Coal India trails global peers in performance: Vision document

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Coal India is trailing global peers in operating performance and technology adoption, while taxes and freight constitute 25% and 34%, respectively, of the cost consumers pay, undermining the monopoly’s competitiveness, the company’s Vision 2030 document said.

However, the cost structure of the Indian coal sector is still favourable: it is estimated that the average cost of production is about `1,000 per tonne, and that cost of production is a concern for only about 10% of the output.

The state-owned company said that for coal transported over a distance up to 100 km, Coal India receives only 56% of the costs paid by consumers for procuring dry fuel.

Taxes, duties and levies are about 34%, followed by freight at 10%. For transporting coal up to 500 km, Coal India receives 41% of the total payments made by consumers while taxes, duties and levies constitute 25%, followed by railways at 34%.

Beyond 1,000 km, its realisation is about 32%, taxes duties and levies take away 20%, while the rest — 48% — goes to the Indian Railways. Although Coal India feels it produces coal at competitive rates, it is critical of its own operating performance.

“There’s a significant gap in productivity norms of similar class of equipment in mines in India and those around the world. For instance, similar class of shovels in international mines is operated 40-50% more hours annually than at Coal India.”

Equipment utilisation rates at mines operated contractually have been seen to be better than those operated departmentally by the monopoly.

“For instance, in Coal India subsidiary, Eastern Coalfields, in 2016–17, the utilisation rate of hired excavators was 93%, against 73% utilisation rate for departmental excavators. This requires much greater focus on operational excellence and asset management practices in the Indian coal mining sector,” its Vision 2030 statement said.

Added to this is Coal India’s option for adopting technology which is limited. The vision document said the sector is beset with relatively small scale mining with limited mechanisation and scale of equipment.

Source: THE ECONOMIC TIMES