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Government looking to open coal auctions to steel and power sectors – Mr Piyush Goyal

Coal News - Published on Wed, 13 Jun 2018

Image Source: steelguru.com
CNBC TV 18 reported that Union minister Piyush Goyal said the government was looking at opening auctions of coal mines to the steel and power sectors, and that a robust framework was being worked out for commercial mining.

Mr Goyal, who runs the coal and railway ministries said different proposals were underway with respect to mines auctioning, and added the banking secretary would be meeting all stakeholders.

On power sector he said that "within that framework, if there is a way to work with the power sector players and the bankers in consultation and under the advice and guidance of the RBI, we will try to find a solution in the best interest of the country."

Edited Excerpt:

Q - Let me start by talking to you about the power sector, your erstwhile ministry. You had a meeting with your counterpart in the power ministry today on the issue of how the government intends to deal with the Allahabad High Court order in the context of the Reserve Bank of India (RBIs) February 12 circular. What is the thinking currently, do you believe that a special carve out just for the power sector is the way forward, when can we expect a decision on this front? I am also given to understand that a parliamentary committee meeting is scheduled for tomorrow which may take up this issue as well?

A - We were meeting today only to understand the contours of the Allahabad High Court judgment and to ensure that all the sections of government, whether it is finance ministry, power, coal, the RBI, everybody works in tandem to address the concerns that the Allahabad High Court has raised and also to ensure that the sanctity of the Insolvency and Bankruptcy Code (IBC) process is not affected in anyway.

So we are very keen that the IBC process should be respected, should be followed, it is a very robust process which will ensure a fair treatment of all non-performing assets in the future. Within that framework, if there is a way to work with the power sector players and the bankers in consultation and under the advice and guidance of the RBI, we will try to find a solution in the best interest of the country.

Q - If I could just take that point forward, you said that within the guidelines of the IBC, keeping the IBC code in mind and in consultation with the RBI, the government could try and find a solution to the power sector. However, then there would be similar demands coming in from other sectors. The telecom sector for instance could also raise demands like the power sector has. What then, will this whole process not then be opened up so to speak for demands coming in from different sectors?

A - That is why I repeated that we believe that the IBC process should not be at all tampered with.

However, we have an Allahabad High Court judgment and the purpose of today’s meeting was to ensure that all the ministries and stakeholders have a common stand, respecting the Allahabad High Court judgment while protecting the IBC framework.

Q - By when can we expect a decision by the government on this front? What is your own expectation?

A - I think the banking secretary will be convening a meeting of all the officials and will then discuss the issue with greater detail. Today’s was a preliminary discussion only to give the guidelines that should be followed and to understand the contours of the Allahabad High Court judgment.

Q - If I may end by asking you specifically on this subject, in your consultation with the RBI on this specific issue, what was the thinking of the RBI?

A - Today was more to be on coal and railways.

Q - Let me then talk to you about what is happening as far as the coal sector is concerned before I talk to you on railways. The Pratyush Sinha committee’s recommendations are awaited, this of course has to do with commercial mining, again a reform that has been long pending now. Are the recommendations in, when can we expect forward movement on the commercial mining process?

A - We have not yet received the recommendation and as soon as it comes in, it will be examined and proper necessary action taken. However, in the meantime, we are looking at opening up the mines for another round of auction for steel or other sectors, power, also possibly for the washeries sector.

So I think different proposals are under consideration and we do hope that people will express interest and we will be able to move forward for auctioning some of these mines.

Q - By when do you expect A) the recommendations to be in and for commercial mining in earnest to kick off. What is your own expectation in light of the ground work that has already been done?

A - I think the Pratyush Sinha committee has had extensive discussions with all the stakeholders, also on the methodology of bidding, whether it should be per tonne bidding or whether it should be a revenue sharing model. So the people, the team, the committee is working at what would be a robust framework.

I am expecting their recommendations in maybe by early next month and after that once we see the extent of their suggestions and we have discussions with other stakeholders in the system, we will be able to define a timeframe.

Q - Let me also get you to comment on what we have seen happen in Tuticorin with Sterlite's facility there. The criticism is that while there is the need for the private sector to be involved in this mining business but there also needs to be much more checks and balances when it comes to the protection of the environment as well as the protection of the communities that are in and around that area. Given what we have seen happen in Tuticorin with now a permanent closure so to speak, what is the view of the government on ensuring that we don't see a repeat and do you believe this is now going to hamper both interest in mining from private sector players as well as Vedanta's own interest in this sector?

A - I do hope that this will not affect mining per se in the whole country, these are isolated incidents. Protecting the environment will always remain the priority of the government of India.

Prime Minister Modi is the person who has been very passionate and committed to a batter future for the people of India, a cleaner future, a better environment and any compromise on that will certainly not be acceptable.

So, having all the requisite permissions and all the necessary infrastructure to ensure environment protection is going to be a very important element of mining going forward in this country.

Q - Have you had any conversations with Vedanta, with Sterlite on the issue?

A - I have not had an occasion to talk to any of them. It is an issue that happened in Tamil Nadu between the state government and the company, so I have not had a chance to get involved in any way and nor a need as a reason for me to be involved in the local issue there.

Q - Let me talk to you about coal production. I understand that power demand has now crossed the peak demand of 174 gigawatts in the month of May. 25 power plants we are given to understand as of May 31 are either critical or super critical which means they have about a week's supply of coal. Can you explain to us what is the status of coal supply and what are the plans to increase coal supply?

A - In the first two months, April and May, production has been up by nearly 14 percent in Coal India alone. Dispatches are up by about 13 percent and very clearly we can see a lot of traction in the industry. You must appreciate that there are two main reasons that have suddenly caused many of these plants to have a shortage of coal.

It is not as if there is not enough coal or there is not enough coal being supplied, there is robust demand for power which is a great sign, confirms our understanding that economic activity is expanding very rapidly but there is a second element which you will have to appreciate, one is the Supreme Court judgement because of which Adani, Essar and Tata's plants in the west coast which were based on imported coal have either downsized or completely shut operations, that additional power demand is now being met with domestic coal in the interior parts of India.

So, coupled with increased demand that demand has added on the load on the coal and railways sector. Also hydro power has only been about 88 percent of what was planned last year, so that has also bunched into an additional demand on the coal sector, all of which put together has increased the need for coal very substantially and very suddenly.

You will recall on March 31 last year, we had 69 million tonnes of coal and right upto June 2017 we were not able to get enough demand for coal. It is only post July 2017 that we suddenly saw expanded demand for coal when hydro went down, wind did not produce to expected levels in the last monsoon, nuclear was down 2000 megawatt and then coupled with that the Supreme Court order.

So, when all of these things happened at the same time, demand suddenly shot up and that has caused some of these plants not to have adequate stocks. Of course despite all of this no plant has shut down or there has not been a power shortage, despite all of this we have been able to generate nearly 103 percent of the planned power generation in the first two months of this year and coal based power generation is actually growing in a robust manner.

Q - By when do you expect what you see as an aberration as far as the supply side is concerned? By when do you expect this to be fixed?

A - I think it is a continuous process. After all getting more and more production out means land acquisition, rehabilitation, and settlement of villages, getting environmental clearances for expanded production. It is a whole ecosystem around mining; it is not a simple job where you switch on and off.

Also, on the railway infrastructure, you need wagons and rakes to carry the coal, you need adequate line capacity and in many cases we already are choker block full on the main lines which carry the coal.

So we are working on different areas simultaneously, we are also looking at tolling where we use coal more efficiently at pithead plants and when all of these things are put together, I am quite sure that we will be able to tide over the problem of adequate availability maybe in the next three or four months.

Q - Let me end then by asking you on coal specifically. What is the current supply demand mismatch at this point?

A - As I said, we have been able to meet the demand that we receive regularly. However, ideal situation we would like to increase the supply by another 2,00,000 metric tonne everyday so that all these plants can build up their stock and as against nine or 10 days, now take it up to about 30 days which would be an ideal situation.

So our effort now is to build up stocks; on a regular basis we are able to meet the needs of the power sector.

Q - Let me then talk to you about railways. If you can give us a clarity on what the current operating ratio is as far as the railways are concerned. We are given to understand it is closer to 98.4 percent. If that is in fact the case, then it would be one of the lowest operating ratios that we have seen in over a decade. What is causing this kind of pressure at this point in time and I am also given to understand that on the issue of pension outgo, the railway ministry has written to the finance ministry which now falls under your ambit, so, what can we expect on that front?

A - I think it reminds me of that old famous Watson statement that it is elementary, the reason for this situation is pretty elementary and I think all of you very well understand that after the seventh pay commission came in, with 1.3 million people on the roll of the railways, our bill for salaries and pensions and all the other allowances went up nearly Rs 22,000 crore; on a revenue base of about Rs 1,80,000 crore we are looking at a 12-12.5 percent increase in expenditure in a very short period of time. So obviously the operating ratio had to deteriorate in the current year.

However, we are working towards improved efficiency, better procurement practices, putting to use some of the assets in a more efficient manner, monetising some of our non-immediate requirement assets like land in various places, seeing how the efficiency of rolling stock and track can be better utilised, looking at electrification being speeded up.

We did 4,087 kilometers of electrification last year which used to be 650 or 700 kilometers in 2013-2014. So we are looking at a very massive scale up of capex, we have expanded capex 2.5 times in the last few years compared to the previous government.

So our effort is to make Indian Railway future ready, to be able to meet the ever increasing needs both on the freight side and on the passenger side and ductile that with efficiency, punctuality, cleanliness, better catering and all of these put together so that railways can truly get back that charm of traveling in Indian Railways which it used to have.

So we can once again have some more songs being made in the railways and some more honeymoon travels coming back to the railways.

Q - Specifically on the issue of the operating ratio and as you pointed out, it is a series of steps that you intend to take forward to ensure that there is an improvement on the operating ratio. Can you leave us with what is the current operating ratio? Also on the issue of land monetisation, we have previously spoken about the issue of land monetisation several times over, when do we actually see the railway ministry move forward with this? Speaking of monetisation today you have already put out an advertisement or at least an announcement on the RITES possible IPO and a discussion around that, can you leave us with some thoughts on what we can expect as far as the IPO pipeline is concerned and in earnest when do we start to see land monetisation?

A - Land monetisation got into a little bit of a delay because some of the conditions that were put - 45 years lease, issues around mortgage, sub mortgage, sub lease which needed to be resolved.

I have had extensive consultations with all the stake holders and we are just awaiting cabinet approval to allow 99 year leases to justify investments in the long run because ultimately Indian buyers and Indian investors are looking for a longer period to recover their investments, it will get approved soon and we will start working on which are the parcels of land which are ripe for investment or which are ripe for monetisation.

Q - On the other hand your question about operating ratio, yes we have a high operating ratio but that is where we need to improve on our efficiency parameters.

A - As regards to the IPOs - RITES, IRCON, RVNL, all of them are on track. IRFC where we were looking for a dispensation on accumulated MAT credit, we have received that dispensation from 2017 onwards. We are in dialogue with the corporate affairs ministry to see if we can get a dispensation for accumulated MAT in previous years particularly considering the unique nature of this organisation.

Once that gets sorted out, I think the true value of IRFC would be able to come out in the IPO. As regards to IRCTC, I personally believe there is a lot of value in that company which has not yet got appreciated or captured.

We have a database, we have consumer interface which is huge, that value is yet to be properly monetised or properly appreciated when we go out to the market. So, I am looking at a significant leg up on the valuation there which will come with monetising some of the huge databases that we have and see how we can put that to good use.

Q - I want to pick up on the point that you made about electrification and you are right that we have seen the highest kilometres of tracks been electrified so far - 30000 kilometres of tracks being electrified till March 2018. However you have a fairly ambitious target of 66000 kilometres by 2021. There were also reports suggesting that the Prime Minister's office has raised concerns with the railways electrification plans. So, is the 60000 kilometres achievable by 2021 and what are the specific concerns that the Prime Minister seems to have with the electrification plans?

A - About 20000 kilometre more is already in the pipeline, it is not as if we are starting from today, there is a lot of work already going on. For this year we are looking at almost doing anywhere between 5000-6000 kilometres.

Our work has started much earlier when Sadanand Gowda and Suresh Prabhu were there and not by 2021, the target is 2022 August 15 by when we hope to see large parts of the railways as the Finance Minister is his Budget speech said - optimum electrification of the railways.

Please don't believe every report that you read, very often these reports are created out of figment of imagination and by unnamed sources which god knows where you get from and what kind of interests are there behind those reports, I really can never understand that.

My Prime Minister is a very economic savvy leader, what he guided us was that we must prioritise the investments that we are making on the electrifications rather than just focusing on how quickly we can do 100 percent.

I think the focus should be on seeing what are those missing links and the important segments that need to be prioritised so that the optimum benefit that we want to get, the maximum payback that we want to get from electrification can be enjoyed by the Indian railways and by the people of India because it has huge climate change impact also.

Q - I will end by asking you two specific questions - one on Air India because your part of the alternate mechanism that the government has setup - no expressions of interest coming in so far, what is the plan now with respect to Air India?

A - The ministers who are tasked with that assignment will meet again and we will take it forward. We will discuss amongst ourselves what other models or what needs to be done to make this a viable proposition.

Q - So, you are not giving up on the plans to disinvest Air India?

A - That decision has to be taken by the cabinet if at all that was to be taken.

Q- I will end by asking you about what the Reserve Bank of India's household consumer survey says. It says household sentiment on the general economic situation for the current period worsened from the previous year. Around 48 percent of the respondents felt that the situation had deteriorated. Expectations for the next year however improved over their level in the previous round. So, while there is a sense that things are starting to pick up and that there is an improvement and a revival, the pain doesn't seem to be out of the economy. You are also now holding the finance ministry, what is your own prescription about where growth is headed and in the short term what more can we expect from the government?

A - I am extremely confident that all the good work that this government has done both on the anti-corruption and anti-black money agenda on the one hand which may have temporarily caused growth to dip but very clearly we had said that there will be a temporary hiccup but it will ultimately give a very good long term future and that is already evident.

We have seen 7.7 percent growth in the last quarter. We have seen the GST collection for the month of April at nearly Rs 94000 crore and April is one of the lowest collection months.

We saw 5 year track record, usually April is about 7.1 percent of the annual indirect tax collection and if you extrapolate that you are looking at nearly Rs 14 lakh crore coming in - far more than the budgetary estimates. So, we are on the right track, the economy is doing well. I am told commercial vehicles there is a six months waiting period today.

The auto sector, steel, cement, power, mining and coal, all the sectors are showing signs of very rapid growth. I am very confident that the economy is on the right track, the nation is moving towards formalisation of the economy in a larger way.

People of India are working towards making India a nation of honest business and nation of honest future for the next generation. I am happy that the success of GST, the success of moving India's needle towards the nation where one can work with pride and one can work honestly is becoming a reality as we go forward. I see a very bright future for India in the current year and in the years ahead.

Source :

Posted By : Nanda Koijam on Wed, 13 Jun 2018
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