Coal India to spend Rs7,765 crore to increase mining capacity

Kolkata: Coal India Ltd has budgeted for a capital expenditure of Rs.7,765 crore in the current year to expand mining capacity as the world’s biggest coal miner pursues an aggressive production growth target of 13% year-on-year.

In addition to that, the company is looking to spend Rs.5,069 crore on other projects, which include building railway tracks to connect mines, setting up a super critical thermal power plant and reviving fertilizer plants.

Last year, the state-owned miner had spent Rs.6,123 crore to build capacity, exceeding budgetary estimates. In the year before that, it spent Rs.5,173.5 crore.

Coal India is up against a steep target of raising production to 908 million tonnes (mt) in 2019-20 from 538.75 mt in 2015-16. This would require the company to step up production by around 13% year-on-year—a bit faster than the 9% growth achieved last year.

Company chairman Sutirtha Bhattacharya wasn’t immediately available for comment.

A spokesperson for the company said the amount budgeted for capital expenditure on core mining projects and others is to come entirely from its own coffers.

Coal India had Rs.38,312 crore in cash at the end of March. It will spend Rs.3,650 crore on a proposed buyback of shares. The company’s cash balance has been declining steadily because it has been investing into its mines to increasingly mechanize coal extraction.

In fiscal 2015-16, Coal India’s board had sanctioned nine mining projects for an ultimate capacity of 159.25 mt. This will entail a total investment of Rs.26,480 crore, Coal India said in its annual report.

During the year, the company’s board had also sanctioned a railway infrastructure project, estimated to cost Rs.3,055 crore for the first phase of implementation.

Evacuation of coal from mines is a key challenge to ramping up production. Coal India said at least three railway links are crucial to increase the production of three subsidiaries: Central Coalfields Ltd, Mahanadi Coalfields Ltd and South Eastern Coalfields Ltd.

Currently, the miner is pursuing 156 projects (of which 123 are ones aimed at boosting mining capacity) at various stages of implementation. Of these, 80 are trailing schedule, according to Coal India’s latest disclosures to its shareholders. Of the 123 mining projects currently in progress, 66 are delayed.

Various environmental clearances required to expand mines is one of the key stumbling blocks that Coal India has been grappling with for years. It said 34 mining projects are delayed for want of clearance from forest authorities, 17 due to difficulties with land acquisition, and three due to deficiency in evacuation infrastructure, or railway link.