure, which you said -- which you had mentioned that, that also is not there in your mind. But because these figures are so huge, it can have a very financial difficulty as regard the liquidity and the profitability going ahead if it comes true. So could you quantify to testify, okay, this is the liability which we feel may come up? I mean...
I don't think any liability is going to come up. [indiscernible] of the land, 200 acres of the land for which we have given them [indiscernible] advance. Where maybe another INR 1,500 crore fees or something like that, not more than that, but the cost needs to match. Beyond that, there is nothing in this [indiscernible] plan as seen land can be not supply.
Wonderful. This is very comforting because the figures which have been going around can really make a lot of difference. I think that, secondly, sir, there is so much of rise in international prices the auction and the spot prices gives us better revenue to the company. Are we -- do we have a cap on this that we can only do a particular amount of production can go into e-auction apart from the ones which you have a tie-up agreement?
Around 20% of the total production, but that constrains as there is more demand from the [indiscernible] customers. As such, we're achieving 20% itself has not been possible in many years now, we have geared that. And so our thing is not a constraint, demand should be there. And if you offer too much of the quantity then there will be no [indiscernible] will be in on it. [indiscernible] making a balance between the demand and supply, all these [indiscernible].
So just to color to it. Basically, right now, the international prices are going, I mean, lifetime high, and there's a difference between a year back and today, it has increased more than 100%, 150%, why is this not reflecting in our prices? Whenever we see international prices, we go for a good sleep because we think even Coal India would have a good price, too. But when we go back, it does not reflect so in our pricing. Is there any particular reason behind it? Like you explained about the spot prices, that 20% is what we can sell and probably we will reach that figure. But apart from that, the FSAs and are we not able to negotiate with them? Like normally, if you see other commodities, they monthly take out a price list, okay, this is the price which we'll give from this particular day onwards, iron ore and other commodities. Why is not that happening in coal, sir?
50% of [indiscernible] prices we can notify. [indiscernible] it increases tremendously, then it will affect the price and the price of the power in the country. So that much of freedom we don't have, but that we can match it with [indiscernible] because if we increase that price for us, our electricity spot price will become almost 150x what we -- or 150% increase in the year [indiscernible]. And then the whole country, same problem. So that type of thing cannot happen with people [indiscernible] commodity. I don't think that should -- that is a practical thing, and now it is a desirable thing. But we completely understand that this is a high time and the price should increase, taking into account the fact that for last 2.5 years and what improves the price in our case selectively to review it to that same [indiscernible] completely agree with you. But whatever we offer on the spot e-auction, I think in coming months, we'll be much higher.
The next question is from the line of Vineet Maloo from Birla Sun Life.
Sir, just wanted to know what has been the progress for us on receivable side at the end of June and beyond June also till date? If you can just talk about that, sir.
I have mentioned this in the opening remarks, Maloo. But then coming that way, at the end of March last -- this year, 31st March, it was about INR 19,500 crores, which is due to INR 18,000 -- INR 18,500 crores by June and my director finance person as of July, and it came down to INR 17,000 crores there has been a reduction of about INR 2,400 crores in the last 4 months.
I think I missed it earlier. And my next question is, sir, what is the total CapEx we've incurred so far in the year? And are we on track for our annual target?
As I mentioned earlier also, the target is about INR 20,000 crores, but that includes our investment in HURL and TFL. And HURL and TFL, I expect that this year, about INR 1,000 crore equity will be put and correspondingly about INR 2,000 crore [indiscernible]. So the INR 3,000 crores is on HURL and TFL account and another INR 1,500 crores fee, INR 1,000 crores, I don't remember exactly, is for railway lines that have been constructed is the [indiscernible] and that also my [indiscernible] only my equity, if successful, that is 64%. But then out of total investment, only 20-20 -- 20% or 30% is equity and 70% is debt. So to that extent, if you are looking from the cash point of view, this tax should be kept into account. And that's the thing is for our improving our coal production.
The next question is from the line of Rahul Jain from Systematix.
Sir, on -- we have started an exercise of import substitution sometime last year, if I'm not wrong. So how far have we succeeded on that front? And what is your expectation for this year? And secondly, sir, I want to know so what is the pipeline of terminal projects coming in the country? And so what do you -- how do you see the landscape evolving in the next 2 years?
I couldn't get your second question.
No, my -- there is more broad-based in terms of this carbon emissions creating a problem globally. So how are we geared up to address that issue?
Okay. Coming to the first question. I think about 70 million tonnes all the things that we supplied and stood up import last year. And this year, again, we will make all the assets to replace import as far as possible. But our limitation is that there is lot of imports, which is the type of imports, the type of coal we don't have, like coking coal, high-grade coal and sold for [ postal ] power plants, et cetera. So that is something which is not replicable. The rest of the full whatever is replicable we'll try our best to replace that. Coming to the second part of the question, which is related to decreasing the carbon emission. We are taking all the step possible. As I mentioned in earlier interact as well that first-mile connectivity, the projects related to first-mile connectivity and the new line are a bigger step in reducing the carbon footprint. Very soon, you will see maybe before an hour on our website that will indicate that a lot of carbon, I don't want to give the numbers exactly. But by constructing all the certified FMC products and lot production will take place in carbon emission that will be a substantial reduction. Secondly, we are increasing the forestation drive. Last year, we did tree plantation on about 800 hectares of the land and did about 2 lakhs plant. This year, we are planning that we should do more than 1,300 hectares of the land and [indiscernible] 30 million plants will be -- will be planted. Besides, this is over and above the statutory requirement of forestation that we are required to do when we affect any forest area. And whatever we have accumulated over the years is more than 4,000 hectares. I don't remember those number [indiscernible] 4,000 hectares -- more than 4,000 hectares of the land we have planted on this, we have trees planted. And in certain areas, actually, the area after our [indiscernible], it has become greener. So all these efforts, we are doing some experiments on how to replace diesel with LNG, and we have signed an MOU with deal recently so that they will help us in introducing LNG, if that happens and for the reduction of in high [indiscernible] can be achieved. We are trying to get into the solar power. As I mentioned earlier that about 250 megawatts we have identified, which will be created just to meet our requirements, which is supplied to the subsidiaries indirectly. And besides, we are trying to enter the [indiscernible] by taking up solar power projects in other areas so that in the next 2 to 3 -- next 3 years, CIL can become energy neutral company.
Yes. That's very helpful. Sir, also on how do you envisage the situation evolving, say, in 5 years' time? Do we see a lower production and uptake given your projections that you would have done? Or do you think that the thermal demand will still continue to grow at more than 5% or what are your thoughts on that, sir?
It will be difficult for me to indicate any number. But my understanding is that the next 1.5 decades, the coal production requirement of the country will further increase. There is no way it can decrease. Our average energy consumption is on -- sorry, we've taken another way, that average carbon emission per capita in India is half of the world average and about 1/8 of the American average. If we have to improve the standards of the living, then this energy consumption in the country will increase. There is no way that it can decrease. So that's 10 to 15 years, I don't think the coal demand will reduce and maybe the share of the coal in power generation will decrease. But in absolute terms, it will definitely improve and the production requirement will be at 5% to 6% increase every year.
Right. And sir, lastly, you think it will be coming from higher PLF? Because not too much of thermal capacity that we added, is the right assessment, sir?
That's right. Last year, it was only 58%. This year, in second month, it was real growth to 62%. So it is likely to increase this year, you will see that PLF will be 60-plus.
The next question is from the line of Vishal Chandak from DAM Capital Advisors.
Just a couple of questions from my side. The first question was with respect to simplification of the e-auction process. If I remember last time, you mentioned that there are a number of e-auctions, multiple e-auctions that you run. And that creates a lot of cannibalism in the system as in who puts in how much quantity in which auction and thereabouts. So price discovery also at times is not very realistic and demand assessment is also not very clear. So any thoughts on how soon can we move on to 1 company, 1 auction kind of phenomena?
Vishal, we are trying very hard for this, but we need government permission for this. And as you know that it will affect [indiscernible] so those interests would start trying to work it, but we are working on that. It will be difficult for me to indicate the time line. But let's see. We are working very hard on this and it should happen.
So in my view, that would unlock a significant amount of value for Coal India because if you look at today, any other company in the commodity space, they have reported lifetime high EBITDA, while the cost structure is probably remaining flattish or marginally up. So high time we have our share of the pie?
You are right, completely. But then other commodity and [indiscernible] is slightly different because almost everything depends on coal. So rampant increase in price of coal products will not be advisable for the country's economy. But then, I completely agree that there should be some increase and all these mechanisms should be transferred and it should discuss that real price [indiscernible]. And we are working very hard on our vision.
That's great to hear, sir. So my second question was with respect to washeries. I remember at the time of our IPO, we had made certain commitments on setting up washeries and proceed towards improved quality of coal. So in recent times, what are the actions that we have taken on washeries, if you could just elaborate on that?
It was found that washing coal becomes slightly expensive, and no power plant is willing to take washed coal. Despite that fact, if you count it over the certain distance, the cost of transportation of the ash content, which makes the coal cheaper, but none of these power plants we not giving any commitment on this, yes. And hence in the last year, the government that made it compulsary not to [indiscernible] beyond second half that has both [indiscernible] has been ratified. And hence, in today's situation, even if I start washery, I don't know how much demand I have. I have been requesting power plants to indicate that demand [indiscernible] commitment. But in the last many years, they have not given. So ultimately, washeries from noncoking coal are unlike -- not many washeries are in noncoking coal are likely to.
Right, sir. And sir, my last question was with respect to our CapEx for reaching at 1 billion tonnes. If I remember, we had stated that we need about INR 65,000 crores of CapEx to reach 1 billion tonne. And we were planning to hit that number by about FY '24. I understand we would be delayed because of the COVID. So where are we in terms of reaching 1 billion tonnes? And in terms of capacity to produce? And how much we have spent on that so far? That will be all.
Last year, we spent about INR 10,000 crores to INR 12,000 crores just on our increasing our capacity. This year, again, as I have explained earlier, it was INR 13,000 crores is a knock of all other [indiscernible] INR 13,000 crores to INR 14,000 crores CapEx will be going. Next year, again, we are likely to do CapEx of INR 15,000 crores on these items. But what you are saying that INR 65,000 crores is required to increase the 1 billion tonne production, perhaps there is some mismatch in these numbers because when we say that so many projects are to be open for reaching this 1 billion tonne target. And for those projects, INR 65,000 crores or INR 20,000 crores will be required. It doesn't mean that for 1 billion tonnes this much is required. Because that INR 65,000 is the total requirement of those projects over the next 20, 25 years. So that much capacity will be created and that capacity makes to be sustained over many years in the coming years. So that is something. So it is not that be required to spend INR 65,000 crores in the next 2 to 3 years to achieve these targets.
As there are no further questions in queue. I now hand the conference over to Mr. Vishal Chandak for closing comments.
Thank you very much for participating in today's call. I hope we have had a very good session. And I hand over the floor to sir, for your closing comments.
Thank you very much, Vishal, for organizing this, and thank you, participants for asking very good questions today. And I must appreciate today that the reputation of the portion were not there, so we lot this well within time. Thank you very much, Vishal, for our presentation.
Thank you. Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.