KOLKATA: Coal India, facing pressure from the prime minister’s office to improve production, plans to invest 75,000 crore ($14.6 billion) in the next five years to develop mines and infrastructure, buy foreign assets and be able to pay a dividend of 6,500 crore every year, top company executives said.
“CIL will be investing 40,000 crore in ramping up infrastructure and production for its domestic operations and another 35,000 crore for acquiring foreign assets as well as in its Mozambique operations,” a director in the company said.
The state-run firm will also spend 4,000 crore this fiscal to urgently meet production and meet its obligations under new fuel supply agreements, they said.
The company’s cash reserves have swelled to 56,000 crore at the end of March, up 24% in a year, helping it plan big investments. The kitty will swell by about 10,000 crore every year unless the money is invested in new projects, executives said.
“We have earmarked 4,000 crore budget for urgent ramping up of production. It will go into meeting additional production required to meet supplies under fuel supply agreements according to the presidential directive,” a senior company executive said.
The ‘urgent production’ investment follows pressure from the government for signing FSA’s that will require at least 40 million tonnes of additional production for the current financial, he said.
In Mozambique, CIL has acquired a 205 sq km area with a five-year license for coal exploration and production. It hopes to start production there in 2015. It is also in talks with a couple of overseas coal producing companies including Peabody for acquiring stakes in mines.
It’s domestic infrastructure investment plans include 6,000-7,000 crore for railway and road links from mines and coal handling equipment at railway sidings. Despite a production of 436 million tonnes in 2011-12, which was short of its target, the company ended up with a stock 72 million tonnes mainly due to unavailability of adequate number of wagons and infrastructure bottle necks at the mines.
“The focus will be on evacuation. We want to invest in coal handling plants for so that offtake increases and targets are met.,” he said.
However, the reserve that CIL has accumulated will largely remain invested in bank fixed deposits till the time it is used for project investments.
This is because the company is not too comfortable with investing the funds in government securities since it needs to hold them till maturity turning it illiquid. Coal India’s output has lagged the rapid growth in demand, particularly from the power sector.