Capex target for FY2018 is Rs8,500 crore: Coal India
Coal India Ltd chairman Gopal Singh comments on the miner’s wage bill, coal production targets, pricing and profitability. Edited excerpts:
If you can take us through what exactly is going to be the hit because of the increase in the wage bill and how much of it you have already provided for? In your previous conversation, you said you are provided for the part of the increase?
This wage agreement has been unique in various facets. The main thrust has been to make the dream of honourable Prime Minister come true that is to provide reliable and affordable power for all to increase the productivity, to provide social security to our workmen, to take care of the life after retirement, medical benefits of the workmen, to ensure hassle-free payments of allowances to workers etc.
That will boost the morale, it will improve the work-life balance and will result in team spirit and that will enable Coal India to achieve what it has never been done so far.
So whatever the outgo will be there in terms of wages increase, that will be 100% compensated by improvement in production, productivity. For the moment, if you can tell us the arithmetic. We were told it is a Rs 5,700 crore wage bill, how much was already provided for?
Exact number I cannot give you but major part of it has been provided for and balance whatever is left, will be provided in the profit and loss account of this year only.
The outgo for the first year is only Rs4,397 crore. This Rs5,700 crore is the average of five years.
I am looking at some brokerage notes as well, there is one foreign brokerage their arithmetic says that you need to increase your fuel supply agreement (FSA) prices by about 5% to offset this higher wage bill, is that a possibility, are you looking at hiking FSA prices? I would not like to comment because we are a listed company.
Give us some sense in terms of pricing? You might not want to talk about the fuel supply agreement bit but e-auction prices, are they trending higher, what is the sense that you get and do you have the elasticity to tinker around the FSA price right now on the upside?
This is for Coal India board to take a call. We will decide whatever is most appropriate for the nation as a whole. Can you give us some clarity in terms of what could be the operating cash flow for FY18, will it be in the range of around Rs14,000-15,000 crore and if you could give us a sense of what is the capex over there?
This year, capex target we have set for ourselves is Rs8,500 crore and actual number maybe more than this because we have to grow to 1 billion tonnes and it was announced in 2014 when this government came into existence, so we have to achieve the target, the milestone of 1 billion tonnes. So we have to build the capacity. So though we have set a target of Rs8,500 crore only this year but actual investment will be more. What about your operating cash flow, will it be at around Rs 15,000 crore? The reason I ask this is because—can you continue to pay the dividends that you have been paying in the past? If you do Rs15,000 crore and if you are going to be spending capex of around Rs9,000 crore plus you add this wage increase, there is not going to be much left on the table.
This information I would not like to discuss.
Some very rough numbers?
Please don’t force me to comment on this number. Operating cash flow would be something that you can give us a ballpark figure? You have a figure for capex, you have a figure for the wage bill increase, so we were wondering if you also can give us a figure for the operating cashflow? It is usually something which other chairmen have given us in the past, that is the only reason I am asking. You don’t want to reveal that number?
Whatever figures we are supposed to reveal, it is already in the public domain.
In September 2017, you said you are going to do 15-16% in terms of growth of dispatches, you did it. Now the street is excited, what the street wants to know is 600 million tonnes (MT) you said you are going to do for this year which again is a tall ask but you said you are going to do it but the run-rate would be roughly around 54 MT every month from hereon, are you up to the challenge, are you very sure 600 MT is possible? Yes. Whenever there has been the need, Coal India family has come up and they have proved. This time—we are targeting 600 MT, which means incremental growth of 46 MT over last year.
Last year was not good but if you look at the previous year, incremental growth was 44 MT and that was the highest in the history of Coal India and this year the team is fully geared up to set another milestone that is 600 MT where the incremental growth will be 46 MT which will be highest ever.
In September, this team has proved, the growth in production was more than 10% and this month, October, also—in September we had Durga Puja and because our mines are situated in the eastern part of the country Bihar, Bengal, where Durga Puja is celebrated on a large scale. In spite of that disruption in production in the last week of September, the growth recorded was 10% and this month again October 1 and 2 October was a holiday, in spite of that there is a growth of 11% in production.
Coal India chairman Gopal Singh.