Informist, Wednesday, Aug 21, 2024

By Avishek Rakshit

KOLKATA – Coal India Ltd will pass on 77% of its retrospective royalty liability of 315.9 bln rupees on coal to its consumers having long-term coal supply agreements with the company, Chairman and Managing Director P.M. Prasad said today. Earlier this month, the Supreme Court had said that states could claim royalty with a retrospective effect from April 2005, and they had the power to determine royalty rates.

Responding to a query from a shareholder at the company's 50th annual general meeting, Prasad said that only two subsidiaries of Coal India – Mahanadi Coalfields Ltd and Central Coalfields Ltd – carry the liability of retrospective royalty. Mahanadi Coalfields carries a royalty liability of 312.3 bln rupees and Central Coalfields' royalty liability is 3.6 bln rupees, Prasad said.

Quoting company officials, Informist had on Aug 16 exclusively reported that Coal India was considering passing on the retrospective royalty liability to its consumers fully or partially, and discussions with consumers, namely from the power sector, would be held.

Prasad said that as per Coal India's internal calculations, 77% of the retrospective royalty or 240-250 bln rupees would be passed on to its consumers, with the company expected to pay the rest of the amount. Prasad, however, said that in the case of Mahanadi Coalfields, which owes the largest retrospective royalty to Odisha, Coal India would seek legal counsel and thereafter, only pay the retrospective royalty that would be decided in court.

Prasad said that, therefore, the financial impact on Coal India would not be substantial, and the company had the option to pay the retrospective royalty over the next 10 years, as per the Supreme Court's order. As such, NTPC Ltd – which accounts for around 80% of Coal India's annual sales, is expected to bear the brunt of the retrospective royalty.

Prasad said Coal India has an aspirational target to spend 200 bln rupees in the ongoing financial year as capital investment to strengthen its mining infrastructure, evacuation, and on diversification projects.

Coal India is also aligning its coking coal production and quality in line with the National Steel Policy, 2017. One of the aims of the policy is to increase domestic availability of washed coking coal to reduce the dependence on imports.

Prasad said Coal India's subsidiaries Central Coalfields and Bharat Coking Coal Ltd were setting up washeries to increase washed coking coal production. Bharat Coking Coal already has around 7 mln tn of washing coking coal capacity, and Central Coalfields is setting up washing capacity of 21.5 mln tn.

In the financial year ended March, Coal India produced 2.3 mln tn of washed coking coal. Washed coking coal, which has much less ash content, is priced at 12,000-14,000 rupees per tn, compared to the usual non-washed coking coal price of 3,200 rupees a tn. As such, it is a key revenue generator for Coal India.

Asked about coal availability at e-auctions, Prasad said Coal India's subsidiaries could offer up to 20% of their production at e-auctions and could increase it beyond 20% if they wished. However, as per law, all Coal India subsidiaries need the government's approval to offer more than 20% of their production at auctions.

At 1340 IST, sgares of Coal India were up 1.5% at 532.3 rupees on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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