Why I’m Studying Coal India
I’m exploring companies operating in monopolistic or oligopolistic environments, either by market design or structural setup. Previously, I analyzed CDSL vs NSDL, and CAMS vs KFintech, and now Coal India fits into this learning journey.
I continuously sharpening my understanding of systemic business dynamics—how regulation, structure, and execution shape competitive outcomes. My CTO encourages me to think in system thinking and frameworks, and these structured case studies help deepen that discipline. Though not directly related to my current role, this practice improves my ability to analyze complex systems, make strategic connections, and articulate insights—skills I apply daily in my work.
For example LIC (Life Insurance Corporation of India). Once a monopoly, LIC’s dominance eroded significantly after the sector privatized in 2000. Its share of new business premiums fell from ~68% in 2022 to ~59% in 2023, now hovering around 64% in FY24, with private insurers steadily taking away the market share. This example clearly identifies how policy shifts and competition can dramatically alter monopoly dynamics. Coal India has structural similarities, but no clear reform roadmap—making this analysis timely and critical.
1. Introduction – The Rise of Coal India Ltd (CIL)
Coal India Ltd (CIL), established in November 1975, was formed as a state-owned enterprise through the nationalization and consolidation of India’s coal mines. It emerged as a critical backbone for India’s energy sector, producing over 80% of the country’s domestic coal (Source: here). Listed on the Indian stock exchanges in 2010, it executed the country’s largest IPO at the time, raising ₹15,000 crore.
2. Global Coal Production – Where India Stands
| Rank | Country | 2023 Production (Mt) | % of World Total |
|---|---|---|---|
| 1 | China | ~4,400 | ~50% |
| 2 | India | ~893 | ~10% |
| 3 | Indonesia | ~690 | ~8% |
| 4 | USA | ~495 | ~6% |
| 5 | Australia | ~450 | ~5% |
3. Top Global Coal Mining Companies (by Production)
| Rank | Company | Country | 2023 Production (Mt) | Type |
|---|---|---|---|---|
| 1 | Coal India Ltd (CIL) | India | ~773 | Mostly thermal |
| 2 | Shenhua Energy | China | ~470 | Thermal & coking |
| 3 | China Coal Energy | China | ~230 | Thermal |
| 4 | Glencore | Australia | ~110 | Export-grade thermal |
| 5 | Peabody Energy | USA | ~120 | Thermal & coking |
4. Cost of Coal Extraction – India vs Global Peers
| Region / Company | Avg. Extraction Cost (₹/tonne) | Includes Logistics? | Notes |
|---|---|---|---|
| Coal India (CIL) | ₹1,200–1,800 | ❌ (mine only) | One of the lowest globally |
| Indonesia | ₹1,800–2,200 | ❌ | Shallow seams, cheap labor |
| Australia | ₹3,000–4,500 | ❌ | High-quality, export-ready coal |
| USA | ₹3,500–5,000 | ❌ | Depth, regulation, and labor costs |
| China | ₹2,500–3,500 | ❌ | Mixed efficiency, domestic subsidies |
5. FOB vs Landed Cost – What Matters for India?
- FOB (Free on Board): Price at origin port (excludes shipping and taxes)
- CIF: Includes shipping, insurance
- Landed Cost in India: FOB + freight + port + customs + GST + logistics
Example:
Indonesian coal (GCV 4200 kcal/kg) at $40 FOB ≈ ₹7,800–₹8,500 landed in India
6. Types of Coal and Price Impact
| Type | Carbon % | GCV (kcal/kg) | Primary Use | Price Level |
|---|---|---|---|---|
| Anthracite | 86–97% | 7500–8500 | Industrial furnaces | $$$$ $Very High |
| Coking Coal | 70–86% | 6500–7500 | Steelmaking | $$$$ High |
| Thermal Coal | 60–86% | 5500–6500 | Power generation | $$$ Medium |
| Sub-bituminous | 45–70% | 4500–6000 | Power, cement | $$ Lower |
| Lignite | 25–45% | 2500–4000 | Rural/local use | $ Very Low |
7. India’s Coal Grade System (GCV-Based)
| Grade | GCV (kcal/kg) | Sector Use | Price Range (₹/tonne) |
|---|---|---|---|
| G1 | >7000 | Industry/metallurgy | ₹10,000–13,000 |
| G2–G4 | 6100–7000 | Power & steel | ₹8,000–11,000 |
| G5–G10 | 4300–6100 | Power, cement | ₹5,000–9,000 |
| G11–G13 | 3400–4300 | Bricks, captive use | ₹3,500–6,500 |
| G14–G17 | 2200–3400 | Rural/low-end | ₹1,800–4,000 |
8. Revenue Split – Coal India Ltd
| Segment | % Revenue (FY2024 est.) |
|---|---|
| Power Utilities | ~75% |
| Captive & Industrial | ~10% |
| Steel/Sponge Iron | ~6–8% |
| Cement | ~1% |
| Misc. Industrial | ~6–10% |
| Mining Services | ~7% |
| Other Income | ~2% |
9. Global Cost Structure Comparison
| Cost Component | Coal India | BHP (Australia) | Shenhua (China) |
|---|---|---|---|
| Employee Expenses | 40–45% | 15–18% | 20–25% |
| Mining Operations | 25–30% | 40–50% | 35–40% |
| Logistics & Transport | 10–15% | ~10% | ~10% |
| ESG & Reclamation | 3–5% | 8–10% | 6–8% |
| Taxes & Royalties | 10–12% | 5–7% | 4–6% |
Insight: Coal India’s elevated employee and legacy cost structure limits its ability to capitalize on low base-cost advantages fully.
10. DCF Valuation (No Terminal Value)
Key Assumptions:
- FCF₀ = ₹16,000 Cr
- Projection = 20 years
- No terminal value
DCF Table
| Growth (g) | Discount (r) | DCF Value (₹ Crore) |
|---|---|---|
| 0% | 4% | ₹2,60,375 |
| 0% | 5% | ₹1,99,392 |
| 0% | 6% | ₹1,67,854 |
| 0% | 7% | ₹1,49,504 |
| 2% | 5% | ₹2,38,010 |
| 3% | 5% | ₹2,63,040 |
| 4% | 5% | ₹2,91,890 |
| 5% | 5% | ₹3,20,000 |
| 6% | 7% | ₹1,99,445 |
| 7% | 8% | ₹1,82,570 |
11. Investor Insight – Two Opposing Views
Bull Case: Efficiency Unlocks Value
“If Coal India adopts global standards in productivity and digitization, profit margins and FCF could soar.”
- New revenue avenues: coal-to-chemicals, logistics monetization
- Government backing offers a buffer during transitions
Bear Case: Privatization Could Undermine Market Position
“Without definitive efficiency roadmaps, Coal India risks being outpaced by more nimble private operators.”
- Privatization efforts may break its monopoly
- Legacy cost structure vs agile new competitors
12. Conclusion – CIL at a Crossroads
Coal India is central to India’s energy security, yet it is trapped between:
- Structural challenges
- Global decarbonization trends
- Rising privatization and competition
Its future hinges on the following:
- Automation and digitization
- ESG and compliance reinvention
- Strategic logistics investments
- Precise policy clarity and reform execution