Coal India Ltd (COALINDIA) Q3 FY22 Earnings Call Transcript

Coal India Ltd  (NSE:COALINDIA) Q3 FY22 Earnings Concall dated Feb. 17, 2022

Corporate Participants:

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Analysts:

Vishal Chandak — Motilal Oswal Financial Services Limited — Analyst

Prashant Kumar Kota — Dolat Capital — Analyst

Amit Dixit — Edelweiss — Analyst

Rahul Jain — Systematix Shares & Stocks — Analyst

Rahul Modi — ICICI Securities — Analyst

Murtuza Arsiwalla — Kotak Securities — Analyst

Saket Kapoor — Kapoor and Company — Analyst

Pinakin Parekh — JPMorgan — Analyst

Unidentified Participant — — Analyst

Vipul Shah — Sumangal Investments. — Analyst

Satyan Wadhwa — Profusion Capital — Analyst

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Mohit Kumar — DAM Capital — Analyst

Rashi Chopra — Citigroup — Analyst

Faisal Hawa — H. G. Hawa & Company — Analyst

Ashish K — Centrum Broking — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day, and welcome to the 3Q FY’22 Earnings Conference Call of Coal India hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal Financial Services.

Vishal Chandak — Motilal Oswal Financial Services Limited — Analyst

Thank you, Rutuja. good evening, and welcome to the third quarter FY’22 earnings call of Coal India Limited. This is Vishal here from Motilal. I would like to thank Shri Pramod Agrawal, Chairman and Managing Director as Coal India for giving us this opportunity to host for the call. So without much ado, I would like to hand over the floor to Mr. Agarwal for his opening remarks followed by which we would open the floor for Q&A. Over to you, sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Good evening, everyone. We have completed third quarter, and we have announced our results to my understanding despite the difficult circumstances in which we were working our performance in last nine months have been significantly better than last year. We must keep in mind that while evaluating this performance, we must keep in the mind that the first three months are very difficult for Coal India because there was very, very difficult I mean there the time was very difficult because of COVID situation, and we lost many of ours miners, many of our officers in that time period. Then secondly, the rainfall in our area was especially very high this year.

On one in ECL there was a windfall of about 400 mm, and this resulted in submergence of almost all the mines of an ECL, and in ECL area for a couple of days or maybe a week there was almost zero production because none of the mines were in the condition where we could have operated. In other areas also the rainfall was very heavy despite that our results are quite satisfactory. And today is a great day for us, because today we have surpassed that dispatch that we did last year on 31st March. And we are looking forward that this year the dispatch will be ever highest much higher than any, anything that we have achieved till now, and I’m targeting that the dispatch will be in the range of 650 to 670 million tonne. Secondly, our production this year also is likely to be very high. We are all already about 25 to 30 — 25 million, ahead of what we did last year and the corresponding till today. So I’m looking forward that maybe we will end up this year with the production of more than 630 million tonne.

We are targeting that we should strive to achieve 640 million tonne, but that is a slightly difficult target, but we will put everything to achieve this. We have supplied huge quantity of coal to power sector. And I think that dispatch this year compared to last year is 17% to 18% higher than what we did last year or any other year, which was a normal year. If we compare the dispatches to non-regulated sector also we are maintaining our dispatch of about 3.2, 3.25 lakh tonne per day, and which is more than what we did and FY’20 on FY’19. In FY’21, definitely, we have given, slightly more coal to non-regulated sector because the demand in power sector was less. However today everybody wants that coal be supplied by Coal India because our prices are very low compared to international market.

Replacing the whole thing in a year is slightly difficult, but in coming years we will definitely increase our production. And if our performance remains good in first quarter of next year, which I expect that it will be then perhaps in next year, that a lot of demand or lot of import that is taking place can be replaced by Coal India. With this opening remark, I’d like you to ask questions so that we can explain if any doubt is there.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Prashant Kumar Kota from Dolat Capital. Please go ahead.

Prashant Kumar Kota — Dolat Capital — Analyst

Sir, good evening, and thanks for the opportunity. And congrats for a good set of results. Sir, my question is regarding the pricing of G1 to G5 grades wherein earlier we had some flexibility to keep the prices of these grades on some discount to import parity basis etc. Where are these prices now? And what is the thought process in thinking around these prices? Because interest rates are quite high. So, sir just wanted to know your thoughts and later situation on this, sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

From G1 to G5 the availability of coal in Coal India is very less. Most of their coal is given to NRS sector, and which is linked to their end use. And then secondly, it is based on linkage auction. Just recall the international price has increased we cannot increase that price suddenly breaking the contract, but small portion of which it is auctioned there we are getting very good premium, and their price will be also consider whenever despite the overall price increase takes place.

Prashant Kumar Kota — Dolat Capital — Analyst

Okay, sir. Understood. Thanks, sir. That’s it from my side.

Operator

Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.

Amit Dixit — Edelweiss — Analyst

Thanks for taking my question, sir. And congratulations for a good set of numbers. I have two questions. The first one is on the status of wage negotiation where we are now when we expect this to be completed. And also if there is a possibility of price hike in next two, three months? That is the first question. The second one is more bookkeeping question essentially on receivable that you have on book as on January end or if you can mention for February 15 that would be great. Thank you.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Coming to your first question on wage negotiation. Wage negotiation yesterday we had the third round of negotiations, third round of meeting. I don’t foresee wage negotiation getting concluded in next three, four months, but definitely try to concluded by end of FY’23. It depends how it goes and where, what are the stand that both of our stake. So it will be very difficult for me to give you the timeline for it because never then, never before wage negotiation has been completed in one year time, only once it got completed 10 months. It generally takes slightly longest time, but we are very keen that it should be concluded well in time. And maybe by end of FY’23 it will be concluded.

The second thing is price hike. I’m trying and trying to bring everybody on board, and for me every day is critical. I hope, price hike should take immediately, it has become very urgent for Coal India, and for certain subsidiaries it has become so important that without that it will be difficult for them to survive. And on the — I can’t tell you what is the receivables on February 15 as such, but it is constantly going down. And December end it was net was INR13,000 crore.

Unidentified Speaker —

December 31, it is INR15,000 crore and it is not INR13,000 crore. And on 31st January it was INR13,000 and on December 31, it was INR15,000. And I think, we should get back to that stage, which was earlier by the end of March. Because some of the state governments have requested us to beer with them till March end. And they have agreed that by March end they will clear most of their dues. So I’m quite hopeful that we should come in the range of minus INR10,000 crore by the end of March.

Amit Dixit — Edelweiss — Analyst

Thanks, sir. That’s very helpful. I’ll get back in the queue.

Operator

Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.

Rahul Jain — Systematix Shares & Stocks — Analyst

Yeah, hi, good evening, sir. Thanks for taking my question. Sir, I have couple of questions. Firstly on your volumes. How do we look at volumes for next year, because this year we have that business sold from our opening stuffs, about 60 million tonnes. So next year, although say probably we may see a 4%, 5% volume growth, but on dispatch front we may just see 1%, 2% growth is that assessment right?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I couldn’t get your question, please repeat.

Rahul Jain — Systematix Shares & Stocks — Analyst

Yeah. Sir, this year so far sold about 60 million tonnes some opening stocks and that’s why we think this offtake growth of about 12%. So for next year, how do you see the situation? Because our typical volume growth has been around 4%, 5% and like we may have to let them issue stocks and things like that. So we are looking at a flat year in volumes for next year?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

No. See next year our production should grow. This year we’ll be ranging at 6.30%. I’m looking for a growth of about, at least 10% or something in that range, because last year our performance in production was very bad in April, May, June, because of COVID situation. We were producing something like 14 lakh tonne per day whereas our capacity to produce in any quarter is about 18 to 19 to 20 lakh per tonne. We will try to maximize this. If we are able to perform well in the first quarter that will give us about 40 million tonne extra coal. And that itself will be adequate to propel our growth.

So I’m looking forward that next year, the dispatches will be in the range of 700 and production should also be in that range. Yeah, you are right to an extent that this year we got a support of whatever stocks we had last year, but then there were constraints also in this year in production front because of COVID and the heavy rainfall. I don’t think this will get repeated this year. If there is a COVID situation if there is a very heavy rainfall like last year, perhaps, then at that point we will make the corrections. But today I’m quite hopeful that we will be able to give a substantial growth next year.

Rahul Jain — Systematix Shares & Stocks — Analyst

Right. Okay. And sir. my second question is on your wage provisioning. So six months have already passed and have we done any provision so far. And what kind of quantum if suppose the last hike what we had if similar kind of a hike happen this time. So what is the provision, which is not been done so far?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We are providing about INR100 crore per month. It will be difficult for me what will be the wage negotiation. But if you see all the factors which are prevailing in the economy wage increase also depend on the growth that takes place in the economy, because that growth gets compensated. The realness or the inflation get compensated in the year but the growth plus some thing is that’s reflected in this thing. So to my understanding this should been the same range, but it will be difficult for me, maybe slightly more posing need to.

Rahul Jain — Systematix Shares & Stocks — Analyst

Sir, why I am coming to this is, because the last time when we had this wage increase I think the total cost went up almost like INR15,000 crores, so INR100 crores is really very initial number.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I think, it went up by about INR4,000 crore to something not INR15,000 crore. It was not not INR15,000 crore.

Unidentified Speaker —

INR4,500 crores.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

INR4,500 crores or so. So I concede that INR1,200 crore or INR1,300 crore may not be adequate but we’ll provide something more in coming months.

Rahul Jain — Systematix Shares & Stocks — Analyst

Right. Thank you so much.

Operator

Thank you. The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.

Rahul Modi — ICICI Securities — Analyst

Good afternoon, sir. Congrats. Great set of numbers, and thanks for a very liberal dividend. Really appreciative of that. Sir, couple of questions. Sir, how has the e-auction volumes and pricing been post December? And how is the demand itself from the NRS sector and our supplies to that sector been?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

The e-auction thing in January our premium was about 100%. We got about 100% premium on that. And this e-auction total was, can you tell?

Unidentified Speaker —

Booked quantity is 873 tonnes.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

In January.

Unidentified Speaker —

Total. Net total.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Total. Till January, and it is 86 million tonne.

Unidentified Speaker —

It is 3% higher on the scenario than last year.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

And 3% higher than the last year. And?

Unidentified Speaker —

Up to December.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Up to December. And this in January what is the?

Unidentified Speaker —

January we are slightly less but up to December it is 3% higher than the last year.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We are doing slightly better than the last year, but the quantum has increased slightly to 3% or 4%, but the premium in January was in the range of 100%. And if we offer in spot more, perhaps the premium will be higher. Because in spot we get much higher this. And the lifting too also has been good. It is more than what it has up and last year. I don’t have the figures right now, but I will tell you in the while.

Rahul Modi — ICICI Securities — Analyst

So sir, we did close to around in the first nine months is around 83 million tonne. So are you comfortable touching obviously, more than 100 tonne for the full year.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I’m quite hopeful that we’ll do more than 100 and 110 million tonne, which we did last year and 120 million tonnes from 124 million tonne. I think our production is increasing. Now today, we have reached 23.5%. Once we cross this 24% we will offer much more quantity for the e-auction also. So maybe not 124 but 110 or 115 tonne we will definitely achieve.

Rahul Modi — ICICI Securities — Analyst

Right. Perfect. Sir, on the employee cost and the contractual expenses. How do you, now employee cost if we see we’ve done around mostly around INR30,000 crores for the first nine months. This is — any actuarial or something booked on a Y-o-Y basis?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

INR100 crore.

Unidentified Speaker —

Yeah. There was a provision of about INR800 crore for CPR SME means for medical after retirement.

Rahul Modi — ICICI Securities — Analyst

Okay. INR800 crores. So this is a provision. This is non-cash.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

This is non-cash.

Rahul Modi — ICICI Securities — Analyst

And this, sir, over and above the INR800 crores we’ve done INR600 crores of wage provisions?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yeah, that’s right.

Rahul Modi — ICICI Securities — Analyst

So wage provision we’ve only done for two quarters. Please repeat?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yes, Rahul?

Rahul Modi — ICICI Securities — Analyst

Wage revision we’ve done only for six months or we’ve INR600 crores, so far, is it?

Unidentified Speaker —

From July since from 1st of July the wage revision is applicable so we have started from 1st of July only.

Rahul Modi — ICICI Securities — Analyst

Okay. Perfect. And sir, how do you see the the contractual expenses? Because obviously, due to fuel price hike there has been a constant increase, so how do you see this normalizing at what level? Obviously subject in the input cost, how do you see this move in? I think, Per tonne basis this will normalize at this level. There is — but one doesn’t know where the — nobody expected that the petroleum prices will breached the hundred rupee — a $100 mark. It has not breached there yet, but it’s reached to $96,$97 per barrel. Nobody expected that. There has been a significant impact on our expenditure because of diesel. I think in the nine months, it has been contractual plus our own diesel consumption that extra expenditure will be more than INR2,000 crore. So, but it should not.

Unidentified Speaker —

INR300 crores diesel.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

INR700 crores is for our consumption plus contractual about INR2,000 crore has taken place. And coming months I don’t see that it will likely to go up, but I can’t make any comment on that. If our production increases, that is something different, but diesel prices will increase if it that further so it will impact.

Rahul Modi — ICICI Securities — Analyst

Sir now this is — this would be a good enough reason for the long-waited price hike. What is your view? Sir we’ve been constantly asking you the same question again and again.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I think, I should do it tomorrow, Rahul. And the crisis that is going on in the country because of this all the stakeholders are not on board. And unilateral decisions are not possible in this sector.

Rahul Modi — ICICI Securities — Analyst

Right. Sir last question from my side before I get into the queue. Sir, in terms of restocking a power plant. Obviously the demand from the power sector in the high and it’s continuing to be high. When do you see this the destocking happening? And we read a lot in the papers that the NRS sector constantly complains. So, and we as Coal India get higher realization selling there. So where do you see on a sustained basis meeting the power demand and moving towards NRS also? How do you see the situation qualitatively?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Rahul, first thing is, we have not reduced the supply to NRS. That is a wrong perception being created in the market. A normal year FY’20 you take we have given more than that 10% more than last FY’20 to NRS sector. One must understand that the price of Coal India coal is much below the market price other imported coal price. So everybody wants that they should get this coal at means by prescribing us there. But it is not correct, that we have reduced the supplies to NRS. The second thing is power plant stocking. The power plant stocks at the power plant has reached 23 million tonne. Besides that, about 8 million tonnes is there in pipeline, which is lying in the stock yards or the good shades sheets and sidings etc. So this coal has already been sold to the power plants.

It is just because the railways because of excessive demand is unable to transport them to power plant point, but that is easily available. And at this 8 and 9 million tonne if it reaches to the power plant, then their stock will reach to more than 30 million tonne, which will be higher than the last year. But last year we faced the crisis. So I think that in March again, we will have to give them extra coal. From April onwards, if we are able to maintain the production level at a reduced level but at the level of January or December also then also there will not be any shortage of the coal. And I think the requirement of NRS even the increased requirement of NRS we will be able to meet.

Operator

Thank you. The next question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead. Mr. Murtuza, please go ahead with your question. Your line is unmuted.

Murtuza Arsiwalla — Kotak Securities — Analyst

Yeah. Sir, I just have one question. A lot of my questions.

Operator

Sorry to interrupt you. Mr. Murtuza. Can you speak a bit louder. We cannot hear you.

Murtuza Arsiwalla — Kotak Securities — Analyst

Am I more audible now?

Operator

Yes. Please go ahead.

Murtuza Arsiwalla — Kotak Securities — Analyst

Yeah. A lot of my questions have been sort of asked. There is only one more left, sir. What is the capex that you’ve been able to do against the original guidance for up to YTD? And where you think you’ll end up for the full year? And any guidance on capex for FY’23?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See for this year, we will be doing about INR15,500 crore to INR16,000 crore. And in next year also, I think we should try to complete INR17,000 crore or go beyond that. Lot of our projects for evacuation and road construction etc., and rail line construction are in progress. Once they get constructed we will be able to evacuate more coal. Today the problem is not coal, but evacuation. So we have to line for that. And once this is done in next two, three years thereafter perhaps the capex will get stabilized.

Murtuza Arsiwalla — Kotak Securities — Analyst

Sure. And just sir for nine months up to December how much of this INR15,500 crore have we spent?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We have spent about INR10,500 crores.

Murtuza Arsiwalla — Kotak Securities — Analyst

INR10,500 crores. Alright. Thank you so much sir.

Operator

[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yeah. Namaskar Pramod Ji. First of all I take this opportunity to thank the the investor presentation team for such an elaborate an exhaustive presentation. And we hope for the continuity of that same, sir. Sir, firstly, coming to the point that as discussed earlier regarding the buyback clarification, which we were awaiting from post the budget. So, any update on the tax part? And sir secondly, as we have seen in in other — one private corporate where they were looking for restructuring the company because of this holding company scenario of dividends, leakage and also buyback proposals getting and not being, having the efficiency in taxation.

So can Coal India could also be looked in that angle in restructuring the same, so that this holding company discounts that generally the company is getting on the bourses will get eliminated?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

There are two questions. First, is about buyback. We did try a lot during for this budget to be incorporated, but maybe their department decided that it should not be done. We are taking up this matter constantly with Deepam. But till the time that buyback the structure is not changed, that the tax structure on the buyback has not changed it will be difficult for us to go for buyback because there is a huge leakage in that. Since about 50% will go as a tax. So I think that will not be considered prudent by their investors as well.

I don’t think there is any leakage in dividend payment, because of the holding structure. Because now that tax is completely passed to. If I whatever dividend I get and I pass it to the shareholders then we are not required to pay any tax. The third thing about restructuring, in a major way, we are not thinking of any restructuring, but we may think of listing one or two small companies like CMPDI or BCCL in coming days, but it depends on what type of financial strength of they develop.

Saket Kapoor — Kapoor and Company — Analyst

Sir, actually I was asking for the holding company discount that we are getting currency. Since all the subsidiaries, we are Coal India is the holding company. It is not entity holding the assets, these are the subsidiaries that are holding the coal mines. So as we have seen in case of Vedanta wherein they were looking to to delist the company get it restructure and then relist again. So can for the value creation for investors since it is — our trading at a huge discount that was the thought process.

So second second point was on the diversification part, sir. Are we looking for in into ethanol projects and flue gas as an opportunity going forward? And also, sir on the cost reduction exercise post the implementation of FMCs what kind of cost reductions and increasing efficiency. If you could quantify per tonne on a basis that will flow to the P&L going forward that would suffice. And then I’ll come in the queue.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Coming to this methanol thing.

Saket Kapoor — Kapoor and Company — Analyst

Ethanol.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Pardon?

Saket Kapoor — Kapoor and Company — Analyst

It’s ethanol sir. Ethanol blending program, sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Ethanol blending we are not getting into because there is — I’ve been told that there is no very established technology to convert coal ethanol from coal. And that is a very, I mean, so there is nowhere in the world I’ve been told that there is any big plant existing. So I don’t think we can go into ethanol blending or using coal for ethanol blending, but at today’s rate everything looks viable. We are thinking and we are exploring the possibility of converting coal to ammonium nitrate. And this ammonium nitrate will ensure steady supply of explosives to our company. We are looking at it and we will be putting it to tender if found attractive and viable.

Actually the finance, honorable Finance Minister has declared in the budget speech also that they will be granting certain concessions for it. And with that, if it becomes viable definitely Coal India will look into it. But that will depend on its viability and rate of return, etc. And the second question that you asked about. What was the another question.

Saket Kapoor — Kapoor and Company — Analyst

I think the flue gas opportunity for Carbon Capture program. And sir, I was are seeking the ethanol projects from the grain-based distillery part. I think Gail and adults PSUs are participating, so with the cash accruals and with the, with the kind of returns that these ethanol plants are generating from grain-based distilleries. In terms of diversification that was my question. Not from — not looking for ethanol from coal. It was a totally going to setting up ethanol plant and helping the government in achieving this blending program.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I’m not. Fankly speaking, I have not looked into that aspect. In the last six months that I was — I just got some information a few days back that it is a very viable project, and it doesn’t require much of capital, but if the capital required and the returns are high, it is better for the Coal India. But frankly speaking, I have not looked into it. Let me look into it, then perhaps we can take a call on that. And sir, second thing, what was your another question means not the gas flue. delisting?

Saket Kapoor — Kapoor and Company — Analyst

Flue gas sir. I was looking into the flue gas opportunity for power plant. Carbon Capturing program sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Flue gas. Again, I have not looked into that nor is a carbon capture to my understanding is a very viable option for Coal India. This is for the thermal power station are the persons who are using that coal to look into. If suppose we get some opportunity by that it becomes very viable for us then I will think. But then as of now, no.

Saket Kapoor — Kapoor and Company — Analyst

Right sir. Yeah.

Operator

Sorry to interrupt Mr. Kapoor.

Saket Kapoor — Kapoor and Company — Analyst

Yeah. I’ll come in the queue ma’am. Thank you.

Operator

Thank you. The next question is from the line of Pinakin from JPMorgan. Please go ahead.

Pinakin Parekh — JPMorgan — Analyst

Yeah. Thank you, sir. Sir, just going back to your comment on e-auction prices 100% premium to FSA coal prices. So just to be clear, sir the third quarter implied FSA e-auction prices was INR1,947 which on FSA was roughly 42%. So has this INR1,947 move to around INR2,500 sir, because that is what 100% premium would imply.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

In January it has.

Pinakin Parekh — JPMorgan — Analyst

In Jan. So the blended portfolio has moved to those kind of realizations in e-auction.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

That’s right.

Pinakin Parekh — JPMorgan — Analyst

Yes, sir. Second point is that there is e-auction sales and then there is linkage auctions. So if you were to roughly the the FSA coal bucket was 145 million tonnes, is that entire bucket of coal sales on fixed prices or does it also include some kind of linkage auction? So basically, trying to understand is there scope for more coal to get transferred from the FSA coal bucket to the linkage coal bucket?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Can you repeat your question. I just missed it.

Pinakin Parekh — JPMorgan — Analyst

So basically, sir other than e-auction coal sales to the non-power sector Coal India has been auctioning coal linkages and supplying that. So sir, what is the update over there in terms of have all the non-power coal sales on contract shifted to linkage auctions or are there more to be shifted over the coming period?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See, we all are based on linkage auction is non-power thing. I’m talking about all and on linkage basis. Some linkages were done in Phase 1 Phase 2 today what is going is.

Unidentified Participant — — Analyst

Tranche 5.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

The Tranche 5. In Tranche 5 there are certain things, which have expired, and we have not been able to do the tender auction for them. But all those are not getting coal on linkage price, they have to take some e-auction.

Pinakin Parekh — JPMorgan — Analyst

So sir in third quarter what would have been their volume, which got sold under linkage auction is part of the linkage auction?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I won’t be able to give you right.

Pinakin Parekh — JPMorgan — Analyst

And sir, that you will be classifying it under FSA coal or e-auction volume when you report the sales?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See if we sell coal through e-auction it will be classified in e-auction. If it is through linkage auction it would be in linkage auction. If their linkage option has lapsed and they are second coal will be classified in e-auction only.

Pinakin Parekh — JPMorgan — Analyst

Understood sir.

Operator

Sorry, to interrupt you Mr. Pinakin.

Unidentified Speaker —

Volumes is are around 100 million tonnes.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Linkage auction volume in the whole year is about 100 million tonne.

Pinakin Parekh — JPMorgan — Analyst

Understood, sir. Thank you.

Operator

Thank you. The next question is from the line of Vipul Shah from Sumangal Investment. Please go ahead.

Vipul Shah — Sumangal Investments. — Analyst

Hi, congrats for good set of numbers. So, sir my question is on your slide 11 you have mentioned that 700 million tonnes of coal projects are progressing so, over what timeframe this are going to be implemented? So our capacity will be 1,600 million tonnes after all the projects are implemented?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

No. See the thing is 700 million tonne, but some of the projects will outlive their life also. So this 700 million tonne what we are saying is the extra coal that projects will generate it will take another four, five years to come in place, not less than five years. So means, it will not go up too 1,500 tonne. But if all this coal is produced by by 2230 about 1,200 tonnes or 1,300 tonnes type of coal can be producer.

Vipul Shah — Sumangal Investments. — Analyst

And sir, you are estimating, so you’re executing coal evacuation infra projects worth INR20,000 crores. But I suppose this as JVs. So all this capex will not be done by Coal India. Some of the capex will be done by your JV partner. So can you quantify how much will be Coal India’s contribution in the coal evacuation infra projects?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See when we are saying INR20,000 crore it includes about INR8,000 crore remaining about INR7,000 of FMC projects, then some of the railway lines, which are to be laid in next two, three years, which will — and which are financed completely by Coal India that will be another INR6,000 crore, INR7,000 crore and the sidings etc., which will constitute about INR4,000 crore, INR5,000 crore. So our INR18,000 crore, 19,000 crore are required to be spent from the Coal India only.

This is the type of money we will be investing, as our own, I mean as equity in certain of projects like the SSG, WRL and CRL etc,, it will be part of the equity and plus what which is fully funded by us. It will not be equity thing, not be debt or partner’s money which we are talking about.

Vipul Shah — Sumangal Investments. — Analyst

So it will be compensated later.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

If we move, suppose we construct the line fully like we have constructed this line simple we get extra mileage on that about 60% extra mileage we get and that money should come and that is process in coming. So in that project alone, we are likely to get INR200 crore per year.

Vipul Shah — Sumangal Investments. — Analyst

Only a follow-up question, sir. Ma’am only this is a follow-up. So what will be the return on this INR20,000 crore worth of investment? I’m still failing to understand.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Okay. For sidings and this FMC projects which constitute the major part of it, we have calculated that the money gets returned in next three, four, five years. Because a part of a — means the transportation cost from mining to the point of loading that’s reduced substantially. So within four, five years we get the return. So that type of return we are getting. For the railway projects which are essential, we don’t get much of return on that but most of those projects are being constructed through that PPP. In that, that PPP company gets return about 12% return, we keep in that. And but that those projects are essential for our coal evacuation.

So if we don’t do that our coal evacuation will come to stand still.

Vipul Shah — Sumangal Investments. — Analyst

Okay, sir. Thank you. I’m coming back in the queue. Thank you.

Operator

Thank you. The next question is from the line of Satyan Wadhwa from profusion Capital. Please go ahead.

Satyan Wadhwa — Profusion Capital — Analyst

Good evening, sir. sir. My question is regarding washed coking coal. For many years since the IPO Coal India has been talking about second half washed is an increase in the output of washed coal, we are still owning at about 2 million tonnes as of last quarter, and coking coal is highly profitable, no matter what the economic scenario is. So, can you shed some light on what the company is doing regarding this. And demand is only going up, so India imports almost all its coking it’s coking coal. But then Coal India not yet to like 30, 40 million tonnes washed coking coal a year in the next years.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See, there are two types of opening whilst coal one is coking and non-coking. From your question I understand that you’re talking about coking coal only. That’s right. Washing the coal reduces the ash percentage, but it does not improve the other properties. Indian coal or Indian this coking coal is not a very high good quality and it can be, cannot be used as such. It has to be blended. It can be used only for blending. And what the people say, and what the metallurgists say that at the best 20% or 25% of Indian coal can be blended with the imported coal to be fed in blast furnace. So whatever the demand is, a few days back, there was a meeting with steel ministry also, and they have indicated that not more than 17 to 18 million tonne of Indian coking coal can be absorbed by — and that to by 2030 by the steel industries other India. So if we think that we can replace the coking coal imported coking coal completely by Indian coking coal that is not a possibility.

Satyan Wadhwa — Profusion Capital — Analyst

Right. But even to get to 15 million tonnes by when Coal India has a plan? By when do you think we’ll get to 15 million tonnes of washed coking coal?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

If all our that washes that constructed in time with the extended timeline also I think by 2030 we will be able to produce that much type of washed coall.

Satyan Wadhwa — Profusion Capital — Analyst

Right, okay. And non-washed coal? Will go up in the same proportion 3 times non-washed versus 1 times washed coal?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I couldn’t get your. 3 time, 1 time is what do you mean by that?

Satyan Wadhwa — Profusion Capital — Analyst

Currently our total washed coal is 2 million tonnes as of last quarter of which 75% is non-coking. So does that percentage remain the same with wash rates?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Proportional. The most of the coking coal or most of the capacity of washing coal is coming up, is it’s in the coking coal not in the non-coking. Non-coking is at two, three, two, one, two washes existing and one more is going to come, which may come next year, and rest of that we are not constructing anymore washeries.

Satyan Wadhwa — Profusion Capital — Analyst

Okay.

Operator

Sorry, to interrupt you Mr. Satyan, may I request you to please rejoin the queue. Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Yeah, thanks for the opportunity, sir. Sir, my of my basic question was on the FSA realizations. So if I see the FSA realizations they are at the like say in line year they have decrease in total absolute terms by 6%-odd if I take the like say nine-month average. And on top of that we are seeing significant cost increases and we are having such a high capex like say.

I do appreciate that in your regime the way the on the capex have increased its beyond imagination. So in that perspective, we are not able to take a price hike. And that is also like say in last four years, we have not took the price hike. So, on the working side like say what price increase we are factoring in or we are asking to the ministry because that is the only authority, which is going to allow you to increase prices?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

First thing FSA price has not gone down in this quarter I think it.

Unidentified Speaker —

FSA price.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

No, sir. I am saying that over nine years like say if I see the realizations in FY’13 it was INR1,300 and we have in nine months at roughly around INR1,380. So it’s a, it’s a total increase of 6%.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

So that’s right. In last four years we have not increase the price that is a known fact. There is nothing. We are trying our best to bring all the stakeholders on board. And the price rise has become imminent there is no question about it. So we are working on that. And I have been working very hard for last words one year or so, but I think now it should happen. When will it happen? It is difficult for me to commit. Capex is required without which we cannot increase our production in disguise.

See certain things we must understand that in Coal India most of the expenditure is committed expenditure. Whatever extra we do gives us a lot of returns. Like this quarter we did slightly extra production as extra dispatch and the returns have been very phenomenal. Second thing in other areas in the non-FSA a area and in this, we get auction price. We are trying to increase those volumes. Unfortunately this year because of the price of imported coal being very high the imported coal-based power plants have shut down, and we have to cover that up.

Unidentified Speaker —

22 million tonnes we have covered.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

And then the rig ready to will enter vehicle. We have to supply, something like 20, 25 million tonnes for that. So in that situation, increasing the volume became difficult. But in coming months with our increasing production I think we will be able to increase our volumes e-auction, and that itself can give lot of return to us. So I’m not worried about return per se, but I’m really worried about price increase, and we must do that, that I understand.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

And sir lastly, on the, like going back to the beneficiated coal. Like in FY’07, we were doing 14 million tonne and now we are doing 10 million tonne. So the whole game that we are going to put up 10, 20 odd new washeries so even more like is around like say almost like 13 years, our volumes have gone down from 14 to 10 million tonnes. So what’s the view on that part? Are they on a no-go mode or they have been stopped or what is happening on that part sir?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See, there are certain issues regulatory some legal issue etc and constructing the washeries because of which three washers which we have LOA we could not start. There are, one washery we have started last year Pathardi, Madhuban, no Pathardi. And the second washery Madhuban we will start maybe in next 15 to 20 days if that is started and then Dahibari.

Unidentified Speaker —

Dahibari.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Dahibari, Dahibari have been started. We are trying to complete this. But there is some issue of using GB land for non-coal purpose and for that almost the decision now government has taken, and I think it should be taken I mean very soon. And once that is done these washeries can be constructed. But this is one aspect in which definitely CIL has failed to deliver on what we have promised.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Thanks a lot, sir.

Operator

Thank you. The next question is from the line of Mohit from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Hello, good evening, sir, and congratulations on good set of numbers. Sir, what is the status of our solar PLI bids? Is there any update, which you can share?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We had, we were out of list when it was only, whatever they had declared INR4,500 crores of success. But now we are in the list and once it is clarified and whatever they have declared in the budget we should get that thing, and we are looking for partner. As I told earlier that Coal India will not establish at it’s own, it will look for some partner and construct a joint venture. If we get that then only we’ll go ahead with that.

Mohit Kumar — DAM Capital — Analyst

Sir, MDO tenders, how has the new experience MDO tenders? And how many block do we expect to bid out in FY’23?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We have already done two. The third Chandragupta again has been bid it out and LOA has been issued for that maybe the agreement or work order will be issued very soon. Subhadra and Gare Palma and another one Madan Nagar. These three are financing offers have been opened and they are being evaluated. So I hope out of these three at least one or two will be awarded. We are working — but these all these are very huge mines. They may look four, five mines, but then Siarmal it’s 50 million tonnes, Kotre Basantpur is about 5 million tonne and that is — and Chandragupt is about 20 million tonnes. So, volume wise they’re very huge. And all these mines when auctioned out means, even if this four, five is done, it will be in the range of 100 million tonne.

Mohit Kumar — DAM Capital — Analyst

Lastly, sir, what was the state the coal gasification project? Will we go, will we start to do something in then the near term, medium term tender out some large tenders, given the fact that there is a national coal gasification policy in place. How do you see over a medium term?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See, we are not implementing this in EPC mode. We are trying to implement in BO mode. Dankuni tender was route, but there are certain complexities because of which it is taking time. And I don’t know what will happen to that tender but, rest of the two tenders have been issued. We are waiting also for the government’s clarifications about what type of subsidies they are going to provide or what type of support they’re going to provide. Once it becomes clear then their viability can be established and then perhaps it will be possible to move forward and define the timeline.

Mohit Kumar — DAM Capital — Analyst

Sir, which are these two tenders?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

One is ECL.

Unidentified Speaker —

ECL and SECL.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

ECL and SECL.

Mohit Kumar — DAM Capital — Analyst

Okay, sir. Thank you and all the best, sir. Thank you.

Operator

Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.

Rashi Chopra — Citigroup — Analyst

Thank you. So what is the cash on your books net cash on your books as of December?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

As of January end I know it is about INR30,000 crore. And as of December end it was 27?

Unidentified Speaker —

INR28,000 crore.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

INR28,000 crores. Hello?

Rashi Chopra — Citigroup — Analyst

Yes. Okay, sir. Got that. Thank you, sir. Second thing is on the e-auction prices. You mentioned that the premium was 100% in January. Is that still persisting through the — through February as well?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

February, I don’t have report right now but director marketing will request if he has got some figure he will tell you. But in January we did got 103% thing, and that was about for 8 million tonne coal or just 12 million tonne coal. And in February do we have data?

Unidentified Speaker —

No. I’ve not finalized it. But it will be more than 12 million tonnes.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

In February, he is saying it will be more than 12 million tonnes and the rate will be in the same range.

Rashi Chopra — Citigroup — Analyst

Okay. Do you anticipate that the situation at the power plants in terms of the inventory gets better in the next quarter the next few months?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

It is getting better. There is no doubt it will get better, because there is 23 million tonne already there in power houses and 8 million tonnes as I mentioned, is there in pipeline. Means, it is not just, it is extra coal that is lying in the good sheets, and washeries etc of powerhouses. So we have already sold that coal. Once it reaches that it will become 3, 32 million tonne, and we are increasing — the accretion is taking place every day. And I hope in April, May, June, again our production will remain good. And in that situation that should not be any shortage of coal in power houses this year.

Rashi Chopra — Citigroup — Analyst

Got it. Okay, just one last question from me. You said that you had the meeting for the renegotiation yesterday. What is they ask from the union at the moment?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

At the initial stage the asks are sky. They’re asking for 50% increase in everything. So those asks have got no meaning.

Rashi Chopra — Citigroup — Analyst

Okay. Got it, okay. Thank you, sir. That’s it for me.

Operator

Thank you. The next question is from the line of Hemel an Individual Investor.

Unidentified Participant — — Analyst

Sir, thank you for the question. Just very quickly, what is the cash on the book as of December 31, and the debt that we have?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

There is hardly any debt. Cash is about INR28,000 crore.

Unidentified Speaker —

INR28,000 crores.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

INR28,000 crores.

Rashi Chopra — Citigroup — Analyst

Okay.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

And we have removed all the short-term borrowing. There is a long-term borrowing, which gets reflected because of those railway projects of the CERL and CWRL. It’s about INR3,500 crores.

Rashi Chopra — Citigroup — Analyst

Sir, so just one final question. The rest is all answered. Is in case we are going to continue with our INR16,000 crore to INR17,000 crore capex next year. And if the price rises don’t happen, the wages do have to increase as per your negotiations to the additional capex still continue, and you would borrow for the same or how do you or is a capital allocation where capex gets the front-end investment over the dividend policy? How does it work in your mind, if you can shed some light on that.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Giving any commitment about future will be difficult. But what I think there is no reason that prices will not increase. Prices will have to be increased otherwise coal production in the country will get tougher. Because some of my subsidiaries are also already feeling that change, and hence that will happen. But in a hypothetical situation nothing happen then we are at the zero debt company. And we can leverage our balance sheet, very easily at a very low cost. So that is not a bad option. We will do that.

Rashi Chopra — Citigroup — Analyst

Okay. Thank you, sir. Appreciate it.

Operator

Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.

Amit Dixit — Edelweiss — Analyst

Yeah, thanks for taking my questions again. I have just two questions, the first one is on incentives. Earlier we used to get incentives in fourth quarter, but last year we forgot it because of COVID situation. So this year do we — I mean how much incentive can be expected in fourth quarter? That is the first question.

Unidentified Speaker —

Since demand which is not there. After that.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Waive at PI that is I think you’re asking about performance incentive because no other incentives is there in Coal India. That is there till March. That waiver was given until March and after March we are going to — I mean, that’s there.

Rashi Chopra — Citigroup — Analyst

Okay and one another bookkeeping question. What was the cash flow from operation in for the nine-month FY’22?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Cash flow from operation are at. I won’t be able to tell you right now.

Unidentified Speaker —

Around INR16,000 crore.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

About INR16,000 crores. I will send you the consent. Okay.

Rashi Chopra — Citigroup — Analyst

Okay, great. And then all the best.

Operator

The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.

Rahul Modi — ICICI Securities — Analyst

Thank you, sir. Just question two questions. Sir, one on the employee cost. Sir, how is the attrition rate panning out as we speak. So you and given the attrition and post the raise hike that has to happen. Are you seeing normalization of the employee cost and that not increasing going forward? That is, first. And second question is, sir regarding the 3000 megawatt of solar project that we are planning to do. Sir, any update on that please? Thank you, sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Thing attrition of the implies that is going, as we had predicted, because there is no production involved in that because the retirement age is one thing which is fixed. It is not decided by god it is decided by man. After wage hike attrition will take place will continue. And because of certain provisioning this year, we have seen slight increase in our employee cost. But in coming years it would likely to reduce further because we had not provided earlier for once this CPR SME post retirement medical benefit for non-exclusive and secondly, there were some provisioning to be made for gratuity also. Because of that we had to make some provisioning this year, and last year as well, last quarter of the last year as well. And so there is some.

I won’t be able to say that this reduction or the reduction in manpower will be adequate to compensate completely for the provision — completely for the wage hike that is likely to take place, but that wage hike will not be significantly — will not significantly the PAT of the country that much I’m quite sure.

Rahul Modi — ICICI Securities — Analyst

Thank you. And last, sir. On the 3,000 megawatt.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Okay 3000 megawatt thing. We have already placed order for 190 megawatt. 90-megawatt is in pipeline, which the order can be made very soon. And another 100-150 megawatt is in pipeline, we were bidding for this from — in whatever market we are getting. This except for 100 megawatt rest of the thing is for our internal consumption. We were bidding in whatever the discounts were coming forward and trying to get that but unfortunately the market has been fluctuating and the taxes, etc, have increased substantially. So we have not been able to — we have not been very successful in that.

Now, we are planning that we can have solar power plants in our own land, which is lying vacant. And perhaps with that the cost of generation will come down and we can bid. So that we are planning.

Rahul Modi — ICICI Securities — Analyst

Great. Sir. Thank you and all the best. Thank you very much sir.

Operator

Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yeah. Sir, coming to the point of this is staff cost versus the attrition part. Sir, so today’s employees trend the x number, what is the reduction we are expecting for this year and for the next financial year in the absolute number terms?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

The net attrition the reduction in the manpower is in the range of 14,000 to 15,000. This year again, it will happen and next year again, that will happen.

Saket Kapoor — Kapoor and Company — Analyst

Right. And sir, on the setup of this employee cost. Sir, looking at the size, the projects we are contemplating and the way the production ramping up. Sir, being a government organization sir is this going to be the employee cost structured permanently. The — a fair share of the revenues goes towards the payment of employee cost. So we can understand the social obligation, the duty and government being the owner, but then you are also in the listed space and you have your minority shareholders to also accountable for it. If my point is correct. So in that case the ratio employee cost to the total revenue stands slightly unexplained in that sense. So if you could explain to us going forward, is this the same ratio going to be. Because sir as you told they’re ask is 50% and as and when we go for an increase in the selling price they would be putting pressure again for revision or in that correlation. So what is the thought process and how is this cost going to plan out say from today at 631 billion tonne to 1 billion tonne and over and above that. So if you could explain?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See, Saket the employee cost has remained fairly constant in absolute terms, over the last four, five years. If you see the numbers, it has remained almost constant. There might have been infused 1% or 2%, 3% or something like that, but the employee cost has not increased despite increase in DA, despite increase then increment that takes place every year. So if we increase the volume that employee cost is not going to increase in the same proportion. Today we are getting more than 70% of our production through outsource mode. So we are not dependent completely on our permanent employee to increase the production nor are we planning to induct more manpower just to increase the production that again we are not doing. So there is no reason why the employee cost percentage in the total expenditure should not reduce in coming year. It will come down substantially over the year.

Our employee strength will stabilize somewhere near 1 lack or something after maybe six, seven years. So that is the thing that is likely to happen. So in long-term employee cost is going to reduce. Whatever capex that we are doing is not requiring extra manpower. If we are constructing FMC etc they are being maintained by the contractor in the initial four, five period and thereafter we are outsourcing the maintenance part and operation part to the private sector. So there also we are not engaging extra manpower.

Slowly the cost of the employee as a percentage of the turnover is likely to reduce substantially.

Saket Kapoor — Kapoor and Company — Analyst

So, sir then what is the key reason for such kind of valuations we are commanding? Sir, if we look at your presentation I just putting the trust again sir. Just.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

That is an enigma to me also. Why the share market is not maybe this is because it is a fossil energy. And people are not liking the fossil energy company all over the world, fossil energies are being valued at much lower. And secondly maybe because it is a government company, and sometimes government take steps, which are not appreciated by the stakeholders shareholders. So because of these reasons we are undervalued.

Saket Kapoor — Kapoor and Company — Analyst

Sir, if I may.

Operator

Sorry, to interrupt you Mr. Saket.

Saket Kapoor — Kapoor and Company — Analyst

Yes, ma’am. If I could make my follow-up and then conclude ma’am. With permission of the chairman.

Operator

Please go ahead. Sir.

Saket Kapoor — Kapoor and Company — Analyst

Sir, as I was putting the thrust on the restructuring part, sir. When we look at the structure for Coal India, it is all the subsidiaries of Coal, India is the holding company. Correct me there sir. So is that could be a reason that our holding company discount is prevailing sharply over the market capitalization? And we should contemplate things like what Vedanta was looking forward just to get it first delisted and then again, yeah sir.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Saket on this topic we can discuss why Vedanta was doing, and why not we should do. These are not something we can discuss openly. And you know much better than me. Why Vedanta was doing? Why it was undervaluing the market? Why it was trying to sell it at much lower price? We’ve got no fact there. And secondly I told you, it’s not because of just because of this. Why NMDC is being valued so low? Is there the considerations, which we have. We can discuss this thing some time offline. But when you are in Calcutta we can discuss it.

Saket Kapoor — Kapoor and Company — Analyst

Sir, I’m in Kolkata sir. I will come down.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Keep the time and come down.

Saket Kapoor — Kapoor and Company — Analyst

Yes, sir. I will do that sir. Thank you for the gesture sir. Thank you.

Operator

Thank you. The next question is from the line of Faisal Hawa from H. G. Hawa & Company. Please go ahead.

Faisal Hawa — H. G. Hawa & Company — Analyst

Sir, do we — will we continue to outsource our contracts for light-weighted to power mech etc and keep on reducing our staff on the roads? And will this accelerate make anything now or we will continue with our own staff?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I couldn’t get your points means. Can you repeat the first sentence?

Faisal Hawa — H. G. Hawa & Company — Analyst

Sir, can you hear me now.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yeah, that’s right.

Faisal Hawa — H. G. Hawa & Company — Analyst

Yeah. My question is that you have been outsourcing most of our extraction, and other contracts to third-party contractors like Power Mech projects etc. So we’ll just continue as a trend we will try to reduce our employees on the books.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yeah. Our employees are reducing. I’m not planning to increase it substantially, so extra production has to come through outsourcing. So that is the plan of the company.

Faisal Hawa — H. G. Hawa & Company — Analyst

So then why are not issuing more tenders for the same. In other mines also?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Lot many tenders.

Faisal Hawa — H. G. Hawa & Company — Analyst

Okay.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

You see number of vendors are finalized for the last year. We have created extra capacity of excavation and transportation.

Faisal Hawa — H. G. Hawa & Company — Analyst

Okay. And what could be the savings in terms of crores of rupees in case two years or three years.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

See giving numbers etc to such, I think will be difficult at about 75,000 person 75,000 people are producing about 70,000 coal, 70% of our production and about rest of the manpower is producing 30%. So I don’t have, right now, but we have got those figures what is the cost per tonne from the departmental labor and from the outsourced labor. Do we have that?

Can we calculate that? I can get it calculated and then send it. I don’t have it right now.

Faisal Hawa — H. G. Hawa & Company — Analyst

No. And sir, I mean efficiency wise you feel that the third-party operators labor is much more efficient than ours. That’s for sure.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Let’s talk, all these things offline.

Faisal Hawa — H. G. Hawa & Company — Analyst

Okay. But I must admit that you are doing a very candid con call also. And within the obviously governments’ constraints that you have you investors very well.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Thank you.

Operator

Yeah. Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Yes. Sir, any update on the aluminum project?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yeah. We are working hard for that. We have got means approvals, etc from Odhisha government. We have requested them to give us mine on nomination basis. Once that is allotted, then we’ll go ahead with it. It is a time taking process, but to my understanding every stage of aluminum is a profit making venture. We can sell bauxite and make profit, we can sell alumina and make profit. And we can make aluminum and make profit. So I think this is one project on which we are seriously working whether we succeed or not that is a different question. I believe the DPR and all has been made. How much? I’m not sure. DPR has been made. Including power house it will cost something like INR26,000 crore, INR27000 crore, but it will be based on liberal thing. And we are not going to invest everything, as we do in generally our own projects.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

And how much excess share or equity would be there?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We are planning that we should hold the majority stake because otherwise on nomination basis getting the bauxite mine is not possible. So we are working in that line. But it will depend when the partners invested that what she wants.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. And lastly, sir your other expenses has increased a lot, sir. Like it’s an increase of mostly around if I see 18%-odd year-over-year. While our production has increased almost 4.5%. So what’s the reason for, there?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Other expenditure.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Was a miscellaneous expenditure.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

The one thing is that environmental and plantation has increased. Higher charges have any fees, but I won’t be able to give you that details why it has increased. Maybe I would request the Director Finance we don’t have Director Finance right now, the CFO to send it to you separately.

Kamlesh Bagmar — Prabhudas Lilladher — Analyst

Okay. Thanks a lot.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Any more question or?

Operator

Thank you. We have a question from the line of Vipul Shah from Sumangal Investments. Please go ahead.

Vipul Shah — Sumangal Investments. — Analyst

So what would be your employee strength three to four years down the line?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

I think we should reduce 14,000 crore to 15,000 per year. That is the likely reduction. This year we are likely to close at 2,45,000. So whatever time period you keep in mind you will keep on reducing by 14,500.

Vipul Shah — Sumangal Investments. — Analyst

So that would result in how much reduction in the percentage of revenue? The employee cots. Any ballpark figure, sir?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

In general, if you are why if you don’t take into account the incidents events like price — this wage negotiation etc or any other industries that suddenly takes place like gratuity was increased by the central government, then it will remain almost constant.

Vipul Shah — Sumangal Investments. — Analyst

It will not get reduced.

Unidentified Speaker —

It is marginally.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Marginal reduction may take place. Because there is a increase of about 3% every year due to increment. There is further increase of 1% or 2% because of the promotions etc 1% you can take on average. And then DA thing gets compensated. So as in real-term it will allotments in real term it will get reduced but in absolute term in that numerical sense I don’t think there we will see serious reduction in that.

Vipul Shah — Sumangal Investments. — Analyst

And lastly, regarding this as a project. So what would be our investment? And when is it likely to be operational?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

There are two sets of fertilizer project. One is HURL and one is TFL. In HURL the total expenditure is about INR16,000 crores, so our share is about 33%. And of that the that means about INR1400 crores to INR1300 crores and in TFL again their total expenditure is about INR13,000 crore and our business so it will be about in the INR1,300 crores. That is the total capex that is likely to take there. And one thing there will remain say that the capex has taken place this much. This also includes the proportional investment that we are making in HURL and TFL and taking loan there.

So in absolute outgo terms with this INR15,000 crore will not take this in actual terms.

Vipul Shah — Sumangal Investments. — Analyst

Okay, sir. Thank you and all the best. And sir, I have many questions regarding your employee cost, but we will not be comfortable discussing this. And so you suggested we can take it offline. So whom should I contact for your time for this questions?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

You consult company secretory Mr. Vishwanathan. He will arrange the thing.

Vipul Shah — Sumangal Investments. — Analyst

The thing thank you very much sir. And all the best for the future.

Operator

Thank you. The next question is from the line of Ashish K from Centrum Broking. Please go ahead.

Ashish K — Centrum Broking — Analyst

Yeah, hi, thanks for the opportunity. Two questions from my side. One is on e-auction volume. So when you spoke about, Jan, Fab which is around INR100,000 premium. So when will it start hitting our P&L?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Next quarter. Because actual lifting will start and about 30-35 days.

Ashish K — Centrum Broking — Analyst

So as of now. If I look at from October in fourth quarter actual thing will start, which we have already booked in November-December time.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Yeah. That will start getting reflected in the fourth quarter. And what was that percentage sir? Is it more than 45%.

Unidentified Speaker —

Definitely on the average this year we have got something like 60%. It’s more than 60% so till December also, it was more than 60%, 70%.

Ashish K — Centrum Broking — Analyst

Okay. And in terms of volume you are saying that no fourth quarter e-auction volume, which will be reported in P&L will be higher than what we reported in fourth quarter last year. That’s right?

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We will be reaching. He is talking about in the terms of lifting. Because if you the lifting takes place it gets reflected in the P&L.

Ashish K — Centrum Broking — Analyst

Sir, last year it was 29 million tonnes in your fourth quarter.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

We are expecting slightly more than that.

Ashish K — Centrum Broking — Analyst

Okay, that’s it. And sir, secondly on employee cost obviously, you must be making some increase in that and taken provisions for that. So what was the rate at which we are making provisions in our employee cost as of now.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

What we are making right now is about INR100 crore per month. I’m talking about the like there initial was 50% increase so is it possible to quantify what percentage increase we are taking into account when making provisions. I won’t discuss that thing.

Ashish K — Centrum Broking — Analyst

No issues.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Affect our negotiations.

Ashish K — Centrum Broking — Analyst

Yeah. Thank you, sir. And all the best and where you are doing pretty well. Thank you, sir. And just. We are waiting for the ultimate thing, which you also are waiting.

Unidentified Speaker —

That’s right.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Thank you, Kamlesh.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vishal Chandak for closing comments.

Vishal Chandak — Motilal Oswal Financial Services Limited — Analyst

Thank you, everyone for joining this call, and thank you very much, sir. I think this was a very, very candid conference call that we had had for a very long time. And I’m sure investors will appreciate that. Sir, I would hand over the floor to you for your closing remarks. Over to you.

Shri Pramod Agrawal — Chairman-cum-Managing-Director

Thank you, Vishal. Thank you everyone for being so patiently hearing for me. Sometimes that become slightly longest, but then that’s to explain the things one has to put some words on that. Thank you very much for hearing me so patiently. Thank you. And I would like to meet you people physically. Maybe soon we’ll be able to travel to Mumbai. Thank you very much. [Operator Closing Remarks]