Company Profile of Coal India

Mission:To produce and market the planned quantity of coal and coal products efficiently and economically in an eco-friendly manner with due regard to safety, conservation and quality.

Vision:To emerge as a global player in the primary energy sector committed to provide energy security to the country by attaining environmentally and socially sustainable growth through best practices from mine to market. The Board of Director of CIL had approved and adopted the corporate plan titled vision 2020. Vision 2020 envisages various measures aimed at improving coal supply and capability building.

Coal India is an Indian state- controlled coal mining company head quartered in Kolkata, West Bengal. It is the largest coal producing company in the world and contributes about 82% of the coal production in India. In April 2011, CIL was conferred the Maharatna status by the Union Government of India.HistoryTo take care of energy requirements of India, the Central Government of India did a nationalisation of coal industry in the 1970s. By 1972, it acquired most of the coking coal mines in India (226 coking coal mines) through Bharat Coking Coal Limited (BCCL). Similarly, it acquired all 711 non-coking coal mines in India through Coal Mines Authority Limited. To consolidate businesses of both coking and non-coking coal under one entity, a formal holding company in the form of Coal India Limited was formed in November 1975 to manage both the companies. Government of India held 100% of its shares till 2010.CoalCoal is a non-renewable resource known as fossil fuel. It is the most abundant fossil fuel in the world. The four types of coal include peat, lignite, bituminous and anthracite. Coal is a combustible brownish-black sedimentary rock. Throughout history, coal has been used as an energy resource, primarily burned for the production of electricity and heat, and is also used for industrial purposes, such as refining metals.Coal is the largest source of energy for the generation of electricity worldwide.Coal is extracted from the ground by coal mining, either by underground or at ground level.

0.35%Structure

89.65%%10% CPSE - ETF

Public ShareholdingPresident of India acting through Ministry of Coal, Govt. of India

COAL INDIA LIMITED

100%%100%100%%100%100%100%100%100%100%

South Eastern Coalfields LimitedEastern Coalfields LimitedNorthern Coalfields LimitedCentral Mine Planning & Design Institute LimitedWestern Coalfields LimitedMahandi Coalfields LimitedCentral Coalfields LimitedBharat Coking Coal Limited

Coal India Africana64%64%

Chhattisgarh East-West Railway Ltd.Chhattisgarh East Railway Ltd.

100%60%70%

Mahanadi Basin Power Ltd.MJSJ Coal Ltd.MNH Shakti Ltd.

Products of CIL

Coking coal: These coals, when heated in the absence of air, from coherent beads and free from volatiles. Semi coking coal: These coals when heated in the absence of air, from coherent beads not strong enough to be directly fed into the blast furnace. NLW Coking coal: This coal is used for power utilities and non-core sector consumers. Non Coking coal: These are coals without coking properties. Washed and Beneficiated coal: These coals have undergone the process of coal washing or coal beneficiation, resulting in value addition of coal. Middling: These are by- products of the three stage coal washing. Rejects: These are the products of coal beneficiation process after separation of cleans or middlings. CIL coke: These are the smokeless, environment friendly product obtained through temperature carbonization. Coal fines: These are the screened fractions of feed raw coal and CIL coke. Tar/ Heavy oil/ Light oil/ Soft pitch: These are products using low temperature carbonization of non-coking coal in vertical retorts.

Achievement

Maharatna Status (2011 12):Coal India Limited was granted the Maharatna status on 11thApril, 2011 by the Government of India thus becoming only the 5th PSU in the country, of a total of 215 central Public Sector Enterprises (cpses) to have been conferred with this status.

Coal India joins Sensex (2011 -12):Coal India made it to the 30 stock Sensex, on 8th August 2011, globally considered to be the barometer of the Indian economy, in a short span of nine months since its listing on 4th November 2010.

Most valued company in the country (2011 12):Coal India emerged as the Most Valued Company in the country in terms of market capitalization on 17th August 2011.

Award of Navratna status (2008 09):Coal India was awarded Navratna status when the company crossed 400 million tonnes of overall production of coal.

Award of Mini ratna status (2007 08):Coal India Limited was awarded the mini ratna status by the department of public enterprises.

OrganisationCoal India Ltd. Which is a Holding company, has a Board of Directors headed by full time Chairman who is the Chief Executive of the Company. The subsidiary Companies have their own Board of Directors. Each of these subsidiary Companies has a Chairman-cum-Managing Director who is the Chief Executive of the Company. The subsidiary companies are:Eastern Coalfields Limited, with Head Office at Sanctoria.Central Coalfields Limited, with Head Office at Ranchi.Western Coalfields Limited, with Head Office at Nagpur.Bharat Coking Coal Limited, with Head Office at Dhanbad.Central Mine Planning & Design Institute Ltd., with Head Office at Ranchi.Northern Coalfields Limited, with Head Office at Singrauli.South Eastern Coalfields Limited, with Head Office at Bilaspur.Mahanadi Coalfields Limited, with Head Office at Sambalpur.

North Eastern Coalfields is presently functioning directly under the Holding Company with a Chief General Manager as the Head.

IMPORT OF COALYearCoal imported2013-14 2014-15

Grades required for coal import are from G1 to G5.Coal is mainly required in two types of industries:(i) Power house (ii) Steel industry

PricingEarlier to 1997, ministry of coal used to fix prices for CIL. After 1997 it was decentralised (CIL started fixing price).

Price deciding factor:(1) Cost of production(2) Profit marginality(3) International Coal price(4) Wage(5) Economic needs

CIL targets- CIL has to fulfil 80% of its demand.FSA(Fuel Supply Agreement)

10%E-auctions10%Steel and others80%Power

COAL MINNING TECHNIQUES

There is more than one way to mine coal. The selection of the optimum method rests primarily on the depth of the seam, i.e., the amount of earth separating the coal from the crust of the Earth. Broadly there are two ways to mine coal: Open Cast/Surface Mining (OC); and Under-Ground (UG) mining Open Cast (Surface) Mining In OC mines, the whole portion of land (overburden) is dug from the top until the coal seam is sighted. The ratio of overburden excavated to the amount coal removed is called the overburden ratio (OBR). The deeper the coal is below the surface, the greater the time and effort required excavating it, thus the productivity of a mine is inversely proportional to its OBR. OC mining is suited when the coal is nearer to the surface.

Underground Mining In UG mining, coal is found deeper inside the earth. The depth can vary from a few metres to more than 1000 metres. Here, a small portion of land is excavated until the coal seam is found. Such mines have to be developed deep inside the earth. This also affects productivity vis--vis opencast production. When the coal seam is found, different techniques are applied to extract coal.

Accounting for OBRIn open cast mines with rated capacity of 1 million tonne per annum and above, cost of OBR is charged on technically evaluated average ratio( Coal: OB) at each mine with DU adjustment for advanced stripping and ratio variance account after the mines are brought to revenue. Net of balances of advanced stripping and ratio variance at the end of the year is shown as cost of removal of OB under the head non-current assets/long-term provisions as the case maybe. The reported quantity of over-burden as per record is considered in calculating the ratio for OBR accounting where the variance between reported quantity and measured quantity is within the lower two alternative permissible limits as detailed hereunder:

Annual quantum of OBR of the minePermissible limits of variance

III

%Quantum (in mill.cu.mtr.)

Less than 1 million.cum+/-5%0.03

Between 1 and 5 million.cum+/-3%0.20

More than 5 million.cum+/-2%Nil

However, where the variance is beyond the permissible limits as above, the measured quantity is considered. SWOT ANALYSISOpportunities and ThreatsOpportunities: Strong economic growth in India and resultant demand for energy Cheapest source of energy and would ensure continuous demand vis- a- vis other energy sources. Increase business opportunity through the use of imported coal by blending the same with domestic coal to remove mismatch between quantity and quality.

Threats: Difficulty in obtaining clearances in respect of coal resources under forest cover and tribal lands. Large tract coal bearing zones being situated in populated areas and thus prone to operational disruptions. Change in policies/ regulations governing the sector. Possibility of negative impact of climate change initiatives on the use of coal Near total dependence on Indian Railways for evacuation of coal.Strength and WeaknessStrength: The largest coal producer and reserve in the world. Well positioned to capitalize on the high demand for coal in India. Track record of growth and cost efficient operations. Strong track record of financial performance Strong capabilities for exploration, mine planning, research and development. Experienced senior management team and large pool of skilled employees.

Weakness: High cost of production in underground mines resulting into losses in such mines. Evacuation of coal largely dependent on external agencies which is often a constraint. Dominance of low grade coal in available resources. To get work done by employees working in coal mines. Modern technologies are not used in most of the mines.

Materials Management

This department collects all the requirement of CILs subsidiary and places order in the form of tender before the suppliers. Their job is to procure materials both for domestic and foreign.

The purchase functions in Coal India Limited are carried out by Materials Management Division headed by the General Manager (MM) reporting to Director (Technical). In respect of Subsidiary Companies, these functions are carried out by respective Materials Management Division headed by General Manager (MM) reporting to Director-in-Charge of MM Dept. Purchase functions is also carried out by User Dept. / Units as per powers delegated to them.

The primary objective is to procure plant and equipment, explosives, spares and other stores and materials required by indenters with a view to:(a) Helping and maintaining continuity of production by correct supplies as per users requirement, in time.(b) Ensuring that items purchased are most economical, taking into account their quality, durability, efficiency etc.(c) Developing effective and on-going vendor relationships to ensure fair play and equity.

The materials obtained shall be:(a) Of right quality(b) In right quantity(c) At the right time(d) At the right prices(e) From right sources

Types of tender:Domestic Open Tender (Advertised)- All tenders which are published in leading newspapers, website.Global Tender (Advertised)- These are published in Indian trade journal and Indian export bulletin. This also has to be published in website. For both domestic and global- The tender notices should also be published in website. The complete bid along with then application form shall be published on the website of the subsidiary/CIL. The sale of tender paper through website shall be guided by the following:(1) It shall be ensured by the concerned subsidiary/CIL that the parties making use of this facility of website are not asked to again obtain some other related documents from the department manually for purpose of participating in the tender process i.e. all documents up to date should remain available and shall be legally valid for participation in the tender process as manual documents obtained from the department through manual process.(2) The complete application form should also be available on the website for purposes of downloading and application made on such a form shall be considered valid for participating in the tender process. The last date of downloading the tenderer from website should coincide with the last date of manual sale of tender papers.(3) The bid submitted against the application form downloaded from the website shall be considered valid only when accompanied by a Bank draft drawn in the favour of subsidiary/CIL towards the cost of the tender documents indicated in the Notice Inviting Tender(NIT).Limited Tender- The sources are limited and whose products are proven.The items intended are proprietary to original equipment manufacturer. In this case, the proprietary Certificate should also be given by the Head of the concerned Technical Department. The demand has to be very urgent as confirmed by the Head of concerned Technical Department.The indent value has to be less than Rs 10 Lakhs. Single Enquiry for proprietary and non- proprietary items- These are mainly for parts of machinery which have been purchased. Single Tender may be issued for spare parts of any equipment based on a Proprietary Certificate to be provided by the Head of the concerned Technical Department. Procurement of bought out items should be taken out from such procurement as far as possible in consultation with the Technical Head.

Repeat Orders- These orders are placed against any previous orders which were placed as a result of normal tendering process. It cannot be more than 25% of the order quantity.

Emergency Purchase- In cases of extreme urgency involving risk of loss of life and property or due to consequences of natural calamities/or an accident in the mine which would lead to stoppage in production/operations resulting in considerable loss of revenue, emergency purchase may be resorted to normal tendering. Procedure to be adopted in such cases:(a) An emergent indent with clear description of materials will be raised by the concerned technical department with competent approval(b) Authorisation for adopting such mode of purchase would be obtained from HOD of MM department upto a value of Rs 10lakhs.For purchase of value of more than Rs 10 lakhs and upto Rs 25 lakhs approval of Director in charge of MM department will be taken.For purchase of more than Rs 25 lakhs approval of chairman/ MD will be obtained.(c) After approval is obtained, the HOD of MM department may nominate a committee consisting of one officer not below the rank of E-5 from MM department Finance and Engineering to handle the purchase.Spot PurchaseSpot/Cash purchase may be resorted to in the case when the following conditions exist:(1) When the value of purchase is not more than Rs 5,000/- and(2) When the items is not regularly purchased and/or not generally included in Annual Indent/Materials Budget and(3) When the item is available ex-stock from show rooms or specially shops dealing with the item of such nature(4) When the item is urgently required by the user and(5) When the item is branded/ packaged in original packing or may be accepted based on standard warranty of the manufacturer.

Every subsidiary company should have its own rate contract. If one subsidiary Co. desires to adopt the rate contract concluded by other Subsidiary Cos., full justification has to be recorded as to why the same subsidiary Cos. Could not finalise their own rate contract.

Tendering ProcessStep 1) Requirements of CIL and its subsidiaryStep 2) Invitation to tender Step 3) Submission of bid:(i) Technical- Those whose specifications match with the requirements are selected.(ii) Price bid- These part consists of details of prices only. Here, the lowest Bidder is selected.Step 4)Earnest money deposit- These money is kept with CIL so that tendererdo not back out. In CIL the amount is 2% of the order price or 10 lakh whichever is lower. EMD should be in the form of demand draft and must accompany the quotation. For unsuccessful tenderer EMD shall be refunded immediately after cancellation of the tender with the approval of the HOD of the MM department. EMD shall be forfeited if any tenderer withdraw their offer before finalisation of the tender or fails to submit order acceptance within 15 days from the date of the order. For procurement value less than Rs 1 lakh no earnest money deposit/ security deposit will be required.

Accounting entry for EMDBank A/c debit To Supplier/Bidder

At the time of refund of EMDBidder A/c debit To Bank

At the time Of EMD refund if foreign exchange rate increaseBidder A/c debitProfit & Loss A/c debit To Bank A/c

Step 5)Security deposit- Security money shall be in the form of pay Order/bank guarantee/ bankers cheque/demand draft drawn in favour of CIL Payable at Kolkata. Deposit security money should be 10% of the value of the contract. Has to be submitted within 15 days Refund has to be made within 30 days after satisfactory execution of the contract. Security money may be converted into Performance bank guarantee. Step 6) Performance Bank Guarantee- the Performance Bank Guarantee clause must be stipulated in all the contracts, procurement of Capital equipment. Performance Bank Guarantee clause should also be stipulated for supply of other items viz wire ropes, belting, tyres etc. PBG- 10% of the value of the contract. It can be submitted in the form of bank draft/bank guarantee executed by scheduled bank It is valid upto 12 months from the date of receipts, acceptance, and installation of materials at site. Refund has to be made if no claim is pending. To arrive at the value of the performance bank guarantee the order value should be calculated as per the following guidelines:For Domestic order- the order value will be arrived at by adding all the taxes, duties applicable such as Excise duty, Sales tax etc. to the FOR destination price of the material as applicable on the date of opening of the price bid.For Foreign order- the order value will be arrived at by adding estimated amount of freight, insurance, port charges, and custom duty etc. as on the date of opening of the price bid to the FOB of the price the materials.

Accounting entry for PBGBank A/c debit To supplier

CENVAT CREDIT

Tendering Process COAL INDIA LIMITED (Holding company)

Take requirements of materials need for coal production From Subsidiary Companies

Notice Inviting Tender

Receive Bid from Bidders along with Earning Money Deposit

Technical Bid

Refunding of Earnest Money Deposit to the Unsuccessful Bidders

Price Bid Choose Lower 1

Purchase Order

For Foreign SuppliersFor Indigenous SuppliersSECURITY DEPOSIT

Receive Performance bank GuaranteeReceive Performance Bank Guarantee

Issue Letter Of CreditDelivery of Materials

Payment