High altitude pastures in Ladakh, India.
January 2016
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World Coal
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market – a previously state-monopolised sector – to sell and
produce coal. Although the removal of Coal India’s
monopoly has caused disruptions in its operations as union
members walked off the job in January 2015, the government
has managed to end these strikes in an expedient manner,
highlighting that reforms are indeed possible if the
government manages to address the concerns of the miners.
The ability to pass the special provisions bill has aided
India’s government’s efforts to auction off the 214 coal
blocks whose licences were cancelled by the Supreme Court
on 24 September 2014. As of mid-April 2015, it had
successfully auctioned off 66 coal blocks for more than
Indian Rupee 3.5 trillion.
Overly ambitious
Coal India’s target coal production of 925 million t of coal
output by 2019 – 2020 will not be achieved. For the company
to meet this production target, it would have to sustain an
average annual growth of 13.4% y/y from 2015 – 2020.
Under the direction of the current Minister of State for
Power, Coal and New & Renewable Energy, Piyush Goyal,
Coal India’s production increased 8.9% over
April – September 2015, compared to the same period the
previous year, signalling that some progress has been made
in improving productivity. Given that the institutional
portion of Coal India’s equity sale in January 2015 was 1.2
times oversubscribed, BMI believes that Coal India would
be able to attract capital from equity markets if it manages
to deal properly with its unions. This would allow it to
purchase foreign machinery to further sustain
improvements in productivity in order to meet its
production targets.
Coal India’s productivity is indeed starting from a low
base. In the 2013 – 2014 fiscal year, it produced 12.2 t and 0.8 t
INTENTIONS
