October , 2023
Coal India Limited
23:42 pm

Nandini Dasgupta

Company Profile

Coal India Limited, commonly known as CIL, is an Indian state-owned public sector undertaking (PSU) owned by the government of India. Founded in 1975, CIL is based in Kolkata and is the world’s largest state-owned producer of coal. CIL is also India’s ninth largest employer, employing almost 272,000 people approximately. CIL accounts for around 82% of India’s total coal production. In April, 2011, the government of India granted CIL the status of ‘Maharatna’, one of thirteen such entities in the country.

History of Coal Industry and Coal Mining Sector in India

lUntil 1956, coal mining in India was mainly owned and operated by the private sector. However, in 1956, the Government of India set up its own coal company, National Coal Development Corporation (NCDC). The coal mines operated by the Indian Railways formed the core of NCDC. The objective of this company was to meet the rapidly increasing energy requirements of the country in order to support the rapid industrialization that the Government of India was pursuing through the Five-Year Plans.

lIn 1971, all 214 coking coal mines and 12 coking-ovens operated by the private sector in the country were nationalized by the government of India, with the exception of those held by the TISCO, IISCO and others for captive use. In order to improve the organization and operational efficiency of the coal sector, Coal India Limited (CIL) was established. Thus, CIL started functioning in 1975 with 5 subsidiary companies under it. These were Bharat Coking Coal Limited (BCCL), Eastern Coalfields Limited (ECL), Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), and Central Mine Planning & Design Institute Limited (CMPDIL). In due course of time, 3 more companies were formed under CIL by carving out certain areas of CCL and WCL. These were Northern Coalfields Limited (NCL), South-Eastern Coalfields Limited (SECL), and Mahanadi Coalfields Limited (MCL).

  • India was in commercial exploitation of coal since 1774. In FY 2022, it was the second largest coal producer and consumer in the world after China, with an output of 777.31 mt (860.84 m3) short tons (approx). About 30% of India’s coal imports come from Indonesia. Demand, supply mismatches and poor quality have forced India to import coking coal in order to fill the gap in domestic supply. Dhanbad is the largest coal-producing city in India and the country’s coal capital. 
  • The majority of coal is used to produce electricity, and the majority of electricity is produced from coal. However, coal-fired plants have been accused of violating environmental regulations. The coal industry has a significant impact on human health and the environment. In India, the electricity generated by new solar farms is much cheaper than the electricity produced by the country’s current coal plants. 
  • The National Mineral Policy (NMP) was adopted by the government of India in February 2019. This policy aims to improve regulation and enforcement, increase transparency, promote balanced social and economic development, and promote sustainable mining practices. The NMP grants industry status to mining activities and encourages private sector financing. Looking ahead, both domestic demand and export growth are expected to play a major role in the industry’s growth and contribution to GDP in the post-pandemic world. India has an abundant domestic reserves of coal. Most of these are in the states of Jharkhand, Odisha, West Bengal, Bihar, Chhattisgarh, Telangana and Madhya Pradesh. 
  • The Coking Coal Mine Nationalization Act, 1972, and the Coal Mines Nationalization Act, 1973 were annulled in January 2018 by the Narendra Modi government. The government allowed private firms to enter commercial coal mining industry in February 2018. The new policy involved auctioning mines to the company offering the highest price per tonne. This broke the monopoly on commercial mining enjoyed by State-owned Coal India since its nationalisation in 1973.
  • The Ministry of Coal, Government of India ensures complete self-sufficiency of the country’s coal production through regular reviews, adopt the mines and minerals (development and regulation) amendment bill, 2021, which will allow captive mines owners, excluding atomic minerals, to sell 50% to 60% of their yearly mineral production (including coal), in the free market, implementation of the single window clearance portal, allow Coal India Limited (CIL) to adopt Mass Production Technologies (MPT) in its underground mines etc.

Company Perspective and Review

Coal India’s stock price has been oscillating for the past few months, following a bullish trend. The stock attempted a breakout in June 2023, but failed to breach the 200-day EMA. The company has zero debt. For the year ending March 2023 Coal India has declared an equity dividend of 242.50% amounting to Rs. 24.25 per share. At the current share price of Rs.283 this result in a dividend yield of 8.56%. The company has an acceptable return on equity and capital employed ratio, good dividend track report with a BUY signal by the Moving Averages and Technical Indicators.

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