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Ladies and gentlemen, good day, and welcome to the Coal India Limited Q4 FY '21 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Sameer Goyal from ICIC Securities Limited. Thank you, and over to you, sir.
Yes. Good evening, all. Thank you for joining this important call. We are very pleased and honored to host Mr. Pramod Agrawal, the Chairman and Managing Director of Coal India Limited for an investor call post the Q4 FY '21 results and also to discuss his views on the recovery of coal demand in India. Along with him, we have Mr. Sanjiv Soni, Director of Finance; Mr. S. N. Tiwari, Director Marketing; Mr. Viswanathan, the Company Secretary; and other head of departments as well. On behalf of ICICI Securities, I thank you all for joining this call. Over to you, sir, for initial remarks, and then we can have a Q&A.
Good evening, friends. It is really a pleasure to interact with you after declaring the full year 2021 results. This was a tough year. Tough because we are operating in an open area, which is -- that's infected by this disease very easily. And this reduced the demand in the market. This affected our manpower very severely and to move about was difficult, but then we could continue our production, we could continue the dispatches. The dispatches were not much less than the last year, nor was the production. Production was less by -- less than 1% and dispatches was less by -- slightly more than 1%. Actually, in month of March, suddenly, the demand reduced and whatever we were expecting that the dispatches will improve in January, February, March, it did not occur. All the power plants were running very high in the stock. So they started reducing the stock. So that affected our dispatches.However, in the -- with near year, new hopes have risen. In April, May, June, the dispatches have been very good. Our production also has been quite good. All these details have been posted in our website. So I would rather stop here and take the questions rather than getting into the details. If you need some details from us, I can address that during my -- in any of the answers. So Sameer, can we take the questions?
Sure. Sure, Mallika, we can open for the Q&A.
[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 is on your production or sales target for this year. If you can provide it subsidiary wise, that would be great?
Sorry to interrupt. Mr. Dixit, there's a disturbance coming from your line. Request you to mute your line while the management answers your question.
Okay, sure.
See, Amit, for '21 and '22, we have -- that's a very ambitious target, assuming that there will be quite a good growth in this economy, and so the demand for coal will rise tremendously. At the time we were fixing the target, we never thought that in April, May and June, there will be corona 2, or maybe corona 3 will hit this country latter part of the year. So we have discounted that and we had assumed that the power demand will be more than -- the demand of coal for power itself will be more than 620 million tonnes. So keeping some -- and thinking that some of the most import substitution would take place, we kept the target for the site as 740 million tonnes and 710 million tonnes -- 740 million tonnes and production target at 660 million tonnes -- 670 million tonnes. So this was our base. And if you see subsidy wise, then the yearly target for production was ECL 52 million tonnes, BCCL 32 million tonnes, CCL 74 million tonnes, NCL 119 million tonnes, WCL 60 million tonnes, SECL 172 million tonnes, and MCL 163 million tonnes. And the dispatched target for the year was ECL 56 million tonnes, BCCL 32 million tonnes, CCL 80 million tonnes, NCL 126 million tonnes, WCL 67 million tonnes, SECL 196 million tonnes and MCL 182 million tonnes. I would say these are very ambitious targets and keeping in the mind that the last 3 months have not -- we have suffered a lot. So perhaps, this will be difficult target, we will have to revise these targets as the months go by.
No problem. So the second question is on receivables. Why receivables has declined compared to maybe Jan, February level? Still it remains pretty high. So what will be the target for FY '22? What kind of receivables can we expect by end of March '22?
Target for -- I've mentioned the targets for dispatching is 740 million tonnes. Our receivables have reduced to INR 17,000 crores. I am targeting that, if everything goes well, then it will come below INR 12,000 crores to INR 13,000 crores.
The next question is from the line of Pinakin Parekh from JPMorgan.
Sir, my first question is on the wage cost for this quarter. And what is the outlook for the year? Because there is also talk about the discussions on the wage agreement starting sometime this year. So how should we look at the wage cost for the year FY '22 on an absolute basis?
See in the last quarter the wage cost must have reduced by about 2%. I don't remember about the quarter as such. But for the whole year, the wage cost has reduced by 2% or 2.5%, in that range. This year, there is -- there will be negotiation but then again, I think -- we have calculated that the reduction in manpower will again be in the range of INR 13,000 crores to INR 14,000 crores. And if we keep that in mind, then had there been no wage negotiations, there would have been a reduction of about 3% in the wage cost. But since there will be negotiation, and it will very difficult for me to say what will be the growth in the wages, but even if it is 5% to 7%, because keeping in mind that in last -- the increase of INR 15,000 crores, and that was only 5 years. And in these 5 years, inflation has remained almost constant and the growth in the country per se has not been very high. So I think there will be very high rise in the manpower cost. So a very high fees in the wage costs, but it will be difficult for me, as I mentioned earlier also, to mention anything right now. But at the end of the year, even if the wage increased with setting an account, maybe at the most, 2% to 3% rise in the cost should take.
So just trying to understand that because in the quarter, the wage cost was up around 14% on a Q-on-Q basis. So was it just related to any actuarial assumptions?
There is one actuarial assumption...
Sorry to interrupt sir. This is the conference operator. Mr. Parekh, there's a disturbance coming from your line, request you to mute your phone.
There has been an increase in gratuity by INR 1,000 crores suddenly. I'm unable to understand why this actuarial thing has come, but because of that, only wage cost has increased or decreased. Otherwise, decrease was in the range of 3%. But if there is an increase of 14%, that I can't comment right now. I'll have to check that.
Sure. Sir, my second question relates to the slightly medium term. Diesel prices have been surging, which means that there is cost pressure for the company. There will be higher wage costs even if you assume a 5% to 7% increase, that's roughly INR 2,000 crores, INR 2,500 crores more. E-auction coal prices are still not breaking out. The company has an aggressive CapEx program. Receivables are not being paid fully to the extent we expected it to. In that context sir, does the -- is the company looking at raising coal prices, especially for the power sector? Because there is a relentless cost surge on one side, and there is also an issue of receivables not being being paid even as the company is doing CapEx. So how can the company look to increase profitability from here?
See, this is the right time to increase the cost and we are thinking very seriously about it. Unfortunately, for the last 3 months, while we were discussing this, this COVID thing was there. So we are discussing it seriously and perhaps we should take some decision soon. But then to say that when we will this, will be -- is difficult.
Understood. And sir, lastly, what is the CapEx outlook for FY '22? And at this point of time, if the receivables is not paid down, would it be fair to assume that the company would effectively look to borrow to basically fund the CapEx and maintain the dividend payouts?
I don't think that situation will arise because receivables are constantly decreasing. If you compare it with December last, means December '20, at that time, our net receivables was in the range of INR 21,000 crores, INR 22,000 crores. Now it has come down to INR 17,000 crores. If everything goes well, then perhaps it will further reduce by INR 4,000 crores, INR 5,000 crores. In April, we really tried very hard to reduce the receivables by controlling and regulating the supplies. Even now we are trying to regulate the supplies to certain big debt -- creditors. So that is the issue. So I think we will be able to generate adequate profit and adequate cash to meet our demand. That I'm quite sure, there will not be any problem.
The next question is from the line of Shikha Raman from Spark Capital.
Sir, what is split of coal sales in FY '21 sector wise, power specifically, both from linkage sales and e-auction sales?
See, I don't remember the figures exactly, but the power -- sales to power sector is in the range of 75% to 80%, maybe roughly 75%. And to e-auction, the complete things that have been reported is in the range of 11%. And rest of the thing has gone to different small sectors. So -- that data, if you want, we can send you. Just one minute. E-auction -- lifting on account of e-auction although we did auction of 124 million tonnes, as you know, but about 64 million tonnes or 65 million tonnes were lifted, rest of the things will get lifted in this year. So about out of 576 million tonnes about 11% to 12% was on e-auction. So am I clear to that extent?
No, can you just repeat this once, like, not completely.
From e-auction accounts, the total lifting was 65 million tonnes -- 65 million tonnes or 66 million tonnes. So it will be a -- booking was 124 million tonnes, but rest of the thing will get lifted this year along with whatever is booked this year. So there is a time given to them to lift the coal. So that comes to about 11% to 12% of the total lifting and about 75% to 80% went to powerhouses. That 2 major figures I can give. Rest of things was to small consumers, cement or something like that.
Okay. Okay. So what is the e-auction volumes expected in FY '22?
We are targeting for something like 130 million tonnes to 140 million tonnes. Last year, we did 124 million tonnes. The growth in April and May and June has been quite good. But then that does not indicate the trend in the whole year because April, May, June last year were very bad. So -- but then we are targeting for something more than 130 million tonnes, 135 million tonnes.
130 million tonnes, 135 million tonnes, okay. So what is the average premium of e-auction sales at present? And what is the likely thing for the entire FY '22?
What will be likely thing it will be very difficult, but then at present, we are getting 16% to 17% premium. And if our supplies remain good, then the premium will be about 22% to 25%, but it will be very difficult from me to predict anything.
Okay. It depends on supply?
It depends. If the supply increases, premium reduces. And how the demand pans out in the coming months, one doesn't know. Because I was expecting that in June, there will be huge demand. But unfortunately, because of the rain, not unfortunately, but because of rain and because of COVID lockdowns, et cetera, the demand was not as I was expecting.
Okay. Okay. Okay. So on the wage hike part that you told earlier, what is the -- when is the wage hike due and expected?
See, the wage review was from 1st of July. And we have set a committee for the wage division, et cetera -- wage revision. But it will take a while before the -- and that's the negotiation that's finalized.
Okay. Okay. Okay. Just what was the total overburden removal in tonnes for FY '21? And how did it compare with FY '20 and what is expected in FY '22?
See, the total OB removal, we count it in terms of million cubic meter. So the growth was 15.7%. The last year, it was about 1,300 million cubic meters -- 1,347 million cubic meters in FY '20, 1,357 million cubic meters in 2021, and it was 1,154 million cubic meters in FY '20.
Come again, sorry.
Okay. 1,347 million cubic meters in FY '21 and 1,150 in FY '20. So the growth has been about 17%.
Okay. Okay. And for -- going forward, FY '22, what is the...
The target is taken into account, then this will be about 1,538 million cubic meter. But if the target is adjusted, it will go down.
Okay. Okay. Okay. So when will the price of linkage coal be increased again? And by how much do you expect?
It's a very difficult question, I can't say on just how much it will be increased and when it will be actually done and how much it will be increase. That is not something I can tell you right now.
Okay. Okay. Okay. And what is the split of manpower percentage between underground mines and open cast?
Underground is about 43% and over -- open cast is about 57%.
Okay. And what proportion of...
Sorry to interrupt sir. But request you to join the queue for follow-up question.[Operator Instructions] The next question is from the line of Vishal Chandak from BM Capital. The line for the current participant is disconnected. So we move on to the next question. The next question is from the line of Rahul Jain from Systematix.
So see, first of all, I want to take on the overburden provision. We have increased it to almost INR 62,000 crore. And we have had hardly any cash to support that. So is there any proposal to reverse that? And how much tax liability do we accrue if we do that?
I couldn't get your question. Please repeat because the...
Mr. Jain, there is a disturbance coming from your line, sir. Request you to mute your phone after your question.
Please repeat your question.
Yes. No, my question is that we have this OBR provision of INR 62,000 crores and we have hardly any cash to support that provision. So do we anticipate the reversal of that? And what is the tax liability will be approved if we do that? And secondly, sir, the MMDR Act amendment, what is the increase in cost do we see on account of premium? For example, for iron ore, the premium is 150% of royalty. Is there a similar proposal on coal? Yes, just on these 2 questions.
Okay. I will take the second question first. Because we have not acquired the land or lease under MMDR Act. We acquired the land under CBA. And so whatever land they get, that's vested in Coal India. And because of that, there is no lease and the royalties linked to the price of the coal, that is about 14% and there is no talk or any issue on increasing this royalty or anything. So that is something different from how we deal with the iron ore. Now coming to your first question, there is about INR 48,000 crores provision for overburden. I hope that over the year, maybe next, not right now, but when the production -- our mines will start getting depleted, then only this issue will come. We already have more than INR 20,000 crores -- more than INR 20,000 crores, INR 25,000 crores in our kitty, which is equivalent to cash. And over the years, this will again build up. So I don't think there will be much of a problem on this.
Right. Right. And sir, also on CapEx budget. So what sort of number we have planned for this year? And how much money are we going to allocate for our diverse -- projects which we have envisaged, whatever the smelter and solar chips and things like that?
See, solar chip, et cetera, I don't think there is any expenditure this year. I mean, our total expenditure on those all projects will be very less because we are looking for PPA partners. We will not be owning this company completely. So only expenditure we incur will be in constructing the solar power stations, of which we have about 100 megawatts allocated in Rajasthan -- Gujarat. So in that -- on solar power, et cetera, maybe there will be capital expenditure if we take 70:30 ratio of that equity. So even if we get another 100 megawatts from that 200 or 300 megawatts, we get -- include this year. So that will be something in the range of INR 1,500 crores or about INR 500 crores. Mostly my expenditure of INR 1,700 crores will be in 3, 4 things. One is acquiring land. Secondly, R&R thing. Third thing is First Mile Connectivity projects, CHPs and bunkers, et cetera, which we have taken so that we can evacuate easily. And the fourth thing will be railway lines and sidings, et cetera. So mainly our expenditure will be related to coal projects only where we are planning to create capacity to evacuate more coal in an environmental-friendly manner.
So will we exceed last year's number of INR 10,500 crores or something in that range?
I think this -- last year, our expenditure was INR 13,000 crores. This year, we are planning to -- we are targeted for INR 17,000 crore. Because all these FMC or First Mile Connectivity projects that we had, 35 projects, all were tendered out. And two, they could not sign that because they could not submit their BD, so we had to do the retender and all these projects if COVID situation do not aggravate, then they will be in full swing. So there will be an expenditure in these projects.
The next question is from the line of Amit Kumar from State Bank of India.
Sir, can you please tell us what will be the working capital requirement for FY '22, if possible subsidiary wise, we want to ascertain finance cost for FY '22?
See, we have got loan of about INR 1,000 crores or INR 1,500 crores in BCCL. So the subsidiaries have got adequate cash to meet all the requirements. So I don't think the -- and BCCL also is now in repaying mode. Another 4, 5 months perhaps, if everything goes well, then they will repay the loan. So I don't think there will be any requirement of working capital to raise loan on this account.
In FY '22, there will be no working capital requirement -- incremental working capital requirement?
Incrementally there will be hardly any loan. We will not be taking any loan on this account.
Okay. One more question, sir. Actually, 2 more questions. Sir, you have informed that 75% of coal supply is towards power plants. Does ESG concern of power plants may impact coal demand in years? Any assessment on it?
I won't say that we have done any much of assessment. We have got some studies done, but the fact remains that as power will remain a dominant energy supplier -- I'm sorry, coal will remain a dominant energy supplier in coming decades or so. Maybe the role of the coal in terms of percentage will reduce, but in overall terms, in water term and every term, it will increase. So I don't foresee much of a problem in this. But then, as is happening in all over the world, that renewables are snatching some space from conventional power, that will happen in the country as well.
Okay, sir. One more question, sir. Sir, we have seen off late the private players are being encouraged in coal mining to improve output. Can it impact CIL in a negative fashion or something?
The thing is whatever mines have been up and till now for private sector for commercial mining, at the most, that can produce 50 million tonnes. And secondly, those mines have got adverse shipping issue, et cetera. Thirdly, we have -- thirdly, they will take another 3 to 4 years to start production. By that time, Coal India is likely to become more sleek and more efficient. So I don't think it is going to affect as much. It cannot. Rather it will affect us positively in a positive manner because of the 2 things. First thing, we will try to become much more efficient because there will be some element of competition in this market. And second thing, for us, the price will become more free and Coal India will get some advantage out of that. Please continue. Sameer? Hello?
Yes, sir. We are continuing.
The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.
Sir few questions from my side. First, can you highlight on the underground mine closure as to how much was done? What is the target for '22 and beyond? And if you can also highlight any incremental savings from those that you can accrue?
Rakesh, last year, we had said that we have identified 23 mines which are to be closed in this year. We have already closed down 13 mines, 14 are in pipe -- 4 are more in pipeline, in the sense, out of that 23, 4 are in pipeline. They will get closed because the closing does not -- we cannot do it suddenly, it takes a while because technical thing has to be done. The rest of the 5 or 6 mines that are left, they have planned to increase the production substantially. Like 3 or 4 mines in ECL they are trying to merge those 4 mines into 2 mines, and increase the production from current level of less than 110 tonnes per day to something like 2,000 tonnes per day. And I've given them time till December, if they increase the production, that's okay. Otherwise they will start closing down because they are deploying some model method to increase the production. And those mines in ECL are mines if they increase the production, then -- I had given them option either you close down or you increase the productivity of the mine. So they are working on that. Another mine is Rani Atari in SECL, they are deploying continuous miner and it was the continuous mine and they were awarded the tender. If the continuous miner through the private operator becomes functioning, then perhaps we can get more than 15 -- in the range of 1,200 metric tonnes to 1,500 metric tonnes of the coal. So that will also become profitable. So we have closed down those 13 plus 4, 17 mines have been closed -- 13 have been closed and 4. To say how much saving has been done, we are working the numbers and best figures, but then what our calculation says that without getting into detail, about INR 300 crores to INR 400 crores will be saved out of the 13 mines. But then the exact figure will come in a while.
And sir, any target that you can highlight for next 1 or 2 years?
See to give target for more than one year will be difficult. But this year again we are working on that. Right now, we have not identified or pinpointed the mines, but we have identified 17 mines which may be closed, but I will not say that I consulted my CMD, et cetera, because some consultations and some discussion has to take place. So we have not finalized, maybe by next meeting we will finalize that and we will give you the number.
Great, sir. Sir, second question is on the MDO economics. So essentially, you are targeting large mines to be given through MDO. So if you can just also highlight what is the kind of differential in costs that could come up, because of this transformative agenda that you have taken compared to if you were to do on your own?
See, MDOs, we have awarded 2 mines. One is Kotre-Basantpur and another is Siarmal . Kotre-Basantpur is for us 10 million tonnes or 5 million tonnes. Siarmal is 40 million tonnes mine. So the cost that we are getting there is about INR 290 crores. And the application cost will be on us. So the first thing will be the production that will be ensured in a very efficient manner because if we deploy the labor ourselves, then it become very costly. Our labor is very costly. If we work through the outsourced model in which contractors deploy the labors and machines, they tend to deploy very small machineries and which do not give good production, and those are not efficient. So when the MDO is given for a longer term, we expect that they will deploy big machineries, which will be more efficient, it will be less harmful to the environment. And secondly, there will be continuous supply. And they will work in much more efficient way. So the cost will reduce substantially to us as well. Secondly, in some areas, we are looking at MDO model in which perhaps we are targeting that we will not be providing the service to the land out. Instead of that, we will give them upfront compensation. So that should reduce the cost. The maximum advantage would be by increasing the production in all these big mines, we will be able to close down the small mines, which have become highly inefficient, and that will save us lot of money. And to calculate what is, that will be difficult for me right now.
Sure. Sir, another question is related to this proposal of merging all kind of e-auctions into a single e-auction window. So any thoughts around it? Where do we think this would actually pan out?
When it will -- because I need the permission of the government because this model was decided by the cabinet. We have sent the proposal that all the e-auctions should be merged and there should be only one e-auction mechanism. This helps us in that -- in 2 things. First thing is, it improves the transparency. Today, it is at the decision of officers that this mine is allotted for a particular purpose. That second mine is allotted for a different purpose. And they reduce the quantity for one purpose, they increase the quantity for another purpose, and all this leads to lot of opaque type of function. So that opacity will completely go and transparency will come. And when there is some lack of transparency, there are attributions, et cetera. So that will also be lower. So that is -- from administrative or government's point of view, that is one of the most important thing. Secondly, if the consolidated amount or quantity is offered for every purpose by mixing all the modes, then I -- we think that the premium will be much higher than what we are getting. So that will help us. But if you say how much premium will increase, it is very difficult to predict right now. But it will definitely improve the efficiency of the auction process and it will improve the transparency of the auction process.
Got it, sir. One last very quick point. Although your targets initially seems very, very ambitious, but the current run rate does suggest close to 660 million tonnes of offtake run rate. So is it something that is easily achievable in your view? Or you think that more than 10%, 12% growth is difficult in current environment?
See, if you talk about dispatch, perhaps it's 650 million tonnes achievable this year, or more than 650 million tonnes, but it will depend how the situation in the country is there. Because nobody knows when the third wave will hit. If it does not hit, then till March, we will be at 650 million tonnes. But if it hits in December or something, then everything goes topsy and turvy. Because last year also, I was thinking there will be substantial increase and we planned for that, we tried everything, but everything was brought to 0, because of this thing. So if everything goes well, then 660 million tonnes seems quite achievable. Till now in April, May, June, we have got advantage of about 15 dispatch, increase of about 36 million tonnes. And if we continue with this -- even if we take into account that the same growth will not be there in the coming months, but if we take -- we assume that at least a slight increase in the coming 2, 3 months will be there, so we'll start the third quarter with advantage of about 45 million tonnes, 50 million tonnes. So achieving a 50 million tonnes growth -- 60 million tonnes to 70 million tonnes growth will not -- should not be difficult.
The next question is from the line of Vineet Maloo from Birla Sun Life Insurance.
Yes. It's Birla Sun Life Mutual Funds. Sir, just wanted to know, one, you've made an investment of roughly INR 3,500 crores. So what is this regarding? That is question number one.
INR 35 crore in what?
INR 3,500 crores appears as an investment under current assets. I mean the...
That is mutual fund because in mutual fund, they have invested in some debt mutual fund. This time, one of the subsidiaries, so that is that mutual fund, nothing -- means not in anything else.
Okay. Okay. Okay. Sir, I thought you mentioned your CapEx was INR 13,000 crores this year. What I can see in cash flow is only INR 10,800 crores. So I thought you were also counting this investments?
See the -- our total -- this is about INR 13,000 crores. We have invested something in HURL and TFL. And whatever loan they take that does not get reflected in our book. But since that has been raised because of that, so we count that in investment for our own purpose. So that is there. And this rail lines debt, that gets reflected in our book. So that might be because of that. Some tax adjustments because INR 700 crores to INR 800 crores is because of GST adjustment also that we have tried to capitalize this year.
Okay. Understood. And sir, when you say you will invest INR 17,000 crores in current financial year, out of that, how much again will be by those 2 entities and how much will be under us, which will get reflected here?
Those entity, I think it will be about INR 3,000 crores for those 2 entities -- INR 3,000 crores to INR 4,000 crores. That depends on how the progress on both is. But then HURL is in final stage. So there will be about -- yes, it will be about INR 3,000 crores to INR 4,000 crores.
Okay. Okay. Understood. Sir, just trying to understand. So with this overall CapEx of INR 17,000 crores, right, and I understand that we will get some substantial terms of receivables back this year hopefully. So we should have sufficient cash flow for CapEx as well as dividend for this year. I'm just concerned, this CapEx rate is unsustainable without cutting dividends going forward, unless you either cut dividends or we resort to borrowing. So what is your thought on beyond current financial year? I mean -- and how do you see this CapEx trajectory evolving? I don't want exact numbers, but a ballpark duration and movement should help us.
See the type of growth in CapEx that has happened in last year or that has like happened this year, this cannot be sustained. That -- and there will not be any requirement either. What do we have -- we are investing what we have done in last year or this year is basically replacing all the old machineries, which have not been replaced for the last 30, 35 years. Some of this draglines of MCL that was bought 32 years back, there was no tender, we have done that tender this year. We had not inducted shovels and the dumpers, which we have finalized this year. So they will come this year and next year. Then as the evacuation projects were not taken up seriously that we have done this year. So that in coming years, evacuation can happen. And now it will depend, what is the demand that we face this year and what is the likely demand next year. If the demand increases, our CapEx may increase. If the demand does not increase, then acquiring the land, acquiring the -- increasing the machineries or increasing investment on rail lines, et cetera, that will reduce. The second thing that we have done is we have gone for MDOs. So that type of CapEx, which we do for acquiring machines, et cetera, or for servicing FMC, now those things will be done by MDO operator and it will be on that account. So if we successfully do the tendering of 8 to 9 more mines this year, large mines, then the demand for CapEx will also get reduced in the coming years. So there are 2 things. First think is CapEx will completely depend on what is the demand that we get in the market. And second, how successful we are in getting the MDO operator on board.
Sir just to clarify, for incremental production, the CapEx that we will require beyond current financial year will be on land and broadly evacuation in production. Machinery, et cetera, will be taken care through MDO route. This is our intention as of now. Is that a fair understanding?
Yes, that's right. And then acquiring the land will also depend on what is the demand. If suppose the demand does not increase that much, then we will not acquire the land.
The next question is from the line of Sonaal Kohli from Bowhead Investment Advisors.
I have 3 quick questions. Firstly, as far as the early CapEx beyond 2022 or 2023. In a normalized environment, would it be fair to say it would be less than INR 10,000 crores? Some broad numbers, if you could give from a 2, 3-year perspective for the core part of the business? And secondly, on the remnant part of the business, is there a CapEx number you have in mind?
FY '23, it is likely to improve slightly because all the orders that we have placed in FY '22, '23 also. And most of this FMC projects and the related sidings and railway lines, et cetera, will get completed. So FY '23 -- till FY '23, I think there will be some -- I mean, some increase in CapEx, maybe next year, we get a target of INR 17,000 crores or INR 18,000 crores and thereafter INR 20,000 crores. But thereafter, for us it will start reducing. But again, if the demand is there and we are able to go for something like 800 million tonnes or 900 million tonnes, then the CapEx will have to be increased.
So sir, if I heard you correctly, even in something like 2024, you were saying CapEx could be INR 15,000 crores, INR 20,000 crores? Or did you mean a much more number. Some sense about -- on that number beyond '22 and '23?
FY '23, I said it will be in the same range. But after FY '23, FY '24, it will be very difficult for me to project because it will depend on the demand. If the demand is good, then perhaps, this can increase. If the demand is not there, then -- if the demand continues in the range of 650 million tonnes, 700 million tonnes, then there will not be much of CapEx.
So when you say not much do -- would you have any number in mind in that kind of scenario? Would it like INR 5,000 crores or it would be INR 10,000 crores?
Not INR 5,000 crores. It will be in the range of INR 15,000 crores or INR 17,000 crores. Because land will have to be continuously acquired and some CapEx will be required for everything because machinery et cetera has to be continuously replaced. So it will be in the range of INR 15,000 crores to INR 17,000 crores. Mine development charges et cetera, mine development funds, et cetera are required.
And sir, what would be our dividend policy going forward? Do we give INR 15 crores dividend this year or would that be maintained or increased going forward? And how will you fund it with this kind of CapEx? Would you be able to make enough cash flows?
See the thing is, the type of money we make if our production increases slightly is very high. Had the dispatch been in the range of 600 million tonnes, then my profitability would have increased by another INR 3,000 crores or INR 4,000 crores or INR 3,000 crores. So that type of money is made. So what I am assuming that every year, we will be increasing our dispatch by 40 million tonnes to 50 million tonnes. If we increase our dispatch by 42 million tonnes, this will generate enough resources for both dividends as well as CapEx.
So sir, you were saying given in a normal year, beyond -- once your base is normal, to a normal industry activity, even beyond that for next 2 years do you expect your demand to grow by 40 per tonne to 50 per tonne beyond the exceptional period. Then also you expect that kind of increase?
I expect that if the normal year is there, this sudden increase will be around 70 million tonnes to 80 million tonnes and thereafter -- in the first 2 years -- first year of -- first normal year and thereafter, it will definitely increase by 40 million tonnes into 50 million tonnes every year. And if that type of dispatch is there, there will be adequate resources for everything. Both for investments and dividend.
And sir, this high-growth rate...
Sorry to interrupt you, Mr. Kohli (sic) [ Maloo ]. Sir, I would request you to rejoin the queue for follow-up question, sir. The next question is from the line of Nitij Mangal from Jefferies.
First question. Can you share what's the latest on contingent liabilities related to mining and tax issues?
Please repeat your question. I couldn't get you.
Sir, could you share details on what is the latest from the contingent liability related to -- there were some mining-related and tax-related issues?
We have 3 types of namely contingent liability. One is land related. So if land related, that is specific to Jharkhand state, and that's to, again, mainly to CCL area. We have acquired land, and we have acquired land from the -- as per records of the Jharkhand State government, and we have paid their compensation to the land owners, but there is some discrepancy in Jharkhand land records where it is shown as government land also. So those also have raised some claim. Secondly, there are -- there is lot of land in CCL area, which we have declared as Coal India's land, but we have not taken possession to that land. For that also, they are asking for money. So we are saying that as soon as we get the possession, we will give you -- that payment should be linked to possession. So I don't think there is any problem with regards to this because this has been discussed many times last year and a lot of solution has -- I mean, to some extent, the solution has been reached. So this will not create a problem. Second thing is related to violation of environmental violation because of which in Jharkhand and in Chhattisgarh some penalty or same has been imposed by the state governments in the range of INR 14,000 crores. And that, too, again, I don't foresee any problem because the stay has been granted. And that case is not related to coal. That case was under which this has been done was related to iron ore. And as I was mentioning, that the way we acquire the land and the way rest of the mining people acquire the land is completely different. So this is -- this has been challenged and that there is a stay. So I don't foresee any problem on that account again. In income tax, there is -- some liabilities had been created, which we have disputed in various courts. But against that, some amount has been -- some money has been deposited, about INR 12,000 crores -- INR 14,000 crores have been deposited in the income tax department. And in many of these cases, we have one appeal at the first level and second level. So at different levels, those cases are pending. I'm -- even if most of the cases go against us, then also that deposit that we have made, I don't say that most of the cases will go against us because in certain cases, they have disallowed the expenditure on overburden removal, completely. Not just overburden adjustment but overburden removal completely. So that expenditure has been completely disallowed. So nobody can excavate coal unless overburden is removed. So in most of those cases, we have won, and those papers are pending in high court. So we are likely to win them. Then there is a disparity in the decision given in support MCL and SCCL. So all these things are being challenged. So even if we lose all these cases, then it will affect our profitability, but then it will not affect the kind of cash flow because those INR 14,000 crores will be adequate to meet all the liabilities. So that liability part is taken care of. Land, we are solving. Jharkhand, most of the problems have been solved. And in case of those violation cases -- EC cases, again, I'm quite sure that there should not be any liability. But then till the time the things are completely off, we cannot remove -- relieve this contingent liability.
Second question, and just going back to the CapEx intensity. If we see the -- let's say -- I mean, not 1 year to year, but let's at least see the incremental volumes over, let's say, 2, 3 years, 4 years period, the amount of CapEx that is going in and in addition to that, the contractual expenses, so both seem to have risen together very sharply. Why are we seeing such a sharp increase in both the CapEx intensity and the contractual expenses and both at the same time? So what's fundamentally changing in the nature of coal production that is resulting in such higher intensity of the expense?
I mean to CapEx, I explained you we are trying to replace machineries, which are old, and we are trying to invest in places where the CapEx -- if you see traditionally, last year, the CapEx was INR 6,000 crores, before that, it was INR 8,000 crores and 4 years back, it was INR 10,000 crores, INR 12,000 crores. So CapEx has been continuously reducing. So I would say that there has been underinvestment.The CapEx has to increase right now because we have to improve our evacuation mechanism. We have to improve our dispatch mechanism. We have to acquire more land. Otherwise, this company cannot grow nor can we make the demand of the nation. The second thing that you asked about the contractual expenditure, contractual expenditure has increased by about INR 2,000 crores to INR 3,000 crores and that is mainly on account of overburden removal.If you see last year, we have removed more than 17% more overburden. And overall, excavation, if you see, we have grown by about 13%. So that type of increase is about 200 cubic meter increase will definitely increase the requirement of -- contractual requirement. So that -- I don't foresee -- the conditions of mines had started deteriorating. Most of the mines have become vertical. In order to ensure the security and the continuous operation, we have to bring those mines to proper geometry. And if you see, again, removal -- this overburden removal of 4, 5 years, it has remained in the range of 1,100 cubic meter, whereas our production has increased from 520, 530 to 600 million tonnes. So all these things had become unsustainable. Now we have stabilized this since we have come to the level. At least the overburden is slightly more than what is required to be done. We are preparing our mines for the future. And at the same time we have invested in the CapEx so that all the old machinery, et cetera, can be replaced and we can continue our mining operation. So I don't foresee -- I mean, contractual expenditure has increased on account of increasing excavation. And this has been -- CapEx has increased because, we want more efficient evacuation process.
The next question is from the line of Subhadip Mitra from JM Financial.
Just what we -- hello, am I audible?
No, sir. Your voice is breaking, sir.
Okay. Is this better?
Yes, sir. You may go ahead.
Sir, my question pertains to the nonpower linkage auctions. If it is possible to share what is the quantum of coal that got dispatched through the linkage auction and the average realization?
What's the question, can you repeat because I couldn't get the first part although it was clear -- voice was clear? Quantum of the coal that has been supplied on linkage, is that...?
Linkage auctions, the nonpower linkage auctions that have happened. I think previous linkages, which are now getting converted into linkage auctions.
Linkage auction we will be doing in coming months. And it will be almost equivalent to whatever the quantity that is lapsing. And if the exact quantity -- do you have. It will be in -- I can't say right now, but I'll send you this figure. But we will ensure that whatever is linkage quantity was earlier there and what has lapped over the last 1 or 2 years, we will put that much quantity.
If it would be possible for you to share those numbers for FY '21 and '22 even it is offline I'm okay.
We will send you.
The next question is from the line of Ashish Kejriwal from Centrum Broking.
Sir, three questions. One, on this overburden renewal only, last year, we exposed our numbers in order to get more in future. And what we have seen in the last quarter that overburden renewal ratio that is stripping ratio has come down to around 1.9x. Overall, average was around 2.3x. So my question is going forward, that is in FY '22, do we see something like 2 or 2.3x stripping ratio?
See, in the last quarter, unfortunately, there was shortage of explosives all over the country -- I mean, in all my subsidiaries, especially in NCL and WCL. In WCL, it was -- shortage of explosive was especially very active. And if you see the removal of the OBR, then WCL and NCL contribute the maximum removal because there the stripping ratio is high. I think that in the coming year, we should be in the range of 2.3x, 2.25x to 2.3x only. 1.9x is not something which is sustainable.
Okay. Secondly, when we are investing around INR 14,000 crores in the first-mile connectivities and we are already having 3 projects with 13 million tonnes, which has been commissioned, so is it possible to share what kind of savings on a per tonne basis we are getting out of this so that we can have at least what kind of payback you get for this INR 14,000 crores.
We are investing about INR 3,000 crores to INR 4,000 cores on transportation of the coal for Phase 2 -- starting with our Phase 2 loading point. So at least that much of money will get paid -- not that much, but most of that money will get paid once these projects are completed. But getting into the...
Is it possible to share what kind of on a per tonne basis we are seeing or we can see when all the things are commissioned?
Per tonne basis, it's INR 50 to INR 60 per tonne, but that is completely based on this calculation. I can tell you those -- I think it should be in the range of INR 40 to INR 50 per tonne.
Okay. Otherwise, whatever projects we have already commissioned if you can get that share that savings also that will be good.
Okay. We will send you this number.
Okay. Sir, lastly, the kind of CapEx which we are doing, like for example, this year, we have spent around INR 11,000 crores. So is it possible to bifurcate into different buckets, like, how much you have spent roughly on land operation or machineries or something else and similar thing for FY '22, what we are planning for?
About INR 3,000 crores would be -- it means, I'm giving completely rough figures. I don't have exact figure right now. But roughly, the INR 3,000 crores should be in the land, INR 3,000 crores should be in machinery, about INR 1,000 crores should be for this SMP projection, INR 700 crores to INR 800 crores for FMC project, and -- I will send you the detail. And then mine development, et cetera, we must have invest something like INR 1,000 crores, INR 1,500 crores. So all this -- so major heads are basically land and machine procurements.
So that's why we are seeing that why FY '24, if demand does not increase that much, we can save on that planned excavation cost. Otherwise, any other costs will continue to.
Even if demand does not increase, but if we continue with 700 million type of production after '23, '24, also 700, 750, then also land will have to be acquired. I won't say that land will not have to be acquired. But expenditure on HEMM expenditure on this first-mile connectivity, et cetera, will get reduced.
Okay. And sir, lastly, I know rail negotiations are still -- they are previous starting from. But from when we can start making provisions, whether it will be second quarter onwards or from first quarter onwards, only we will make provisions? And certainly, in case, if we have to increase coal prices under SCC that can be done only after final wave negotiations or that can be done earlier also remaining on demand for sale.
That is not linked to wage negotiation. We will try to do it because wage negotiation will take quite some time. We'll try to decide on this fast.
And making provisions on wages?
From second onwards, we'll start making provisions.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
Sir, one question on the part of auctions. So I'm not going to the, like, say, auctions for power and nonpower and all that. But even if you see like a spot auction, sir, we are getting premiums of hardly around 29-odd percent, while the way the global prices are and the petrol prices are. So the improvement has not been that significant. And even if we see the amount of quantity which we have auctioned, it has been hardly around 4 million to 5 million tonnes in an environment when the prices are on such a high level. So what's the issue there? Why the customers are not participating in that, even in the special spot auction. So we have, let's say, sold hardly around 4 million to 3 million tonnes in the last 4 to 5 months. And even if you see the special spot for coal importer, right from October 2020, we have auctioned hardly around, like, say, we have been also able to allocate around 7 million tonne in that. So on that front, like, say, I really want to know that what's the issue on the part? When the international coal prices are at a high of, like, say, 10 years, and we are not able to sell the volumes in the auction market. And again, we are trying to say that now we will allow the buyers or the participants to sell into the export market. And when we are -- and on the another hand, we are not able to, let's say, get self-sufficient on the domestic demand as well.
First thing, let's just correct the figures. Last year -- maybe I have understood wrong. Last year, we did auction of about 124 million tonnes, not 4 million to 5 million tonnes. I don't know where did you get the figure from.
No, no, sir, I am talking about last 3 to 4 months.
Last 3 months, we have done something like -- booking is about 26 million tonnes in the last 2.5 months.
I was referring only to the spot auctions and special spot key auctions. I do understand that in the special forward for power, there are constraints and the sector is under the problem. So I do appreciate that there the realizations would be low. But I am referring only to the e-spot auction and the special re-auction and lastly the special spot for coal importers.
I don't have right now the figure of spot auction and e-spot auction. But then 1 should understand that if we -- last year, we did 122 million tonnes, and that -- in April to May, spot auction is about 3 million tonnes and the special spot is about 5.5 million tonnes that is you are right, about 4 million tonnes was done April and May. And the premium that we have got on this -- spot, we have got 32%, special spot, we have got 7%. We should not see special spot and spot separately because both of them are almost same except for the fact that in special spot where we have got. Now you have to see that in the last few months, in January, February, March, how much auctions we did on this account. We did last year, 124 million tonnes, out of which most of the things happened in last 6 months. And those people are still to lift the coal. And secondly, durign all this 2, 3 months, the demand got subdued because of COVID, et cetera. And in such circumstances, we expect that people will -- and them the -- again, the rainy seasons were add. We know that in rainy season, the consumption of the coal gets reduced. So people didn't bid for it. We have offered lot quantities. If people are -- there is no demand in the market products, we cannot do much about this. Whatever the coal import is taking place, one has to see -- do the analysis why the coal import is taking place. A part of this, the maximum part, went out of 200 million tonnes is [indiscernible] and 50 million tonne is because of this steel industry cooking coal, which we cannot replace. 25 million to 23 million tonnes is on account of the power plants located on the coal. So there is hardly much of the coal, which needs to be replaced from. We understand that the quality of the coal is not very good in the country, and hence, we cannot replace that type of the coal. So we can replace only the coal which is not -- which is of the same quality as Indian coal. And in the context, thermal power coal that was required by the country last year, almost -- whatever was substitutable, we could substitute. What we calculated that about 80 million to 90 million tonnes coal has been substituted. This year, again, has there been the normal circumstances for power, auction could have been much more. See, the price of the coal, means the premium that we get in the coal also indicates the demand. If the demand would have been there, perhaps the premium would have been much higher.
And sir, question on this CapEx on the evacuation. So on -- in the presentation, we have highlighted that around INR 27,000 crores odd investment would be made on the evacuation projects. So would it be entirely by us only or there would be participation by the railways as well? So how much would be shared by the railways? Because even if we see the past, entire of the investments on the railways used to be done by the railway, Indian Railway. So is it going to be spent entirely by us on our account?
See, the evacuation that we have shown is only our infrastructure. About INR 10,000 crores to INR 12,000 crores will be spent on CHP. So these are our CIL's infrastructure. You cannot expect railways to spend on that. Then there are about 24 and 21 -- 45 lines, which are -- 21 is siding and 24 lines providing connectivity to our siding. So we will have to spend on that. So I don't know whether INR 24,000 crores or whatever but in that range, INR 20,000 crores to 22,000 crores will have to be spent by us. It is not railway's project. It is project for the excavation of the coal and specifically on the Coal India's property.
Okay. So in that sense this means that CapEx intensity is going to remain very high for Coal India in coming next 3, 4 years?
At least for 2 years, it is going to be -- it means it is going to remain in this range, INR 16,000 crores, INR 17,000 crores.
The next question is from the line of Kirtan Mehta from Bank of Baroda Capital. Mr. Kirtan Mehta, your line is unmuted, sir. Sir, there is a disturbance coming from the line of Mr. Kirtan Mehta. The next question is from the line of Rahul Jain from Systematix.
Also, on the -- my question earlier on the MMDR Act. So it is very clearly certified that PSUs will have to pay around 200% of royalty. I would invite you to the schedule fix of the event. So this -- I was saying that we're not applicable to anyone. I'm just confused over here. Can you still elaborate?
I don't think MMDR Act is applicable much more -- except for certain things. We are not on the lease land. We are not operating our mines on leased lands. And there is no -- we are already paying very high royalty, which is about 14% and plus some -- this -- all we are saying more than 18% of -- 18% of our selling size as royalty, and on that royalty again 18% GST. Plus we are paying INR 400 as GST compensation tax. I don't think there is any further talk about imposing more royalty on Coal India or coal per se.
I mean -- see, this is -- your other peers, let's say, NTPC and NMDC, both are now paying the premium because it is basically compensatory measures for private entities, which are paid high premiums for mine acquisitions, right? So I'm just wondering how it is different for Coal India.
We are completely operating and completely differently. If you want, we can have offline discussion on this particular issue.
So secondly, sir, under your assessment, when is it that in India's coal demand is likely to peak because none of your competitor -- none of your weekly customers are expanding capacity? Now hardly some 6 gigawatt of capacity was added last year, and there is very small pipeline for a 12-month capacity addition for the next 2 or 3 years. And in that environment, you're doing such high CapEx. So what is your blue sky assumption, say, 3, 5 years down the line of where our coal demand is going to peak?
I think it will peak somewhere near 2030, not before that. See, we already are now for opting at very low PLS. Even if that PLS is about less than 50%. Even if they increase by 10% to 20%, which is quite sustainable, then the coal demand will increase tremendously, and that likely will happen. If the country has to grow, it needs power. And whatever power we are talking about cannot come through solar energies and so on.
Right. So we also plan to enter the power generation sometime in the future?
Not in a big way or anything significantly. We are looking at solar power only, not beyond that.
The next question is from the line of Vineet Maloo from Birla Sun Life Mutual Fund.
Sir, just a quick follow-up question on the CapEx part. You said there's bulk of it on machinery, which is for replacement of existing stock, which is very old and depreciated. So sir, how long will this portion of the CapEx will continue? How long will it take for you to modernize your fleet of machinery?
We have ordered almost everything that was required, means, not small thing but almost all the big machineries that were required, almost that have been ordered, like 240. Only thing that is left is 42 cubic meter shovel. Otherwise, the draglines, 20 cubic meter shovels, dumpers, et cetera, have been placed. This will come in the next 1.5 years or 2 years. Dragline will take a long time because there have got a lead time -- quite a long lead time. Perhaps, draglines will come in next 4, 5 years. But rest of the machinery will come in 2 years. So thereafter, perhaps this investment should seize.
The next question is from the line of Sonaal Kohli from Bowhead Investment Advisors.
I have some questions. Firstly, on the ESG side, have you taken any significant initiatives? And if any possibility of expectation of the core plants, how is the technology there? Over the next 5 years, do you see any possibility of that or what could these roadblocks or any technological changes that are happening, which could help us on that side within a time frame of 5 years? That's my first question.
Yes. ESG side, you can see the presentation. Also, last year, we did about -- more than 800 hectares of land. We planted more than 20 million trees. This year, we have increased our target to 1,300 hectares, and we think there will substantially more improvement. We are investing in FMC because of ESG also because it will reduce the environmental load. We have seen that the transportation of the coal caused much more pollution than the production of the coal. We are -- instead of using blast explosives excavating coal, we are going in a big way for surface miners and all new contracts we are providing that the contractors will use surface miners. Then, we are using whatever water discharge is taking place from mines, we are using almost everything of that for dump stabilization, et cetera. So all those things, whatever is possible, we are doing. We are getting our mines graded so that if there is some external agencies so that if certain improvements are made, we are working on that. For the first time in Coal India, we have brought out of the ESG reports prepared by some third-party agency next year again. This year, again, we will be preparing that. So all those possible things on ESG, we are doing. In COVID situation, we have tried to help the society in the big way. And actually, there is no other corporate entity in the country, which would have established hospitals amounting to total beds of about 4,000 beds. So in the area of our operations, for us, we were the big -- after the state government, we were the biggest provider of the health care during COVID situation, and we have upgraded our hospitals. We are creating this oxygen plants in about 77 hospitals so that they can just continue like COVID something, similar to COVID happens again in future. There is no shortage of oxygens in those areas. So all these things we are doing. For gasification, we had put this Dankuni on tender. We have not received -- we have received one offer as well. We are doing the analysis. But everything will depend on viability. Unless there is a clearcut viability and there is a commitment from agencies to -- for offtake of the product that we take -- it will be difficult for us to proceed in that line.
Sir, as far as your sort of CapEx is concerned, do you expect it to become material after your CapEx for the next 2 years, which is quite large, is over. Is that creating some -- your investing heavily in solar and would those tax change, let's say, in '24 or '25? Secondly, the technology which you are [Technical Difficulty] very high CapEx over next 2 years. So what I wanted to know was because of that, is it that you are missing this on solar and would that a bit change beyond '23, let's say, in '24, '25, like, you will start spending much more on solar projects?Secondly, the kind of machinery you're employing, which is new, what it will -- once this new machinery is over, let's say, we land up in 2024, could we expect some kind of EBITDA per tonne increase because of these initiatives once all of this is complete and what could be that quantum? We're just trying to evaluate any advantage higher on manpower reduction or progress increase because of this new machinery.
See manpower is decreasing very rapidly, about 15,000 manpower is -- roughly 13,000 to 14,000 manpower net reduction is there. We have decided that we will not take up solar projects in those areas where the manpower engagement is very high. Like in areas where we have to take land outsees in larger numbers, we have stopped taking those mines, and now we are concentrating on the brownfield expenses. So manpower is going to reduce continuously. And for us in coming years, the manpower will reduce at a much -- still rapid rate. So that is one thing. So the cost is going to reduce. The machinery equipment will likely to go down. Whatever investment -- you are right, whatever investment we are making in solar projects, et cetera, will likely to give good results. So EBITDA will definitely improve from next year onwards. There is no doubt about that. It depends mostly on our -- the offtake. If there is a normal year and offtake improve, even in this bad year, we had an EBITDA of 25%.Last year, it was 28%. So it has reduced only slightly, with so much of everything. So EBITDA is likely to increase further. If we go to 650 or something like that this year, there will be tremendous increase in profitability and EBITDA. So that is not something which will get affected by whatever investment we are making or whatever machinery investment, et cetera, we are doing. Means, those impacts will be very small.
Sir, my question basically on the contrary, the operator perhaps may have come out of it. What I was trying to understand because of the machinery you're spending, have you done any -- envisaged of EBITDA being constant. What would be EBITDA per tonne increase because of reduction in the employee cost or increase in productivity? Any sort of emphasis like EBITDA per tonne this year [indiscernible] (01:18:45)?
Your voice is not clear. If you send this -- somehow I'm not getting -- can the moderator repeat the question because his voice is getting slightly blurred. Hello? Hello?
Let me try it again. Can you hear me?
Your voice is coming, but it's not clear. Clarity is not there.
Is it better now?
No, no.
I'll send you an e-mail. No worries.
Then I will reply you separately because those...
The next question is from the line of Vishal Chandak from DAM Capital.
The line got disconnected on the previous occasion. Sir, my question was, we had in the past been talking about the vision of achieving 1 billion tonnes of production by FY '25, then we accelerated it to FY '24. And now you are talking about 600 million, 700 million tonnes also probably could be more aggressive target for next year. So when are we, at all -- are we planning to hit about 1 billion tonnes in production and dispatch or is this something that would be kind of thing of past?
See, if you -- coal production depends on what is the demand of the economy. We cannot keep on producing the coal and storing that. So the last year, we produced about 596 million tonnes. And still our stock increased to 99 million tonne or it started touching almost 100 million tonnes, which was the ultimate capacity we can store the coal at our place. This year, again, we have kept the target of 740 million tonne of dispatch, but as the things are happening, I think in coming months, perhaps we will have to recalibrate our targets. I think that by FY '22, the economy will be at the same level as it was at FY '20. So these 2 years have been lost. So if we think that the country will progress in the -- develop in the same way as it was expected, then perhaps FY '24 will become FY '26. So we are keeping those targets that are perhaps at a slightly lower level. But to say that someday or other things will be achieved is slightly difficult. Nobody expected COVID to happen. Nobody expected that almost second phase will be so severe. Nobody knows that third wave will come or not. So in that circumstance, keeping the target constant, it's not something right to do.
No, I completely agree, sir. So my question was largely with respect to where do you see the pockets of revival in coal demand so that we can hit 1 billion tonne. So it's always the demand, which is the constraint, not the production capacity now?
First thing is the demand of energy is likely to increase if it is a normal year. We are operating our thermal power stations at 60% or something like -- I mean less than 60%. These are likely to increase if the country has to develop. Secondly, in NRS sector, again, we can replace some coal, which is being imported. Last year was a difficult year. So as you know the productions are at such a low and demand was low. This year, again, the likely demand scenario is going to be subdued. But in coming years, definitely the NRS will improve. Despite huge pressure on us during April, we kept on supplying coal to NRS sector, and this is for the first time that we didn't -- we did maintain the ratio for NRS with increased power demand also. So I think that slowly we'll gain the confidence of NRS sector, and we will be able to meet their demand. And that way, we -- I think our coal demand should increase. The country has to develop coal. Coal is going to remain the main source of energy in coming 10 years.
Sir, my second question was with respect to your CapEx. We have been talking about replacing 3-decade year old machinery and probably by next 3 years' time frame, we will replace everything, which is possible. And as you mentioned, we'll spend about roughly close to about INR 45,000 crores odd in this entire phase over the next 3 years' time frame. Will that be good enough to take us to 1 billion tonnes capacity? Or again, to reach that 1 billion tonne production, we would again have another INR 50,000 crores of further next round of CapEx for that?
See, there are 2 things. INR 45,000 crores is not for machineries and FMC only. This includes land development. This includes rehabilitation of the people. It includes many more things. So first thing is there that requirement for perhaps connectivity, rail connectivity, requirement for this machineries will get subdued because 2 things are -- 2, 3 things are happening. First is that construction will happen, so the requirements -- to that extent, the requirements will get reduced. Second thing, we are moving to MDO mode, so on all those new projects, et cetera, that required funds will be invested by the mine operator. Third thing, in most of the mines, slowly, our own production is getting reduced and production is increasing through outsourced mode. So there the machinery requirement is getting replaced. But at the same time, if we have to maintain some consistency in our production and constant increase in production, at least 20% to 25% of our total production should happen in-house.Otherwise, because of the figure of the contracts, because of other things, production will not be constant. So to that extent, we have -- we are maintaining our in-house capacity and rest of the thing is getting outsourced. So after this investment, perhaps the investment on these 3 things will get reduced, but investment on land will be there and that will be a substantial investment, not in the range of INR 10,000 crores, INR 20,000 crores, but INR 3,000 crores, INR 4,000 crores, INR 5,000 crores of land will be required. And along with other things if we have to increase the production, then some investments will have to be made.
Great. Sir, my next question was with respect to your diversification from coal. You mentioned coal to gas is one project, then fertilizers and other, solar power is another. So if you could just give a brief update on where are we on all these projects?
See, coal to fertilizer is one project of TFL that was started about 2, 3 years back. And the construction got hampered because of COVID. Otherwise, it should have reached to 30% level. This is now in 10% to 15% -- I don't remember exactly, but it must be in the range of 10% to 15%. But this government has given guarantee of 12% IRR on this project. So -- and -- but our investment is not much because the total project is about INR 8,000 crores ot INR 9,000 crores. Our total investment is likely to happen to INR 800 crores to INR 900 crores only. The second project that we are talking about is gasification. We are looking for partners and we are looking for somebody who can offtake over all our products. These things have not materialized. So saying anything beyond this will be difficult, when will it come, what will happen. Unless the viability is there, unless the assured offtake is there, we are not going to invest on this. The third thing is solar power. Solar power, we are targeting for about 2,000 to 3,000 gigawatt investment in the coming year. We have got one project which we have -- on which we have to work, and we are likely to complete this in this year. And then coming years, we'll take some projects. Because that will -- solar power is one area where we think that it will give economic sustainability to the companies for coming 2 to 3 decades. So that is one area in which we need to invest. Rest of the things, smelter or these things that will depend on whether we can get some partner who can -- we are looking for a model in which we'll provide all the clearances. We'll -- whatever facilities the government is going to assign that we will take on board. And thereafter, we will tender it for some private person to invest. And we hope that maximum expenditure or maximum capital investment will be done by both of us. Because in those sectors, there is a risk of technology and which Coal India perhaps will be -- it will be difficult for Coal India to take.
Sir, my question was
Sorry to interrupt Mr. Chandak sir. We have other participants waiting for their turn. Thank you.The next question is from the line of Ashwani Kumar, an Individual Investor.
I had a question. If I look at your production data for monthly production data on Slide 11 of the presentation. We see that in March, you were able to produce 70 million tonnes, sometimes 75 million tonnes, sometimes 80 million tonnes, and maybe you have gone up to 82 million to 83 million tonnes. Now in the previous months, either they are at 28 days or 29 days depending upon the leap year or not being there. So if you are able to produce 80 million tonnes in the month of March, what basically prevents the company in terms of either man, machine or the process or within MDO or with the company mines company's own production, why you are not able to scale up it in the months of January, February and March. One can understand that first half, July, August, September is a period where there is monsoon, et cetera, or maybe the demand is low. But certainly, in the normal years, demand in Indian economy in second half is slightly higher and gets more higher in March, many a times. But if you are able to do 80 million tonnes in March, why you are not able to produce 80 million tonnes in the month of February or in the month of January?
There is sort of last mile. The last 100-meter runs very fast. We put all our equipment, all our resources and production of coal. If you will see that, to that extent, OB removal gets ahead of us. So basically, in the last 1 month, the type of resource mobilization, which we do, type of purse which we make, is something unsustainable since we removed the machines from OB and start producing coal. Because in January, February, March, we have to produce more because in spring month, April, May, June, the demand is always very huge. And that type of -- filling that type of production becomes very difficult. So whatever is there that we do in March is something difficult to explain. But then I have found that it is completely unsustainable. In April, May also the type of production we do, if we do that throughout the year, perhaps the -- means, there will be no demand for the whole.
So what point is, sir, in whatever conversation I'm hearing for the last 1.5 hours, basically, your estimate, as even Vishal pointed out that 1 billion tonnes was the earlier target, and you said, you have 2 COVID years, FY '21 and '22, one part of it -- first quarter of it. But if you really think about the industrial production moving up and again the demand for $5 trillion economy cannot happen without power demand going up and that to thermal PLF improving. So if we take the normal situation here, the demand for coal has to be strong. So I agree that you can do 80 in March, but let's say, lesser in previous months. But if the demand were to rise, let's say, by 10%, 12% in terms of power demand, thermal power demand, demand for coal could drive on a normalized basis. So would you make any attempt to increase production of coal? Because you have cash, you have man, you have machines, you have put the CapEx on the higher-size machines. What is the plan to really improve the monthly output in months other than March? Is there any specific attempt by the company to improve the production other than the month of March? Let's say, should the demand rise, would you be in a position to supply more or would India will have to import again more? That is my question, sir.
I'm quite sure that if the demand rises, then we will be able to meet the demand very easily. First thing, in the last -- actually, in this month of February and March, I stopped talking about production to my offices. Because it's quite evident that we will end up with 100 million tonnes of stock. I was emphasizing only about the dispatch. But in April, the dispatch was improving, but again in May, the demand started pitching off. But then there was a demand. I won't say demand was not there. So if the demand is there, producing coal is easier than evacuating coal. that's why we are in evacuation. And evacuation, if this FMC project, if that materializes in '23 -- we are targeting for '23, '24. So as on March or April '23, at least most of them will get completed. Thereafter, the evacuation will not be a problem. We have started everything. We have started monitoring the contract. Till this time, we used to think that our contracts should be of the same level as the demand is. Now we are saying that the contracts should be at least 1.3x the demand -- likely demand is. Because if -- because there is hardly any situation in the country where the contractor perform up to 100%. There are very few contractors who give 100% performance. So we have increased our -- this capacity, contractual capacity, also tremendously. There are 2 types of contractual capacity: one is renewal of OB and coal; and second is transportation and crushing. At all these points, we have increased our capacity in all subsidiaries and almost all mines by 1.3x. So with this, I'm quite prepared to increase the production whenever the demand is.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Rahul Modi from ICICI Securities for closing comments.
Thank you, Mr. Agarwal, and thank you, Mr. Soni. Thank you, Mr. Tiwari for your time. And again, a very detailed presentation and a very detailed call. You have given more than 1.5 hours of your precious time. We'd really like to thank you for all the efforts you made.
Thank you, Rahul, for arranging con call. I understand there are a few questions which have remained there and people could not get the chance to, if they send a question to Mr. Viswanathan, we will send them reply on e-mail. And if they feel that certain question -- I don't -- there were 1 or 2 questions on which the data could not be given. If they send those questions, we will definitely send them through e-mail. Thank you very much for arranging this con call. Thank you, Rahul.
Thank you.
Thank you on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.