Coal India into Solar?

Coal India is one of the world’s largest miners of coal, thanks to its position as the monopoly miner in India. The company has decided to jump in to the solar bandwagon and plans to set up 1000 MW of solar power plant capacity in India. The government of India has set an extremely ambitious target of building 100000 MW of solar power by 2022 and has pushed state owned companies to set up plants as well. However, Coal India has almost zero expertise in running power plants of any sort. Its only competence and that too is not too high in mining of coal. The company is highly inefficient and corruption ridden. Besides its gives too much money to its workers without any productivity benefits. The only reason why it is thriving is because it has a monopoly over coal mining and the monetary benefits it gives to government ministers and bureaucrats. The new government has not taken any radical reforms to the problem of coal mining in India. Despite owning billions of tons in reserves, India imports more than 100 million tons of coal a year, which is criminal considering that India is one of the poorest countries in the world.

Coal India now wants to build solar power plants on the water at a capital cost of Rs 4-5 crores. The capital cost of the plant has come out to be Rs 4-5 crores according to Coal India which makes no sense, given that a solar power plant on land costs Rs 6 crores. I think India is going a bit overboard with solar energy, by pushing inefficient monoliths like Coal India to build solar power. It will make more sense for companies efficient in the power sector to build solar power. Coal India will be better off by giving off the excess money in its balance sheet as dividends. While I own Coal India stock mainly due to its monopoly position and relatively cheap valuations, I think it’s a short over the long term. Coal is coming under immense pressure around the world due to its high pollution and global warming characteristics. Witness the struggle being faced by Adani to start its Carmichael coal mine in Australia. Coal India is also massively inefficient, paying more than 25% of tis costs as salaries which indicates the depth of its problems. It has almost no expertise in underground mining and in other areas. I think that the company should be broken off and privatized. It will take a huge amount of courage to do so, considering the lazy slothful Coal India workers will oppose this tooth and nail.

TOI

State-run Coal India (CIL) will invest Rs 6,000 crore to set up 1,000 MW of solar power generation capacity over the next five to six years, according to a senior company executive. “We will fund 70% of the project cost through debt, which will come mostly from banks, while the rest will be through internal resources,” said the executive, who did not wish to be named adding that land for the plants will be provided by the states. As a first step, Coal India has prepared a detailed project report.