CIL plans to shut down unprofitable mines

15 August 2017 Week 32 Issue 420

State-owned Coal India Limited (CIL) has plans to shut down nearly 100 unprofitable mines over the next two-three years.

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The miner aims to close 37 of them by March 31 because on financial and safety ground.

CIL currently operates 394 mines, down from a maximum of 750, of which 15 are highly profitable.

CIL, which accounts for more than 80% of India’s total coal output and, also aims to make a further 90 mines profitable.

“We have engaged the Indian School of Mines and the expertise of Singareni Collieries to chart out a roadmap for the 90 mines. They would submit their study soon on the basis of which we would either merge a few of these mines with existing ones or change the method of operations in these mines,” an unnamed company executive told the Economic Times.

“Opening new mines and shutting unviable ones is a continuous process,” the official added.

CIL aims to save between 8-10 billion rupees (US$124-156 million) per year by shutting down unviable mines, mostly underground.

Mines with inferior grade and lower priced coal, or with under 1 million tonnes per year of production, are usually unprofitable as the scale of operation does not support the production costs involved.

CIL has already stated publicly that a large number of its mines, including those owned by its subsidiaries, are not viable as they are unable to cover labour costs.

High operating costs has been a major factor in dragging down CIL’s profits, despite a rise in revenues.

Last week, CIL reported a 23% decline in profits to 23.5 billion rupees (US$366 million) for the April-June quarter owing to higher expenses.

The company posted profit of 30.7 billion rupees (US$478 million) in the year-ago period. CIL's April-June income was 217.7 billion rupees (US$3.4 million), a 4.5% rise.

CIL produced 554 million tonnes of coal in 2016-17. The company has reduced its output target from 660 to 600 million tonnes for 2017-18 as it is saddled with more coal than it can sell in the domestic market owing to depressed demand from thermal power plants.

Edited by

Richard Lockhart

Editor

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