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Coal India Ltd
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Ladies and gentlemen, good evening and welcome to the Coal India Limited Quarter 2 2021 Earnings Call organized by Batlivala & Karani Securities India Private Limited. [Operator Instructions] I would now like to turn the conference over to Mr. Jinit Mehta. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. Welcome, everyone, on the 2Q FY '21 earnings call of Coal India Limited. It gives us great pleasure to host Mr. Pramod Agrawal, Chairman and Managing Director of Coal India Limited. And along with him, we have the entire top management and other directors on the call. On behalf of B&K Securities, we thank everyone present on this call. Without much ado, I would like to hand over the call to Mr. Pramod Agrawal for his opening remarks, post which we can have the question-and-answer round. Thank you, and over to you, sir.
Thank you very much, and good afternoon, friends. We have posted one presentation on our site. I request you to see that slide, and I think many of you would have seen that in which we have given the details of our performance in Q2 and H1. However, I would like to mention some finance features, and I'll not like to talk much about that because you would have seen that. And most of the -- most of the data must be known to you, and so there will be more time for question and answer. Our Q2 performance was, compared to Q1 or Q2 of last year, I would say, satisfactory in the sense that the COVID -- situation of COVID was continuing in the country and the demand at some places was depressed and the economy could not take off completely. And as the figures are appearing in Q2 also, this economy, there was some -- there was actually negative growth of about 8.6% or 8.7%. So that indicates that, technically, India was in recession for these 2 quarters. Even in that circumstances, our offtake increased by 9%, and our production increased by 10%. And 9% or 10% of growth in Coal India is a significant achievement. Third thing, our OBR production increased by about 50%, which is a significant increase. And this indicates that the geometrics of our mines have been improved significantly. Secondly, it also indicates that we are now ready to increase our production whenever the demand increases in the economy. And this is evident from whatever we have done in September and October. In September, our production increased by 32%. In October, it increased by about 20%. And in November, again, we are continuing with a growth of about 8% to 9%. And we hope that in November, again, our growth will be in double digit. So this indicates a very significant achievement in September, the growth of dispatches or offtake was about 32%. The growth in offtake in October again was in the range of 25%. And in this month, again, we are seeing a growth of about 20% in offtake. So all these figures indicate that we are now on the correct -- we are in the correct path. And in coming months, our offtake, et cetera, should improve significantly. One thing I would like to mention that in September, the energy consumption, energy production based on thermal -- coal fuel has increased by about 10%. And in October, again, the increase was in the range of 14%. So that shows that there is a huge demand for coal. And in coming months, we will be able to meet this demand. So our performance will improve significantly in coming months. Thanks a lot. With this opening remark, I will invite you to ask any questions that you might have.
[Operator Instructions] We have first question from Mr. Pinakin Parekh from JPMorgan.
I have 3 quick questions. My first is, sir, can you please give us an update as to what is the current policy on the e-auction floor pricing? And have we -- the 6-month leeway that we had given on e-auction coal prices, do they still sustain or have they been removed? My second question is, sir, what is the situation on receivables? What are the current receivables versus September? And what were the peak levels? And my third question is, sir, yesterday, NMDC in its call said that the government of India is considering allocation block policy where all minerals which have been given on an allocated basis, there could be a premium which they would have to give on the signing of leases. What would be your take? And will it apply to coal?
Okay. Thank you very much for asking questions. Update on the e-auction floor price, as you know, that from November onwards, the CIL guidelines on floor price have been removed and subsidiaries have been asked to fix their own floor price based on their judgment, demand and the supply situation. So all those guidelines were removed from September. In October also, the guideline was that the maximum floor price they can increase was by 10%. So from November onwards, those things have been removed. And whatever situation was existing before COVID has been restored.About receivables, our receivables have not decreased. It is still in the range of INR 22,000 crore. Actual amount is about INR 22,500 crore on October 31. On September 30, it was in the same range, about -- sorry. On 31st October, it is INR 23,800 crore, and on 30th September, it was INR 23,300 crore. So in October also, there has been slight increase, but the issue is, whatever we are supplying now, and these supplies are very high considered to what was happening last year, we are getting money. But one thing I should make clear here that there is no doubt that anything will go -- will become bad debt because all these issues are from fair discount. As we know that fair discounts are facing a lot of problems, and because of that, receivables are not getting diluted. But we are hopeful, after Diwali, we will be in the position to hear on them and reduce this receivable. This is the situation about receivables. NMDC thing that you have asked, allocation on the group fee, coal is a different thing. Coal, we acquire the land and we acquire the mine, et cetera, under the Coal Bearing Act. And so there is no question of mining license to us. Whatever we get is something we acquire against that. So we are not paying any royalty. What we are paying is an amount equivalent to royalty to the state government. So there is no question of imposing any premium on coal. So the coal is on a slightly different footing.
Just to confirm, you said that receivables as of October were higher than September. But at this point of time, all your supplies, you are receiving payments in cash, there is no incremental increase in receivables.
Yes. From now, I will -- see, if I compare from September end to October end, the receivables have increased by INR 200 crores, INR 300 crores, which is not a very significant amount. And November again, whatever we are supplying, we are getting that money. So receivables are not [Technical Difficulty] But at the same time, I wouldn't say that receivables have diluted. Now after Diwali, we are thinking of putting pressure on the state government. And I have already taken up the issue, all the Chief Secretaries. I think from now onward, the situation should improve.
We have next question from Mr. Vineet Maloo from Birla Sun Life Mutual Fund.
Sir, on this topic of receivables only, you mentioned that since they are dues from state government entities, so there's no chance for bad debt. Just wanted to understand, sir, I mean, is there any state level guarantee or something like that? Or is there any security upon the entities, bank guarantee, et cetera? I mean, is there -- or are this completely unsecure?
Means, there is no guarantee as such. We don't have any bank guarantee or anything against this. But then the states in general have not failed until now in the country in paying their dues. So these are the dues against the state because those are the state entities. And I don't know of an example where the state has failed in honoring its dues as of now. So I'm quite sure that we will get the money.
So sir, basically, what you're saying is these amounts outstanding, because they are dues to -- I mean, dues from state or state government entities, there's no chance of any loss out there, right?
That's right.
And sir, which should also mean, there is no chance of indirect loss of value by Coal India providing any sorts of rebates or waive off any part of these receivables or any future receivables, right?
I don't think we will provide any waive off or anything.
Right. So sir, I mean, what we are -- sir, what we are concerned about is, for example, a lot of times, state governments have pressured a lot of other power companies, et cetera, to bring down or give a discount or settle the amount, et cetera, as well or provide discount in future purchases. So that is effectively a loss only in the outstanding receivables.
I don't think they're going to put that pressure on Coal India. And that is not -- we will not accept that. State governments are continuously paying whatever dues are there. Basically, the dues increased during March to June. And thereafter, it has remained almost constant. So governments are paying, but then there is no likelihood of we negotiating with them or reducing the thing. And in case there is some problem, then there are other mechanisms like NTPC has one. So those things can be resorted to. But then I don't think that situation is likely to come.
Sure. Sir, my last point on this, just wanted your clarification. And I understand -- I appreciate during difficult times, sometimes you need to support your customers. That's perfectly valid reason. Just wanted a clarification, sir. I mean, if things don't -- if the amounts are not realized after some time also, then what are the recourse available to us, right? And is there a procedure that only after such and such time only we can resort to those recourse, et cetera? If you can just provide some clarity on these sides.
What is the recourse? See, the first recourse is we can stop the coal supply to them, and that itself is a great recourse. Hence, no state will like to shut down their thermal power stations. As of now, there is no state government rule. So that is the most important recourse we can take.
Correct. Yes, so that is one. But I mean, I presume -- I mean, in normal course of things, we will not do that. But I'm saying just for recovery point of view, you highlighted some NTPC has done something. I don't -- so if you can throw some light on that, it will be useful.
I'm saying that situation is unlikely to come. State governments are facing problems of liquidity. But after June, they have been paying. After June or July, they have been paying all over what was current due. And then second thing is, we can regulate the supply of the coal. The third thing is we can approach the central government to help us. Fourth thing is there is a mechanism called AMRCD, Administrative Mechanism for Resolution of Commercial Disputes. So all these things can be resorted to. And then problems can be resolved. So I'm not foreseeing any bad debt issue in this case.
We have the next question from Mr. Bharani Vijayakumar from Spark Capital.
[Technical Difficulty]
Mr. Vijayakumar, your voice is not audible. We'll check with Mr. Vijayakumar.We'll take next question from Mr. Rahul Modi from ICICI Securities.
Congratulations on numbers, and thank you for the dividend that you've provided to investors. Sir, just a follow-up on the policy that you've approached. It looks like that you've almost paid 90% of your first half profits. Sir, so I'm sure this will not be the full year dividend, you will be paying more as profits continue over the couple of quarters in this year?
We have paid based on whatever we put in the first 2 quarters of this year. I foresee that in third quarter, our profitability should be higher than what it was last year and, certainly, even higher than what we saw in Q1 and Q2. And in case nothing wrong happens, I am quite sure that in January, February, after the second quarter -- the third quarter results are available, we will be in position to make some more dividend. Last time, when this con call was conducted, and I had assured my investors that we will try to maintain at least what we have paid last year. And today also, I see that we will try to maximize the return to the investors and try to maintain at least that level which we achieved last year, maybe after the third quarter, maybe after the fourth quarter. And then, we are trying to make this dividend payment not once-in-a-year event, we will at least pay twice a year, but this time, perhaps it can be more than that.
Right, sir. That's very helpful. Sir, there were some news reports in the morning suggesting that Coal India has been asked or maybe NMDC to take over Hindustan Copper. Anything of this being thought about?
I don't know about NMDC, but as far as Coal India is concerned, we have not heard of it. We have not ever been asked about that, and nothing is under discussion. I don't know where this rumor has come from.
We have the next question from Mr. Abhinav Bhandari from Nippon India Mutual Fund.
Just wanting to understand on this premium on the e-auction volume, so how is the situation now in October, November? And what could be outlook for second half?
See, our production has increased significantly. But the type of premium that we were getting last year, I don't foresee that type of premium too we get. But on the whole, until October end, we got 10% premium. And in October itself, 13% premium was achieved. But whatever premium loss is taking place, is being more than compensated by the total quantity being booked under this. Last year until October end, only 31 million tonnes of the quantity were booked. And in this year, already, we have booked 59 million tonnes. 59 million tonnes, just to compare with the last year, was in the whole year, 59 million tonnes was booked. So if we increase the quantity, whatever incremental growth that we get in e-auction, helps in improving our profitability substantially. So I think that in e-auction per se, this year, we'll earn much more than what we did last year.
Sure. And in terms of volume guidance on the auction, if I remember in one of the earlier call, you mentioned that you will be eyeing closer to 80 to 100 million tonnes for the full year. Is that understanding correct?
I think we should be able to surpass that. We have already achieved 60 million tonnes, 5 months are left. And these months are of better activity. So I'm quite hopeful that we will be going beyond 100 million tonnes.
Got it. Got it. Sir, the other question was on the CapEx. So how much we have done for the first half? And any change in outlook for the second half versus the earlier guidance of INR 10,000-odd-crore?
We had indicated that we will be doing 10,000 crores in the sense that [Technical Difficulty] our machines, et cetera department to work. And we require to invest in that mechanized evacuation system. We have already done INR 5,000 crores. I think this target is INR 10,000 crores. And we will be just crossing target in that range or maybe INR 1,000 crores extra, but not beyond that. This CapEx requirement is essential to ensure that pollution in the area is minimized, and our production from departmental, machinery, et cetera, is maximized, so that departmental output -- efficiency of departmental work can increase significantly. So we are working on a very -- this guarded manner. And if the demand increases, we should be in the position to supply to the nation, the coal requirement.
We have next question from Mr. Amit Dixit from Edelweiss.
I have a couple of questions. The first one is on FSA realization itself. So FSA realization, if I compare it with the last quarter, it was up around 4%. Now I wanted to understand what led to this improvement in realization? Was it higher proportion of linkage coal or grade improvement? And how much of it is sustainable? That was the first question.
Maybe Director of Marketing is sitting with me. He will be able to reply this question.
This is Director of Marketing, Coal India, and you were wanting to know about FSA realization. Basically, this FSA realization also includes dispatches through linkage auctions. The linkage auction itself has a component of premium. So the portion of non-regulated sector, coal, which has been dispatched, becomes part of selling price. And as I told you, NRS' linkage auctions will have that component or that premium part of it. So FSA regulated sector plus linkage auction of NRS sector, this has given us a flip or additional things which you are talking about.
Sir, just a follow-up, is it possible to let us know, what is the mix of regulated and non-regulated? And how did it change quarter-on-quarter?
That I have to work out and give it to you, but you can very well understand in terms of -- we have got NRS linkage auction for 100 million tonnes around. And how much of it has worked out for this quarter, that I have to work.
No problem, I will take it offline. The second question is on the over burden removal. So while higher overburden removal is always welcome, I mean it kind of prepares your minds for higher production. So -- but subcontracting expenses also shoot up Y-o-Y, is it -- is it the direct result of higher overburden removal? And will we see contracting expenses coming down, I mean going ahead as the focus goes on production?
See, contracting expenditure is directly proportional to how much excavation we do, whether it is excavation of the coal or excavation of the soil, or what we call overburden. In case our production or excavation of overburden of coal increases, then the contracting expenditure will definitely increase. And looking forward, I'm quite sure that our overburden removal plus coal, both will increase. And hence, the contracting expenditures will increase. But this results in greater profitability to the company because we get more several coal.And one must understand that last 4, 5 years, OB removal has been less than what is desirable. Unless the mine's geometrics are good, the productivity suffers a lot. If you compare NCL, Northern Coalfields Limited with other subsidiaries, you will see that during rainy season also, Northern Coalfields is in position to produce coal, and its -- the volatility in production month-by-month is very less. This is just because they have maintained the geometric process of their coal mines. If we do in other areas also, then it results in more production at the time we need. Secondly, if the overburdens are kept at proper slope, then the mixing of the overburdened soil with the coal does not take place, and it results in a better quality of coal as well. So it is desirable that we should do the desired amount of overburden removal.
Thanks for the elaborate explanation. If I can slip in one more question. We saw a very good increase in MCL, both offtake as well as in production terms. Can you let us know what went right for MCL this time, because last year, this subsidiary was struggling quite a bit.
I would give credit to the person who has retired now, who was the CMD. He had set a very good profit, et cetera, first thing. The last year, there was some problem related to industrial relationships. Those things do not happen this year. And we have answered to the state government to help us whenever the situation warranted. There has always been standing with us in case a law and order problem or industrial relations thing happened. And secondly, ICL has introduced a lot of mechanized coal production. And MCL instead of blasting and using shovel and dumping method for the coal production, most of the coal major mines are now being produced by the surface miner. Because of that, the quality of MCL also has improved. I think the potential eventually is much higher than this. And in coming years, you will see SECL and MCL contributing a large -- contributing a lot in growth of coal production.
We have next question from Mr. Sonaal Kohli from Bowhead Investment Advisors.
I would like to know what is your -- what will be your dividend policy going forward? Like, certain percentage of profit or a certain percentage of profit minus CapEx? I'm not referring to FY '21, but let's say, from a medium term, long-term perspective, let's say from FY '22. So the kind of dividend are you giving this year, would it be similar to next year? Or it could be substantially higher?
It will be difficult for me to say what will be the dividend this year. But as I mentioned earlier, that we will try to -- even in the difficult circumstances, when the profitability has reduced because of COVID situation, we will try -- we will maintain at least what we gave last year. And coming forward, whatever CapEx -- see, CapEx are funded to 2, 3 mechanisms. One is through whatever cash is generated from depreciation, then there is another source, that is OB removal, then some component of the cash is generated. And there are circumstances in which while CapEx investment, one has to take a look. So all these 3 things. And on the other side, whatever profit is generated, minus CapEx, plus all those things, we will try to give a large portion of that as dividend. And coming years, I foresee that with increased coal production, our profitability is substantially increased because whatever incremental coal we produce, give us a huge profit. And with that, our dividend should increase. But how the economy pans -- how the economy develops in next year, I'm quite hopeful that India will grow about 8% to 9% -- 7% to 8% next year, and that way, coal demand will also increase substantially, and we will be in a much better financial position.
Sir, will I be completely out of whack in thinking that an INR 18, INR 20 dividend could be a possibility in FY '22?
In my mind, it seems quite probable, but then giving any sort of commitment will be difficult.
And sir, do you have any plans for any buyback any time in the future? Any constraints you face and any ways you can overcome those constraints?
See, the buyback is one option of giving money to the investors. But what is the policy today is that in case we do buyback, that tax component will be in the range of 45% to 46%. So this is something which is not in favor for the investors, nor in the favor of the company. And hence, as of today, we are not thinking of buyback. But in coming months, how the things, I can't commit and I can't say anything . Actually, Coal India is a structure in which subsidiaries earn the money, and they pass on to the headquarters at which level the buyback happens, it is a very inefficient method. Buyback becomes a very inefficient method. But if we see certain advantage to stabilize the market, we can go for it.
Sir, have you represented or planning to represent to the government to look into this matter and take it similar to dividends?
We have already requested that.
We have next question from Mr. Vishal Chandak from Emkay Global.
Sir, my first question is with respect to demand. We have always said that India will grow at 7% to 8%. And hence, there is -- there would be ample demand for coal. But in reality, when we actually tie down with how much coal will come from which particular mine, that is fairly easy to plan. But how will you market, let's say, for example, if we have planned incremental coal from eastern side, and the demand is significantly higher from a place where mining expansion has not been planned, or a demand has not been forecasted properly. So how do we plan to match the demand?
If I understand your question correctly, like, means, you are asking, that the production might decrease in one area and the demand might increase?
Not only that part, but also we might end up producing, but do we have a sense, as in, have we tied up with any of the power plants as to they would definitely be doing an expansion and taking the coal? Or it's just one part of the supply that we are addressing?
See, the first part, area wise, see our coal, we can produce [Technical Difficulty] the country. A small portion has produced in country part that is with Western Coalfields Limited and then, there is a huge demand for Western Coalfields Limited. And if you see the growth profile of Western Coalfields, Westell, then you see that it has shown an increase of 10% every year for last 3, 4 years. And this year again, I'm quite hopeful that they will show a growth of over 10%. There, coal price is slightly higher, but the demand of the convention area is nearby. So there is a demand, and that company is doing well. Second thing -- and that is the only thing -- in most of the country, except for 2 peripheral areas of the south [Technical Difficulty] Coal India, coal is still the lowest price coal in the country and 5th coal producer in the world. At this point of time, there is 20 million tonnes of coal, which is substitutable. And we have tried to substitute that coal, and we are getting good results. In blending, that was required for the power plant import except for a few plants of the Tamil Nadu, et cetera, they have stopped importing. Similarly, if we are able to supply coal, then there is a huge -- if you see the e-auction, et cetera, this demand is there because we were not able to -- we were not in a position to supply coal earlier. So the demand is existing in the economy. We have to supply. I'm not quite sure what will happen after 800 million tonnes of the production. But as of today, when we are at 600 million tonnes, there is a demand of about 150 million, 160 million tonnes, extra, which Coal India can meet. So till that time, we see that there is no dearth of demand for us.
My next question was with respect to the coal gasification project. If I recollect, you had in your previous calls highlighted that about 50 to 100 million tonnes is what you're looking at from a long-term perspective. And that would be the part of your 1 billion tonnes of coal consumption targets. So are we in a position to probably offtake that 50 million to 100 million tonnes for coal gasification by FY '24?
FY '20?
FY '24.
FY '24, we have not. It was FY '30, I think, of 50 million to 100 million tonne, that was for the whole country as such. So to say that coal gasification will contribute a significant portion of 1 billion tonne program, I don't think that was exactly what we would have said, but maybe we would have -- that was not the point that I was trying to make earlier even. What we are seeing today, we have issued verbal tender for Dankuni Coal Project. We have given pre-feasibility study for 3 more projects of coal gasification. And these 3 projects was -- the feasibility report was supposed to come in November, but by December, they'll be there. And thereafter, we will put the tender. So even as we put on fast track, not much of this coal will be used for coal gasification by FY '24 or something like that. 2 or 3 plants -- 4 plants of -- not 4 -- the Talcher fertilizer plant is based on coal gasification. And there, the technology is accepted. Government is likely to give guarantee for that for offtake of urea produced through this mechanism. So if we are successful in these efforts that we are making and if we see that, in a year or two, that something will be beneficial for us, then we will take a bigger program. And just to inform that, in that all these 3 projects and Dankuni projects which we have proposed, we are proposing a new model so that the technological risk is not taken by the Coal India. And to that extent, the risk is being guarded.
That is quite helpful, sir. And lastly, if I may squeeze a small question. Sir, for the last 2 quarters, as the OBR has been higher than the general provisioning, since -- and then we have seen a negative OBR, so how should we see this trend going forward? Should we see a normalization to return in rest of the quarter? Or the current pace of negative OBR provisioning in this P&L will continue for a while?
I will continue -- I think we should continue with this. Otherwise, increasing the coal production will become difficult. We had reached a situation in certain mines where almost vertical cliffs were being -- we have reached the vertical cliff level. Those things are not something which are desirable from the safety point of view or from the good quality production point of view. So from that point of view, what we are doing, and I personally will try that this level of OB removal is maintained every month.
We have next question from Mr. Nitij Mangal from Jefferies India.
Can you provide some update on the contingent liability around the income tax and the environmental issues and also some details on this demand on land from the state of Jharkhand please?
State of Jharkhand, you meant to say?
Yes, state of Jharkhand.
State of Jharkhand, we have -- I think we have achieved some breakthrough, and now we are on the same page. Till now, we were not paying anything from the state government's line, which we felt that is not proper. And the state government also has agreed that exorbitant demand that they were making on discount are something not desirable. So they have formed a committee. We have -- even our honorable minister met the honorable CM, and it was resolved to a great extent. And I think that by saying -- whatever dues are required are not so huge, but the calculations are being made. It has been agreed that whatever land we get possession of and for which no compensation has been paid, will be made. So that dues are not likely to be very high and the contingent liability on that account will get resolved in coming years completely. About income tax, the contingent liability is there, we have paid some amount as advance also. We have paid advance of about INR 14,000 crore to INR 15,000 crore but many of the contingent liabilities that have created in many of these cases, we have got orders in our favor. But the department has gone against us in that piece. I am hopeful that a few cases will be decided in the coming few months. And then the contingent liability should get diluted. But when the court will decide the order -- will decide the case and when we'll get the final order are difficult things to make any comment on. About environmental clearances, basically, I would say that these issues are pending, and they're discussed at highest level. These liabilities have been stayed by the central government. And as of now, nothing much can be said about that. But then any impact -- likelihood of an impact coming on Coal India are very remote.
Okay. And just a follow-up on the Jharkhand state issue. So there was a very big gap between what the state had raised as a demand, versus, I believe, what your opinion was. Is there any sense on where that matter might eventually settle?
We have already paid INR 600 crore to INR 700 crore to Jharkhand on this account. And even if the total land that we have got in possession, I won't be able to give you a correct fund, but that amount will not be much higher than another INR 400 crores, INR 500 crores. That -- but it will be wrong on my part to give any figure without confirming things. It was demanding, and we were saying that nothing is payable. Both the situations are wrong.
Okay. But the demand for something like INR 26,000 crore is completely, that quantum...
It is not even INR 2,500 crores to my mind. But then it will be wrong on my part to indicate any figure.
We have next question from Mr. Pulkit Patni from Goldman Sachs.
Sir, my question is on e-auction realization and offtake. So clearly, what we have seen in the previous quarter is as the premiums vanished, we saw the offtake was very good. Now should it be fair for us to assume that clearly, given that we have -- our production numbers have been pretty decent, that our focus even at the medium term would be that we ensure more offtake happening from the auction side rather than really focus on a bigger premium coming through that route? And given that we have spoken about massive import substitution as a country we want to do, how should we look at this from a longer-term perspective? Compromising on premium works, but the volume should continue to stay robust, is that the right way to look at things?
I would say that the right thing should be to maximize the profitability, not profitability in terms of certain production, but profitability on the overall production -- on overall things. Like, if we do much more this e-auction, then the quantity will increase, though there will be some reduction in the premium. But the quantity increase will be substantial, and overall profitability or overall profit from the e-auction will increase substantially. See, we should try to maximize our production and maximize our profit pattern from that. Whatever incremental production we do, this has a lot of profit as I said. Means, if our realization is in the range of INR 1,400 or INR 1,350 per tonne, extra production cost is just INR 400 to INR 500. So whatever we get is the profit. If we are -- NRS, whenever we supply, we get another 20% extra. So with that amount of profit, it means even if it's double our e-auctions, our profit from that will increase substantially. So that should be our target, and we are working on that.
Sure, sir. Sir, my second question is, could you talk about the time lines of wage renegotiation? When do things start? And when should we expect that to hit the P&L exactly, which quarter?
See, the wage is required to be filed by July '21. So by maybe April, May the negotiation will start.
We have next question from Mr. Kamlesh Bagmar from Prabhudas Lilladher.
Yes. And sir, I wanted to congratulate on excellent presentation you have put. It's very resourceful, sir. Sir, just on the question side, like we have seen provisions in this particular quarter. So it had been higher since the last 8-odd quarters. So what pertains to these provisions, sir?
Which provision? That INR 399 crore provisioning or what?
Yes, yes, yes.
Actually, there are some disputed amounts of SECL with NTPC on first mile transportation thing. That issue for future has been resolved, but that matter has been referred to AMRCD. And that matter, since it was 3-year-old thing, and our accounting policy says that any amount which is due for more than 3 years should be provided for. So because of that, it has been provided. But that issue for future has been resolved. That needs to go to AMRCD, and we are expecting some decision on that.
Okay. And sir, on the CapEx side, can we see this INR 10,000 crore CapEx trend for next couple of years? Or it will further shoot up from INR 10,000 crore levels, or it has more or less stabilized at INR 10,000 crores, sir?
See, it depends how the production increases and what is the demand. If we have to achieve 700, 800 in the next 2 years, then CapEx requirements will be there. In case the demand is not there, then the CapEx requirement will also be not there. So, the CapEx is quite linked to the production level. I'm quite hopeful that in coming years, the demand will be there. And so next year, perhaps we may reach 700 level or something more than that. In that case, we will have to invest something more expense, maybe INR 12,000 crore, INR 13,000 crore.
Okay. And lastly, sir, on these railway lines. So we do comment that we have commissioned 2 of the railway lines on the phases of the railway lines, Tori-Shivpuri and Jharsuguda-Barpali. Sir, but what is the actual loading we are doing, those 2 railway lines?
Both of these lines are overloaded, that much I can say. I don't have exact figure.
[indiscernible]
Tori-Shivpuri, my Director of Marketing is saying is loading about 12 to 14 rakes per day. And in discussions, we came to know that the returns are very high on this, whatever investment we have made. But exact figure, I won't be right now able to say. Maybe our company secretary will contact you and give the details. Again, there is a demand now for Tori-Shivpuri to -- it should be made 3 lines. The capacity should further increase. And third line should be laid. And in case of Jharsuguda line, again in regard to Jharsuguda line, it is working at its capacity level, and there is a demand that the double line should be laid. So these investments are really good for evacuation of the coal.
Sir, just one clarification on the e-auction. Now the policy is that there won't be any floor price mechanism. Subsidiaries are empowered to put their own floor price on whatever they want to keep back. Is this new policy now effective from November or a 10% premium or the notified price only the floor price?
See, what we have decided now is not something new. It was -- whatever situation was existing before the COVID period, that has been restored. They are not -- earlier also they were free. Depending on the situation, some of the subsidiaries have started fixing 20%, some of the subsidiaries have started 10%. So that completely depends on the demand existing there and the production they can do.
We have next question from Mr. Rahul Modi from ICICI Securities.
Sir, a couple of questions. Are you confident of moving ahead of what we've done in terms of production and offtake last year? Confident of achieving that?
I am quite confident that we will surpass that easily. Yes, in production terms, we are already 1.3% higher. And I'm quite confident that we will increase this production level substantially in the coming months. And offtake, again, we are slightly behind, that is about 2.3% behind the last year -- till now -- the corresponding period till now. And I am quite confident that by November and the -- we will enter into the positive terrain, and thereafter, we will increase our offtake. There is no question of remaining at the level of last year.
Right. Sir, how is the demand of coal from power? Has it picked up over the last couple of months? Or it is primarily more of NRS that is offtaking the coal?
See, we talk about NRS more because NRS gives us more profit. And that has really picked up. But on the power demand side also, if you see in September, the increase of coal-based power was about 9.5%. And that was in September. In October, again, it increased by 14.6%. So there is a huge demand increase in power -- coal-based power increase in the last 2, 3 months -- last 2 months actually.
Right, sir. Sir, one question I had, sir, what we've seen is that in terms of SECL, our offtake is still lower on a Y-o-Y basis. However, most of the power plants are actually operating being pick head, are operating at quite high levels. So SECL has been a bit of a laggard. You expect this to improve in the second half?
See, SECL has been a laggard in the sense that it's still 4.82 million tonnes -- sorry. It is around 2.86 million tonnes behind what they did last year. But 2.8 in the first 3 months is not something very significant. SECL, in last 2 months, have been showing offtake growth. Last month, they showed growth of about 26%. In September, they showed a growth of 25%. This month, again, they are showing a growth of about 18%. And I'm quite hopeful that SECL will increase its OpEx considerably incurring weak time also. They have -- there were some problems. There are some issues which have been resolved. And now they are -- the production also is increasing. And I'm quite hopeful that in coming few weeks, we will see a substantial increase in their offtake.
Right. Sir, just last one question I had on receivables again. Sir, you are confident that at least we will be, if not the same levels of what we saw in FY '20, but almost at same levels of receivables? Can we achieve that by year-end, March?
Last year at March end, we were at the level of 15,000. And I won't say that I am sure of this, but we will try to achieve that level or maybe about 16,000 levels or maybe even less. How the liquidity of state governments improve once they take the loan, et cetera, also it will depend. But then I'm quite hopeful that we will be below that level what was at March 15 -- March 20.
We have next question from Mr. Rakesh Vyas from HDFC Mutual Fund.
Sir, two quick questions. One is we have seen very strong production and offtake growth so far. And given that the OB removal is running significantly ahead of production, how should we look at FY '22? Because historically, in the last 4, 5 years, we have seen Coal India struggling to give consistent growth because of various issues. So are we likely to see double-digit growth in FY '22 based on how demand is panning out, how your production is tying up?
Rahul (sic) [ Rakesh ], I am quite sure that we will do it -- sorry, Rakesh, I'm quite sure that we will be able to do it, because there are a lot of opportunities for Coal India to increase the production. Even if we increase our production from Gevra, Dipika and Kusminda, that will be a huge plus. And most of the time last year, our things were not ready. But this year, we have ensured that all the contracts are in place. We have contracted out almost 1.25x of our requirement so that if situation arises and the demand is there, we can increase our production immediately. We have removed OBR. So if -- by removing small amount of soil, the coal production can be increased. If you see our loading data this year, at this point we are doing about 1.8 million tonnes daily. This was being -- never done earlier in the month of October or November, this type offtake was never taking place. So I'm quite hopeful that in coming years, that by FY '22, situation will be much better and the economic -- with the growth in economy, demand will be there, and we should be able to show a double-digit growth. And that is our target.
Great, sir. Second question is on the linkage auction. So in last few months, we have not seen any new plants coming up. Any thoughts around how should we plan for linkage auctions for nonregulated sector going forward?
See, there are 2 ways of meeting the demand of nonregulated sector. One is doing continuous auction like spot auction and exclusive auction, which we are doing, and there is no shortage of coal to any consumer. But doing linkage auction at this point is not advisable. So we are waiting for the right opportune time to do it.
Got it. Got it. And sir, one very interesting chart that you have shown in your presentation around the peak demand during the day. So if you can just highlight as to what essentially we are saying is that the peak demand actually comes up after -- or during evening and which is when the solar is not available. So can you just throw some light on that part, sir?
Exactly, that is the point we wanted to make, that everybody is talking about that the renewable energy or the solar energy will replace the coal production -- replace the coal-based energy in the country. This is what we are showing that when the peak demand is there, then the solar energy is not there. And hence, the requirement of coal-based energy for coming many years will be there. If you have seen one of our most tables which we have associated with, even if the country grows at the rate of 6% by 2030, the demand for the coal will be about 1.25 billion tonnes. And if it grows at about 8%, perhaps it will be higher. And that too is -- we must understand that in India, the per capita convention is about 1/3 of the world average. Even the coal consumption per capita in energy term is 1/3 of the world average. So all the things with these parameters will improve. And hence, I am quite sure that for coming 1 or 2 decades, there's no situation in which the coal demand will decrease in the country. Maybe the percentage of the energy produced from the coal, that percentage may reduce. But in absolute term, there will be a huge increase in coming years.
We have next question from Mr. Abhineet Anand from SBI Capital.
Sir, just wanted to know this. You said that this 150 million tonne demand looks very clear. Can you highlight -- or can you break up it into how much is it power? And how is it nonregulated part as per you?
See, about 20 million tonnes is imported for blending, which is easily replaceable by us. That if we take an Indian coal equivalent, it is about 30 million tonnes or maybe -- it is 22 million tonnes, so it will be about 30 million tons. Another 60 million tonnes is imported for NRS sector, which is, which is not very high-grade coal. So this coal, again, can be replaced. And if this coal is replaced, that will be about maybe 70, 80 million tonnes. Besides that, there are many other coal importers like this cement sector and [indiscernible] , et cetera, who are importing the coal. But if we can produce more than for the thermal energy, we can give slightly lower grade coal. And this high-grade coal, whatever is produced in the country G8 or G7 type, which is also 50, 60 million tonnes in our country, that can be transferred to this cement industry or [indiscernible] industry. And then that also can be replaced. So all this easily add up to 150 million tonnes.
Okay. My second question is, although you did mention that coal in India is like among the cheapest, but if you can highlight over the next 3, 5 years, what can the company do to still make coal cheaper? Because you did mention solar doesn't happen at peak. But let's assume the storage comes in a big way, which takes away the peak part up to certain extent. So coal needs to be competitive in that sense. So I'm saying 5 years hence, wage revisions can't be avoided, but in other cases, how do you bring down the cost of production? Any thoughts on that?
Our primary expenditure is manpower cost, which is still 50%. But our manpower is decreasing by at the rate of 5% every year. If you see last year also, from October last to this year last more than 14,000 people -- means there has been reduction of more than 14,000 in our manpower. And hence, if you see in H1, the cost of manpower has reduced by 1%. I don't say that 1% is a significant amount. But keeping all the inflation in the economy, keeping the wage -- natural wage increase, et cetera, even if we keep it constant, that is a big achievement. So first part is that we are working for reducing the manpower. Second thing is, we are going for MDO mode. We have already tendered for 5 mines. We have identified 16 -- 15 mines for which we will produce about 160 million tonne after 3 -- 5 years down the line. And that cost of the production will be very less compared to what we are. And there, this requirement of capital expenditure from our side will also be less. So to that extent, our cost will be less. We are investing in evacuation. That will also decrease our transportation cost. We spend about INR 2,000 crores every year on [Technical Difficulty] [indiscernible] evacuation also. So that will get reduced. So all those things, we are working on how to reduce our electricity bills, how to economize on diesel. So all these things, I personally believe, in coming 4, 5 years, if inflation factor is taken into account, our coal price will definitely -- at least not increase if the inflation is in the real term.
Due to time constraints, we are closing the call now. I would now like to hand the conference over to Mr. Jinit Mehta for the closing comments. Over to you, sir.
Thank you. We sincerely thank Mr. Pramod Agrawal and his team for giving us an opportunity to host this call and sharing their insights. We also thank everyone who participated in today's call. Thank you, and stay safe. Goodbye.
Thank you, Mr. Mehta for organizing this, and stay safe. Happy Diwali.
Happy Diwali to you, sir. Thank you so much.
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