KOLKATA (miningweekly.com) - Major Coal India Limited (CIL) is willing to increase its already-planned capital outlay of $966-million for 2015/16, if collaborations in logistics and transportation projects are successfully pushed forward.
According to a company official, the company's capital investments for the forthcoming fiscal were 20% higher than during 2014/15, but increasing investments would not be an issue if infrastructure projects could be speeded up, as adding transportation and evacuation capacities held the key to CIL’s ability to ramp up coal production.
Elaborating, he said that about 300-million tonnes a year potential coal production was locked up for lack of evacuation capacity at mines in the central and eastern Indian provinces of Chhattisgarh, Jharkhand and Odisha.
CIL management was amenable to the increased capital expenditure (capex) provided that it was done through planned joint ventures or special purpose vehicles (SPVs) dedicated to the creation of infrastructure, like the government-owned and operated Indian Railways.
While the SPVs would construct last mile rail connectivity with various pitheads across these provinces, CIL would be willing to invest in procuring its own rakes for coal freight and operating along the rail network built in collaboration with Indian Railways, he added.
However, the extent of the increase in planned capex had not been firmed up and would largely depend on how fast projects were conceived and implemented and funding would not be a hindrance, he said, pointing to CIL’s estimated free cash reserves of about $10-billion.
The criticality of creating freight and coal evacuation capacity could be gauged from the fact that CIL in an internal assessment had concluded that production from existing mines was falling and was already down 25-million tonnes a year.
The fall in production from existing mines was projected to be about 165-million tonnes a year by 2020 at a time when the government had set a production target of one-billion tonnes a year by 2020 clearly indicating that incremental production would have to come from new projects.
The success of new projects would depend entirely on infrastructure capacity available at the new mines, the official said.
The lack of infrastructure available to CIL and its impact was also evident from data released by the miner which showed that while production was up 6.7% during the period April 2014 to January 2015, offtake growth was much lower at 3.2% during the period, an indication that production could not be evacuated to end-users.