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Coal India Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Post Results Conference Call of Coal India Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Modi from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good day, everybody. On behalf of ICICI Securities, I welcome you all to the Q1 FY '23 Post Results Conference Call of Coal India Limited. Today, we are pleased to host the members of the senior management of the company, led by Shri Pramod Agrawal, Chairman and Managing Director. Thank you, sir, for giving us time for this interaction. We will begin the call with remarks from Chairman, and after which, we will open the lines for Q&A. I would like to hand over the floor to CMD now. Thank you, and over to you, sir.
Thank you, Rahul, and good day to everyone present. Let me first apologize for postponing this meeting twice, first because of my sickness; and second because of some urgent work that emerged, but I'm really thankful to ICICI for organizing this meeting.
I really wanted to come personally to Bombay, but somehow it is not happening because of the pressures of increasing production. There is -- demand for power coal has increased substantially, partly because the demand for energy has increased and partly because the imported coal-based power plants have reduced their production substantially. The generation capacity has -- the generation has reduced substantially.
Secondly, even the CTPs, which were importing coal and producing their own power, they have now shifted to the utilities and hence, the power consumption through utilities have increased where the Coal India has to supply power. In first quarter, we are happy to inform that we could meet the demand of the power sector and we could maintain the supply to non-power as well.
Because of increased production, cost per tonne has reduced significantly, and because of the increased international price, we could get higher prices in e-auction as well. Because of the -- all of this has contributed an increase of profitability despite the fact that our cost of production has increased slightly because of the increase in price of diesel and petrol and increase in price of the explosives compared to last Q1.
But increased production, increased offtake has helped us in reducing the cost of supply, and this has helped us in increasing our profitability. The company is quite sure that this year, we will be achieving the target of our 700 million tonnes. And for this, we are working very hard. There are certain problems in 1 or 2 companies, but we are trying to resolve it, and even then, even if it is not resolved, we'll increase the production from other companies to compensate for that.
And I'm quite hopeful that this year will be the very -- will be an outstanding year for Coal India, both from a production point of view, from -- secondly, from meeting the need -- and because the production is there, we will be meeting the need of the nation and all of this will contribute to increase of profits of the company.
Thank you. So now I would like to invite the questions.
[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.
Congratulations for a very good set of numbers. I have 2 questions. The first one relates to, essentially, the wage provisioning. We have not seen anything in the P&L profile and this is contrary to earlier times whenever wage provision was there, it was being shown from Q3 of that particular year.
But so far, we have not seen anything. So could you please throw some light on the possible quantum of increase that you would provide for it? That is my first question.
Will you ask the second question as well? And then I will reply both the questions simultaneously.
Yes, yes, sure. The second question is essentially on e-auction volume and pricing. What we have seen that the e-auction -- blended e-auction prices in Q1 were like INR 4,400 almost, but the bookings in the last 3 months have been -- I mean upwards of INR 8,500. So what kind of number can we expect in terms of realization in this quarter?
And going ahead so far in September, what kind of price you have seen? Has it fallen from that level? And what kind of volume can we see in the e-auction for the whole year? So these are the 2 questions.
Okay. First is wage provisioning. Last year, we have provided something like INR 700 crore, INR 800 crore -- INR 900 crores. Last year, we had provided for the wage increase. This year, again, we are providing INR 150 crores per month, so INR 1,800 crores.
Now we have provided INR 100 crores, and we will increase it in coming quarters, maybe in third quarter onward we'll increase. It will be very difficult for me to say what will be the impact of the wage negotiation, but -- because the negotiations are still on and we have not come to any agreement, but the impact, we will try to respect this.
Secondly, our -- we must understand that not many people are retiring, and this is giving us some leverage like this year, again, we are expecting that 12,000 to 13,000 people will retire. So there will be increase. There will be some impact, but the impact is not going to be very phenomenal. It will be something which can be managed. And with the price increase due, I think it will not have any impact on Coal India's bottom line as well.
E-auction price last year in the first quarter was around INR 4,340 and that increased the substance sale. Quantity was 20 million tonnes. I don't have a figure right now, what is the quantity we have auctioned in Q2, but I presume that this trend of about 20 million to 25 million tonnes will continue throughout the year and we will end the year with about 80 million to 90 million tonnes of e-auction coal.
But this depends how the demand for the power comes up. If the demand of the power increases substantially, then our the ability to do the e-auction reduces to that extent. Price as of now is still very high, and in certain cases, we are getting about INR 4,500 or even 300% of the premium. So I think about this range will be maintained if it does not increase further. But at least this range will be maintained for e-auction price as well.
Great. That's very helpful. So I just wanted to understand INR 100 crores per month you are providing in wage provisioning, right?
Until now, we are providing INR 100 crores. From quarter 3 onwards of quarter 2, let me see, we will increase this slightly further. It is likely -- it will be very wrong for me to give any indication to what will be the wage impact because the negotiations are on. And if I indicate something, it will impact the net base negotiation.
No, INR 100 crores is every month, right? Not every quarter. It's every month.
Every month.
The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services.
Sir, my first question was with respect to the status of the railway line of the railway projects, the Tori-Shivpuri doubling of the line and Jharsuguda–Sardega doubling line. So what would be the current status of the expansion, sir?
Tori-Shivpuri line, as you know, the second line was completed and the third line was even in progress. And I think next year, it should get completed, if I'm correct. Yes, Shivpur–Kathoutiya will get by 2024, and this line should get middle of next year, the third line will also be laid. The work is on.
The second question about Jharsuguda-Barpali-Sardega, the Jharsuguda-Sardega line, the first line is already there. It is functional. The second line, we have sanctioned it, and it is likely to get completed by March '23, but there are 3 components in that.
One is Barpali bulb and the second is there are some overbridge at Jharsuguda and the third is line. Doubling of line as far as concerned will get completed next year, but this bulb will take another 2 years and the overbridge -- and the flyover will get completed by -- somewhere in the middle of '24. So this is our expectation.
Great. That's quite helpful, sir. Sir, my second question was with regard to the 1 billion tonne production target. Now that coal is back in focus globally and everywhere there is a huge demand of coal, so I'm sure now there is no dearth of demand going forward from both power as well as non-power sectors, so how soon can we plan to realistically approach a full year production of 1 billion tonnes?
See, our target is to achieve by '24, '25. That is FY '25, we should achieve the target that is given by the government. Earlier, it was '23, '24, but as you know that we have lost 2 years because of COVID, et cetera, and the demand shortage. This year, I am quite hopeful of achieving the target of 700 million but to achieve target by FY '25, we need to produce about 840 million next year and then increase it 1 billion the year after.
I feel that may not be very realistic. Realistically speaking, perhaps by '25, FY '25, we will reach something higher than 900 million tonne, and the year after, definitely, it will be achieved. If the demand is there, we will achieve the 1 billion tonne target. But we'll try to achieve this by '24, '25.
So sir, if I keep things in perspective, what we are saying is between FY '23 and FY '25, we are going to expand by at least 200 million tonnes. That is more than 30% growth.
Not 30% growth. FY '23, we will be closing by 700 million -- yes. It will be 200 million tonne.
Roughly about 30%.
That's right.
And we have never done this kind of a growth in the past. So land acquisition, clearances, R&R, evacuation. Do we -- have you all the things in place? Or we are still -- will take it up as it goes forward?
See, there are many steps of this. First thing is PR approval. We have got a PR approved of all these things. We have issued MDO contract for about 100 million tonnes, 50 million tonne [ more than ] we have done for Chandragupt and we have done for Kotre Basantpur, and 1 more in this MCL. That is 1 more we have done.
So with all this about 100 million tonnes we have already awarded, these are like -- this will produce coal by FY '24. And by any stretch of imagination they can -- by any means, they will produce definitely by FY '25, this 100 million tonne. Besides, we have got -- in this year, only FY '23 alone, till now, we have got EC of about 60 million tonne, 64 million tonne.
You see we have already got. So government is quite proactively granting EC. There are certain issues related to FC, but it is a continuous process. Last year also, we got -- I don't remember the figure, but we have got sufficient FC clearances last year also, and this year again, there is a progress in that.
Land possession last year, we got something like 3,000 hectares of land repossessed. This year, again, we are going to do this. So these are all continuous process, but we have got a plan on paper at least, which we are following. And until now, we have been quite successful in that. So if we push the thing, I think Coal India can achieve target.
The next question is from the line of Pinakin Parekh from JPMorgan.
My first question is going back on e-auction. Now over the last few months, we have seen government policies, which have tried to tamp down on shortfall/windfall profit for various companies and various sectors. In that context, sir, are there any risks to the e-auction prices or volume in terms of potential policy action? Does the company see if prices remain such high then there could be restrictions in terms of what kind of e-auction sales volume has done?
My second question is there seems to be an increase in the receivables by around INR 3,500 crores in June versus March. So what has driven it? Which state SCBs are driving that increase? And third is on the CapEx outlook. Can you give us a sense of the CapEx outlook for this year? And what, broadly, areas would the money be spent on?
Okay. I think you have asked 3 questions. First is related to windfall profit. See, we are selling 90% of our coal on [ FMC ], et cetera, which is tied-up coal and there is hardly any profit on that. We are getting only 10% coal, which is e-auction and 10% to 15% on which we make all the profit. And in our case, there is hardly any windfall profit. If the windfall profit, if they try to control the price of the e-auction coal, then they will have to increase the price of this power coal.
So to me, that doesn't seem likely at all, but it will be difficult for me to see what will happen in future. But there have never been any talk of windfall profit. We are not making windfall profits per say, and whatever profit we are making is just because we have increased the efficiency of production, because we know that we have got a very huge production leverage.
Our employee cost is very high, which remains constant whether we produce 500 million tonne or 700 million tonne. So by increasing the production, that cost per tonne has been reduced. I don't think we are getting anything windfall in that sense. So to me, that doesn't look anything -- any possibility, and there has not been any talk about it.
Second question was about receivables. Yes, receivables increased slightly from INR 11,000 crores to INR 14,000 crores in first quarter. But again, we have reduced it to INR 13,000 crores this month. We have reduced it by INR 1,000 crores. So that is -- our quantities of supply to the power houses have also increased demand, that's about 20% or so.
I'm not saying that if that increases then the receivables should increase, but there are [ PDFs ] when the SCB and gencos are under tremendous pressure and we are also pressured to keep momentum-ing the supply lines properly. Otherwise, there would be a power cuts in the country in 1 place or other, which is not acceptable.
So we had relaxed slightly during April, May, June period because at that time, the supply was very high, and we had to ensure that there is adequate stocks for this rainy season as well. But now onwards, when this threat is not there, from October onwards, we will control it further. We have controlled it in August also, and we will control it further so that our receivables will come down again. So there's no risk involved in that.
The third is CapEx. Last year, we did something like INR 15,500 crores. This year we'll reach INR 16,500 crores. Actually whatever we are spending is being spent only on coal-related and coal production activity. I think this question is being asked to me for the last year right from the beginning when I joined because we have increased our CapEx [indiscernible], but you must understand that we are able to increase production this year just because we had made all those investments at the right time.
Secondly, we are investing in a big way in our FMC projects. There are 35 in FMC projects that we have always been talking about, they will get completed by March '24, as I've been committing it right from very beginning. There are 9 more projects which are in pipeline. And then related rail infrastructure for this line. This requires huge amount of money, and we have to procure land also continuously, unless we made these investments.
And the third investment is high capacity equipment. Unless we make these investments, the future production will get affected adversely. So we have to ensure that the -- there is enough pipeline of investment, continuous pipeline of investment and CapEx, so that our production never gets suffered.
We need to create a situation where the -- where the capacity to produce in the country is slightly higher than the consumption requirement of the country so that we can avoid the import of the coal, at least lower quality of the coal. So that is the thing we have to ensure. And for that, the CapEx is required.
The next question is from the line of Shivam Gupta from Matsya Capital.
As there's no response from the current participant, we'll move on to the next. That is from the line of Sanjay Parekh from Sanjay Parekh investments.
Yes, yes. So I'm from Sohum Asset Managers. Sir, one question I had was if you were to compare on a CCL basis, realistic value basis, what is the discount today on e-auction versus imported coal, sir? And what is the gap you see -- I mean, historically, how has that been, sir?
It is very difficult for me to compare these things, but let me try, because I have not prepared -- the coal that we are supplying is mainly lower quality coal, and imported coal is generally higher quality coal. Hence, generally, the imported coal is in the GAR of 5,000. And if you say what we are supplying normally is 3,500 GAR or about 4,000 GAR.
So comparing this cost size of this, just on calorific value, will not be proper because you don't convert the inherent calorific value directly into energy. There are certain losses, et cetera, and there are certain other things as well. Like in [indiscernible] plants, they will always prefer imported coal if it is slightly costlier also because it gives them a longer period of operation. The yields are slightly higher.
And all this, there are many factors which improved. But then -- if you compare G5 coal of this Eastern Coalfield Limited, we are selling it at -- which is roughly in 5,500 kilocalorie, we are selling it at the rate of about INR 10,000, INR 11,000 per tonne. And imported quality of the same -- imported coal of the same quality will be in the range of about, today, $120, $125 because prices of coal have decreased in the international market from $134 to now $100.
So it will be -- I think it will be a $125 range. So there is some difference, but not much. But it will be very difficult for me to answer this question directly, if you want, we can do some research and then give you.
No. No. Perfect, sir. So sir, second question is just the coking coal where we actually badly need as a country to be self-sufficient. And there were some -- recently, clearly you also mentioned that we should -- we would step up on that. So for coking coal, over 3 to 5 years, what sort of volumes can we get, sir?
You must understand that we -- becoming self-sufficient in coking coal with the present technology is slightly difficult task. There are 2 aspects of coking coal. One is its hardness and another is the ash content.
We can reduce the ash content slightly or substantially also by washing the coal, but hardness cannot be increased. So with present technology and with that [indiscernible] -- with the [ stand cell ] charging technology, the maximum quantity of the Indian coal can be used up to 25% to 30% also only of our blending, and the rest 70% to 75%, they will have to import.
Without stand charging, the sale, et cetera, are falling. Even 10% to 15% mixing is possible. Beyond that -- going beyond that is really difficult. So in foreseeable future, becoming self-reliant in coking coal will be difficult. We are producing -- this year, we will be producing about 40 million tonnes of coking coal, but then grade 5 and grade 6 -- washing grade 5 and washing grade 6 is hardly used for steel industry, only 1 to 4 are used.
And in that also, India, basically the most maximum quantity of the coal comes from this washed grade coal. So we are trying to increase the production. We are making some policy interventions also so that we are thinking that if the steel plants can take the coal and wash themselves, for us, it will be better.
So we are thinking in those terms also. If that comes, then perhaps it will help the country to increase the usable coal in a bigger way, but giving any commitment or giving any -- this will be difficult for me.
Sure, sir. And sir, last one, we are investing in renewables in alumina plant and other ventures. So normally, what is the payback for these projects, that payback threshold for us to invest in this project, sir?
See, for solar power, we are -- we have to do it, firstly, because we have to become energy neutral. And that is one area in which the company has to develop. We can say that coal will last for another 20 years, 30 years, but beyond that, there are possibility -- technology will take over and everything does not last forever.
So solar energy, one has to invest because, as I said, we have to become energy neutral. Maybe in the next 2, 3 years, we should target that, otherwise coal production itself will suffer because of many pressures that are operating in the society. We look for IRR of at least 12% before investing in anything, but in solar projects, sometimes we reduce that also, but we have not made any substantial investment in that.
We have bid here and there somehow. The prices that is coming in the bidding are very low and Coal India has not been very successful in that account. But whatever solar plants, we are installing our [ disc ], which will likely to come to 450-megawatt or so. That energy will be consumed by us only, and that will definitely reduce the price of the energy for us.
So as far as for self-consumption is concerned, the IRRs are very high and the returns are very high. If you go for selling it in the market, the IRR, we are looking at 12% or slightly below that. At alumina, et cetera, that is -- we have -- we will not go unless the IRR is much more than 12%.
We are trying to get alumina mine on a nomination basis. If we get that, we'll proceed with that. And that, I think, should be a profitable venture. But rest assured, Coal India will not invest in any enterprise or any fact -- any project where the IRR is not adequate.
And sir, this is project IRR, right?
Project IRR.
The next question is from the line of Kamlesh Bagmar from [ Lotus Asset Manager ].
Sir, first question on the part of the coal compensation step. So if you see all the captive mines, which have come under auction, they have the benefit that they don't have to pay that INR 400-odd coal compensation cess. So are we making any ground to the government saying that it's not a level playing field because all these coal mines which would be coming after 5 years or 3 years would be enjoying such a significant benefit?
See, if the coal is consumed in the -- by the same company and in the same state, then only the coal compensation tax will not be applicable. But many of these companies will be using this coal outside their state. Coal compensation tax is -- how long will it continue? It is difficult for me to say. There were -- this was till June this year, but this has been extended. Maybe it will get extended further.
Now they have indicated that it is 2026, still 2026, there is not much of pressure because that is the situation. Because not much of production is likely to come from these captive mines, et cetera, not captive mines. But if they are selling in the market, then they will have to pay the full compensation.
And our competition is always with the persons who are selling in the market. If somebody is doing his own mining and consuming it, there's hardly any competition with us. But the second thing is that Coal India has got many advantages also. We are not paying any premium to the government on the royalty that these mines, captive mines, et cetera, have to be paid.
And secondly, we have all the best mine. So when compared to everything -- and then this is completely passed through to the consumer. I don't think it's going to create much a problem for us. But you are right, we will take up this issue at the right point.
Okay. And sir, secondly, on the part of your investment in other projects like the aluminum and then that fertilizer and coal gasification. So what's the status on that part?
You know that in HURL, we have invested in HURL. Work in the plant hasn't started, but the 2 plants are likely to start very soon. TFL, there is some delay of about 18 months. About 18 months delayed there because of COVID, et cetera, and there were some issues with these issuance of visa, et cetera. So because of that, it has got slightly delayed. Aluminum project, it is still on the board -- drawing board. I'm not stating how will it develop.
And so lastly, like you have performed very strongly on the FSA realization. So despite the fact that your dispatches to the non-power sector has come down significantly by around 21% year-over-year while the power volumes have increased, but we are seeing the play-around 3% to 4% increase in FSA realization. So what's the reason? Is it because of the grade or like any other element?
I couldn't get your question. FSA realization is increased, but it looks the same.
Yes, for 3.5% year-on-year.
This is mainly because of grade realization. And previously, people were not purchasing coal from BCCL and ECL because they are costly coal, but now they are purchasing that coal also. So the coal mix has changed slightly because of that. It has been increased. I think that should be the reason.
The next question is from the line of [ Vipul Shah ] from [ Sumangal Investments ].
My question is how many workers on an average retire every day? And what percentage of that portion is employed in underground mining?
See, today, we have got about 240,000, 245,000 workers. Out of that, about 1 lakh is there in underground mine and 140 or 145 is in opencast, that -- roughly in that range. About 5% of our manpower is reducing every year. This year, again, it will reduce by about 12,000 to 13,000. So that's the situation.
No. But that -- out of 5%, what percentage is from underground? Because their productivity is ridiculous and it is highly loss-making for us. So I mean why -- out of the retiree majority are from our underground mining workers or opencast? That is my question, sir.
Underground mines, they are the older mines, so the people engaged there are slightly older. But I don't have this figure right now that what is the percentage. But higher percentages from underground mines and lower from opencast. But I don't have a good figure right now.
And secondly, sir, when IPO was launched at that time, presentation was made that we are investing very heavily in washer use, but we have not seen any significant increase in production of washed coal. So by what time we can see significant increase in washed coal volumes?
Okay. If you talk about washes, there are 2 components of it. One is coking coal and another is non-coking coal. Non-coking coal, there's no purchaser of washed coal. People are not very eager and they are not willing to pay for it, even if they are saving. Unless we have got our rationale, there's long-term tie-up with somebody, it will be difficult for us to sell the product in long term.
And hence -- and secondly, the government earlier had said that beyond 500, not -- coal having more than 34% ash cannot be carried. That limitation also has been removed now. So in non-coking coal perhaps washing -- installing washing will be a [ risky thing ], and we are installing 1 more washery, which was under construction. So it will come -- maybe next year, it should come in production. But we are not thinking of installing.
At that point of time, people were thinking that very -- they were very optimistic about non-coking coal. For coking one, there were certain issues about the land leasing, et cetera, that has been resolved now. So now in CCL also, we are going to award the contract or we are going to do the tender so that these things are coming.
Last year, we have increased our washed coking coal production by more than 60%, 70%. And this year, again, we are going to double -- almost increase by 70%, 80% further. So 2 washes have come in production, Madhuband and Patherdih. These 2 have come. Bhojudih is likely to come -- Bhojudih has also come but there's some problem of coal, et cetera. And these washeries, when they come, then washed coking coal production will increase, but non-coking coal, we are not investing much.
But sir, regarding coking coal also your base is so low that even if you grow at 100%, so it makes hardly -- can we expect this coking coal to touch 20 million, 25 million tonnes over the next 2, 3, 4 years? Is there any likelihood of that happening?
No, it's not likely to happen.
So 2 to 3 years down the line, what should be the coking coal volume?
Sorry to interrupt, Mr. Shah. May we request you return to the question queue for the participants waiting for their turn. The next question is from the line of...
[Operator Instructions]
The next question is from the line of Atul Jain from [indiscernible] invest.
Sir, my question, I'll just go quickly with them. My first question is, while the international prices are quoting, as you know, $400-plus, in our investor presentation, we are realizing about 4,400 on the auction and about 1,500 on the FSA. So why is there such a huge gap between the two?
The second question is, there's a lot of other conference calls of these power companies, the management is saying that they've been able to renegotiate their supply agreement and PPA agreement and they are able to get higher prices because of the increased coal cost and increased cost of production. So why aren't we able to achieve that if that is the case?
And third question, I just quickly put that in, is 25% of the production is allowed in the e-auction, where we normally average about 11% to 12%? So is there any scope because, as you said, that's the profit-making the units. So is there any scope on increase in that?
Now comparing to international tax, $400 plus is the price for coking coal. That is not for normal coal. As I mentioned that in Indonesia ICI 3 last leek was $114 only. That, too, is very high compared to our price at which we are selling. But as you know that our coal is slightly inferior rate and getting -- and the consistency in our coal is low because of the [indiscernible].
It is the geographical conditions -- geological thing that is happening. And hence, we always had slightly lower price than the international price. So there is no anomaly on that. We cannot get the price of the coking coal. Coking coal is a completely different basket.
Then secondly is PPA agreement they're renegotiating, et cetera. Yes. Imported coal-based power plants renegotiated their price with the discom and they tried to increase their production. But still, the discoms did not go beyond certain line, a certain limit. And hence, the production of imported coal-based power plant have been very low.
It has been -- in the last month, it was in the range of 100 million unit per day, whereas the capacity is about 300 -- the capacity is about 350 million units per day. So they were not producing adequate quantum of that energy, and they could not renegotiate much and the state governments did not agree.
As far as coal price is concerned, there is no negotiation on that. Whatever the price for India fixes that the consumer has to pay in FSA, that is a [ FSA clause ]. But being the monopolistic -- monopolist organization, we have to bring all the stakeholders onboard. And in this inflationary situation, no government will allow -- let's be candid that no government will allow the prices of fuel -- so critical to increase substantially in the market.
We have been discussing with the stakeholders, I've been trying for the last 2 years to increase the price. But because of the different situations, I have not been successful. And after getting such a good profit, nobody will permit me, at least in the short duration, to increase the price substantially.
There are stuff going on to increase it, but then in this inflationary environment, perhaps government is slightly -- all the stakeholders are not coming on board. About e-auction, we are allowed to auction up to 20% to -- 20% of our coal production through e-auction. We -- last quarter, we did about 29 million tonnes -- so it is about 12% to 13% of the total coal that was sold. The total coal sold was about 170 million tonnes.
So about 12% of that, we have sold. Last year, we did about 900 million tonnes, which was about 16% to 17%. See, we have to give priority to the power sector. There's no way in which we can ignore that priority. And hence, we have reduced -- we had to reduce this quantum, but in the coming months, as our production is likely to increase and the demand from power sector is going to reduce, I am quite hopeful that e-auction volume will increase further.
[Operator Instructions] The next question is from the line of Amit Dixit from Edelweiss.
[indiscernible].
Sorry to interrupt, Mr. Dixit. We are not able to hear you clearly.
That SECL has been an underperformer for quite some time as far as offtake is concerned and ECL as well. So are there some specific issues there? In the current month, of course, we saw SECL bouncing back. So if you can throw light on SECL in particular, because it is the largest subsidiary that we have.
The second question is on linkage materialization. So a lot of [ competing ] in the nonregulated sector mentioned that the linkage materialization dropped in Q1. So is there any chance of them -- of the linkage materialization improving in the quarter?
Coming to SECL. SECL has got some problem in their major mines. There are 3 major mines which produce maximum coal in that company: Kusmunda, Gevra and Dipka. We have been able to solve the problem of Kusmunda and Gevra. There is some problem in Dipka, which we are trying to solve. 1 or 2 villages have been solved. But 1 or 2 villages are still pending. We are actively working on that.
If you see the dispatches this month, this has improved. If you see the OB removal, this has improved. But unfortunately, for the last 15 days, it has been also raining very heavily, because of which at SECL, results which we would have predicted have not come.
In the first quarter, the performance was very good because they increased their production by -- I think about more than 36% compared to the last quarter. But you are right. SECL is the largest company, and it has to come back in a big way. I'm quite hopeful that this year, after this rains, from October onwards, they will perform much better.
About linkage materialization. We are committed to meet the linkage materialization up to the level of the minimum coal guarantee that we have given. There are issues of transporting coal through rail because the priority being given by railway and everyone is to the power coal. And so to that extent also, the linkage is suffering and we were giving priority to the power coal also. But even today, we have a stock of about 31 million tonnes. So in coming months, I don't think there should be any problem in meeting the requirement of non-power sector.
The next question is from the line of Anshuman Ashit from ICICI Securities.
Three questions. The first question is on the e-auction booking, which has dipped a bit this year. So we have seen only 20 million tonnes of booking in the past 5 months. Sir, where do you see this trajectory? And will it improve going forward?
Second question is on the Angul-Balram rail link. So we had mentioned in the annual report that it was supposed to be commissioned in July '22. So has that been commissioned? And -- or what's the status of it, if not?
And the third question is on the coal gasification projects that we have announced. So what is the status? And who will be our technology partners on these projects?
On the e-auction volume in the first quarter was perhaps 20 million tonnes. Now, if I am remembering correctly, this is low compared to last year, but the realization is very high. E-auction volume will increase without -- in coming months with the demand of the energy sector going down, because as the trend has been in October, November, December, the demand for power goes down, and with that, requirement of coal also goes down.
I'm quite hopeful that thereafter, there will be not so much of the pressure to supply to the power industry. Secondly, I'm quite hopeful on this account because today, the power house, the stocks at the power houses is about 28 million to 29 million tonnes. Last year, it was 10 million, 12 million tonnes. So this extra 16 million tonne will give them a lot of leverage. And this will help us in giving coal to non-power sector also.
And this is not likely. For next few days, perhaps the stock may go down. But after that, in October onwards or after 20th of September, the stocks of the power are unlikely to go down. That's my -- whatever the trend we have seen, but nobody can say or confirm because it depends a lot on the monsoon condition and the temperature also.
So that is the situation. So e-auction volume should increase in the coming months. Now Angul-Balram, yes. We had hoped that it will get completed by July, but now that -- this economy has indicated that it will get completed by September and -- September or by in the middle of October, definitely. It is in an advanced stage of completion.
All the land-related problem has been solved. The bridge is under construction. One major bridge needs to be -- the bridge has been constructed only the approach. Earth filling is required, so it will take a while because that cannot be done during this monsoon period. That's affecting their work. But then by October, definitely, it will get completed. By middle of October -- in the October month, it will definitely get completed. And that is the time when we'll require it the most.
The third thing is coal gasification. We have tendered [ not ] many times. We are going for coal gasification on new model because we don't want to take technology risk. This will be a new thing for Coal India. And because of that, not much of response have come.
We have tried to modify the contract document or tender documents in the way it can become slightly more effective, but we are trying. As of today, it will be difficult for me to say who will be technology partner because it will depend on the tendering and who puts the best rate.
Okay. Sir, just one clarification. Sir, both booking and lifting of e-auction volume, sir, both the volumes were similar in the last 5 months? Could you just give us that volume for booking and lifting separately?
I have got booking figure. Lifting figure should be also in the same range, but I don't have figure right now. I will give this figure separately.
The next question is from the line of from Dhruv Muchhal from HDFC Mutual Fund.
Sir, you mentioned about the difficulty in price hike and the inflationary pressures in the profitability, but sir, is it fair to assume for the wage hike, when it happens, the offsetting price hike will happen? Because that -- in any case, it's -- I believe it's a small amount of price hike that you will have to take, so that component can be offset. Is that fair understanding, sir?
I think we should be able to do that, Dhruv. But then committing anything will be slightly difficult for me. But at least I find that everyone should agree to compensate us for wage increase, petrol, diesel increase and explosive increase that we have incurred based on this explosive, so that at least our production cost -- increase in production cost that -- increases the inputs of production that compensated. So we are trying for that. But wage, at least, I think it should be doable.
Sure, sir, sure. And sir, secondly, this -- the 1Q number, is the cost base that we see on contractual expenses and cost of material now on a pattern basis, should we think that this is peak now in terms of the overall? Because diesel cost further is not increasing contractual, does it represent the full inflationary impact now from a quarter basis, I mean, as a benchmark for the quarter?
For second quarter, I can say that it will not be higher than the first quarter because the prices of diesel has not increased. The prices of explosives have also remained constant. Rate increase has not been there. So to my understanding, pattern basis, the contractual costs should not increase. On the fourth quarter, the digital price will remain constant or not...
Yes, that may be variable. We understand.
The next question is from the line of Bharat Sheth from Quest Investments.
Sir, my all questions have been answered. I have one only technical question. So typically, we understand that H2, our production is much higher than the H1 because of H1 in large part of having a 3 to 4 months kind of monsoon. But if you look at, I mean, month-on-month, April and May production-wise declined from the March substantially.
This year, we have tried to restrict it. But in March, everybody rushed to achieve the target. And that type of rush and pressure cannot be maintained. Our machines, we have deployed in coal production. We shift the machines also from overburdened production to achieve the targets.
But overburden removal becomes [indiscernible] and April and May, all those housekeeping things are bringing the mines back to the shape, et cetera, are required. So -- and then that type of pressure cannot be sustained for now. Then the third thing which is important is high temperature.
See, in April this year, the temperature was 40, 45, and in the mines, it was touching 50 degrees. To operate in such a high temperate is really difficult, and to maintain that pressure and that high temperature may be counterproductive. So March and April, May, we have tried this year to keep the pace, but then maintaining that type of pace will be difficult.
The next question is from the line of Mohit Kumar from DAM Capital.
I only want clarification, sir. What is your cost of production under the new MDO contract on an average? And how does this compare with your current cost of production from these from the [ overall cost ] mines?
In MDO contract, it will depend largely on many factors. One is what is the stripping ratio. If you compare the total excavation cost, it is slightly higher, 10% to 15% higher, than the cost of total excavation from what we normally do, because here, the capital investment from the MDO is expected and is required to solve many problems which other is the companies solve.
So the -- but the coal production cost, if you see, per se, it is different in different pockets. Like in Siarmal, it is almost comparable to what we charge, but in -- the same is the case of this year. But in SECL, the rate we have got is slightly higher than -- maybe 15% higher than what otherwise it will cost.
So broadly, are you saying that there is no advantage of going through the MDO? Is that a fair assessment?
I won't say that because many of the problems that resolve faster so that we can achieve that target earlier. Secondly, wherever the deals are being appointed, the quantum of production remains what we predict, whereas in our mines, when the problems are there, so the quantum of production is not there. What we say as the cost of the production is based on the assumption that type of production will come, but actual production is much lower than what is projected.
And are you looking to award any more MDO tender in this fiscal year? And if -- and can you please quantify it?
There are 2 mines, underground mines, which I will like to award. One is Chandragupt and another is [indiscernible]. We are going to -- Chandragupt is already put to tender, and MCL we're likely to put to tender in the first week of October. These are the 2 major mines. And if you award that, about 130 million to 140 million tonnes of coal production will definitely come after 2 years.
So there are only 2 mines which are -- which are lined up for MDO this fiscal year?
That's a big mine than the normal. In case of underground mines, actually, we have got the cost of production lower than what we otherwise incurred, so even employing the continuous miners, et cetera, and higher even higher. So we are getting cost of production less impact.
One more question. If you look at coal to gasification, when do we expect that we'll get more clarity on the way forward, is 12 months down the line or it's a couple of years down the line, when you see that we'll have more clarity on producing some of the chemicals or hydrogen? Because I see a lot of action is taken from the Ministry. There are a lot of papers out there in the public domain, but there's nothing concrete as of now.
You're right. But it will be difficult for me to say, give any time line because we have...
Broadly to your expectations -- your expectation is that we'll have more clarity whether you want to go ahead or not go ahead?
We are tying up with the other PSUs so that our offtake is ensured. The demand from the operators or the demand from technology providers was that at least first to ensure the uptake that. So we have tied up -- we are tying up with other PSUs so that uptake can be ensured. And now, thereafter, once this is tied up in the next couple of months, maybe we can thereafter to put it to tender. And I think within the next 7, 8 months, maybe 7, 8 months something will come out.
And are you exploring blue hydrogen by any chance there? Or is it still some time away?
Not as of now.
The next question is from the line of Nilendra Sinha from ICICI Venture Fund.
My question was related to evacuation plans and longer-term [ either ] production constraints in longer-term coal production plants. What I understand that by FY '26, when 1 million tonne is expected to come, some of the these evacuation projects which are currently constrained, they will come.
But in the near term, these projects -- evacuation projects may be [indiscernible] -- so how confident you are of achieving 700 million tonnes in FY '22 or FY '23 or 800 million tonnes next year? If you -- if the evacuation projects like the rail projects happening in Chhattisgarh or Odisha or [indiscernible], if we can [ debate ].
See, for FY '22, 700 million tonnes, there's no [indiscernible]. The existing lines, with the slight improvement that railway is doing, able to take business for growth. And if you are talking about the railway lines, there should not be any problem because that much adequate arrangements have been made because -- if you want to talk about the area wise, [ valley ], there are certain things which will come. as Sardega -- as the Jharsuguda-Sardega line is operating not at the maximum capacity. The capacity is still there.
In Jharkhand also, their capacity is there. In [ Kharsia ] line, the fourth line between [indiscernible] and Bilaspur it is being laid, and this will come up this year only. So that will help in evacuation further. They are trying to introduce this automatic signaling that will improve this. So by incremental things, this [indiscernible] line will come, which will help in evacuating another 10 million tonnes. So I don't think there is any problem for evacuating 700 million tonnes.
Although the way -- will have to work slightly -- will have to work under pressure the way they are working right now. And next year, I'm quite sure that the third line of Tori-Shivpuri and Sardega line will come up. And with that, we will -- mostly we will be able to handle whatever production comes next year.
So I won't say there is a lag between the 2. And then these FMC projects will help us in loading the wagons in a much faster way, and that will give some more capacity. So with all the projects in line, there should not be any problem in the next 2, 3 years to evacuate the coal.
The next question is from the line of [ Falguni Dutta ] from Jet Age Securities Private Limited.
I just had 1 question, which is whenever this wage revision happens, will it in any way have -- would there be any increase in the contractual expense because of that? Or there is no such contractual laborer, contract laborers, who are employed to whom we have to give a hike?
See, our contractual labor price is also linked to the wage. So the HPC prices, high-power committee price, as we call it, has to be paid to the contractual laborers also. And that is the whatever minimum price fixed by the government of India and the lowest of the wage that we pay to our worker and average of these 2. That is theirs. So there will be some impact on contractual things as well. But since the labor there is not so much, the impact on this -- our labor will be much more than this.
The next question is from the line of Faisal Hawa from H.G. Hawa & Co.
We'll move on to the next participant. That is from the line of [ Alok Nath ], an individual investor.
Yes. My question is regards to the solar, like what is the update on that? And as we know now the green energy is increasing and government is also pushing for producing more in the form of green energy, so the demand for coal will definitely go low. Currently, the demand is high because the energy consumption has also increased, but -- in talking about near future, they want us to reduce the consumption of coal. So for that, how is the company looking at the [indiscernible] business?
Whether the coal will lose its [indiscernible]. I think my voice is getting repeated because somebody's mic is on. Please.
[Operator Instructions].
See, it will be difficult for anybody to predict. 2 years back, it was -- there was a thinking that perhaps the coal demand will never come back, but it has bounced back this year. My understanding is that -- and it has always been, that for the next 15 to 20 years coal requirements will definitely will be there. The percentage in the total energy basket may reduce, but coal demand in tonnage terms will keep on increasing. And in the next 3, 4 years that we...
Members of the management team, we have lost the audio from your line. [Technical Difficulty]
Are you able to hear us?
Yes, sir. Please proceed.
Okay. So my understanding is that for the next 15 to 20 years, the demand of coal will definitely increase. Maybe the percentage term in the whole energy basket, it will reduce, but the quantum will definitely increase. And for that, we have to be prepared. So saying that the demand of the coal will not be there, I don't think that is the right thing.
But at the same time, Coal India has to develop another green energy thing as I had applied to 1 more question because of 2 reasons: one, to neutralize whatever energy we are consuming so that we can become a zero energy consumption company; and secondly, to invest in the areas which are more futuristic. So because of that, we are investing in this.
And Coal India has been trying in the last 1 year to get more -- to win the tenders, et cetera, but somehow we have not been successful. But we are quite hopeful that -- we are talking to the different state governments so that we can establish power plants, solar power plants for the consumption of the discount. So we are working on that. We'll be successful soon.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for their closing remarks.
Thank you, everyone, for coming to this con call. I'm really thankful to you for asking the questions. I think I was able to reply most of the questions. But in case there are any more issues, you may write to Mr. Viswanathan, he will be able to communicate to you the other details. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.