Singareni management worries over high cost of coal production

Company Chairman and Managing Director N Balram during a recent meeting with the workers expressed serious concern over the high cost of coal production and asked officials to find solutions to bring it down.

Hyderabad: The high cost of production of coal is worrying Singareni Collieries Company Limited (SCCL) management as it would become very difficult for it to survive with the current cost of production. Due to high production cost Singareni’s profit from coal sales is less than 1 percent making it difficult to get into new areas and other expansion plans.

According to officials, the high production cost of SCCL was due to the percentage of underground mining that it does, which causes a daily loss of Rs 1.79 crore to the company. While it costs Rs. 10,000 to produce a tonne of coal in an underground mine, the sale of that coal was fetching the company less than Rs.4,000, the officials said adding that the company was suffering a loss of Rs. 6,000 per tonne.

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The selling price of Singareni coal was higher than that of Coal India and other private companies, and if this continues, there was a risk of customers moving away from Singareni, officials said, adding that only if the production was increased, the cost of production would come down or it would face difficult times. The company is currently operating 48 mines. Of these, 19 opencast and 29 underground mines are located in 6 districts of Telangana.

The management believes that the average cost of production of under- ground mining had throughout been much higher and could never be recovered from the coal prices, hence, it was trying to find ways to bring down the cost of production. Company Chairman and Managing Director N Balram during a recent meeting with the workers expressed serious concern over the high cost of coal production and asked officials to find solutions to bring it down.

Singareni’s production cost remained high, on account of high stripping ratio of coal reserves, higher employee costs following the provisions made for the payment of pay revision under the National Coal Wage Agreement 11 and higher Over Burden Removal (OBR) adjustment cost, officials said, adding that if Singareni fails to improve its production it could see a margin pressure as it continues to have high fixed operating expenses in the form of employee payouts and higher other operating expenses.

The Singareni management has started holding meetings with the workers to assess the current situation and how it could bring down the production cost. Sources say Singareni was making efforts to get into mining of other minerals, and as part of its business expansion activities, it was going to enter into new businesses like solar electricity, green hydrogen, thermal power, pumped storage plants and lignite mining.

Normally, in open cast mines heavy machinery should work at least 20 hours a day, but at present in Singareni mines it was being used only for 12 hours, resulting in less production, official said, adding that heavy machinery was required to be used at least 18 hours a day to increase production. The company has reportedly asked the workers to use heavy machineries for at least 14 hours a day to over come the losses being incurred by the underground mines.