• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Badal Sanyal

KOLKATA, Feb. 8

THE management of Eastern Coalfields Ltd (ECL) has prepared a plan for survival and eventual revival of the ailing ECL, which is currently under the purview of the Board for Industrial and Financial Reconstruction (BIFR) as a sick company.

The plan envisages reduction of manpower by 23,000 from the current level of 1,27,000 over the next five years with the support of Rs 200 crore per annum from the Union Government for a voluntary retirement scheme for three years.

Consequent to reduction of manpower, a continuous process of redeploying manpower and machines to viable/potentially viable units by phasing out unviable operations shall be implemented. It is estimated that a total of 23 highly losing mines out of its total 108 operating mines shall be closed over the next three years (till 2004-05) and men and machines rendered surplus redeployed to the extent possible.

The production loss due to closure of mines estimated at 1.32 million tonnes (mt) shall be more than compensated for by the rise in production by 1.87 mt from the other mines where men and machines are redeployed.

Opportunities currently available for increasing coal production by working opencast (OC) patch deposits through hired heavy earth moving equipment (HEMM) have been identified. An increase in coal production from 28.02 mt in 2001-02 to 35 mt in 2006-07 is envisaged from coal transport outsourcing in Rajmahal mine (1.5 mt) and deployment of hired HEMM in Chupervita OC (1 mt), Hurra-C (1 mt) and other small opencast patches (1.5 mt). This will enable ECL to enhance coal supplies to National Thermal Power Corporation (NTPC) by 3.5 m.t. till 2006-07.

The required financial support for the implementation of the survival plan has been extended by Coal India Ltd (CIL) and the Union Government for meeting liabilities for payment of arrear wages and debt servicing. The support for payment of wage arrears may be extended as interest-free loan repayable by 2005-06, provided all components of the plan are implemented. Moreover, required guarantees and/or letters of comfort will be provided by CIL/GoI to enable ECL enter into gain/loss-sharing arrangements with deferred payment facilities for augmenting production capacity.

Further relief by way of reduction of cess by the West Bengal Government to the level of royalty in other States has been factored in. This is expected to yield a net revenue increase of Rs 100 crore per annum by internalising the effect of cess reduction in the form of equitable price increase, without affecting the pithead price to the consumer.

The resultant positive impact of the proposed plan will be felt from the year 2003-04 onwards when the ECL management expects to achieve a cash surplus as against the company's resource gap of Rs 450.64 crore in the current year and Rs103.76 crore in 2002-03.

In other words, the liquidity position of ECL shall enable it to meet the third annual instalment of discharge of arrears in 2003-04 and repay the amount it borrows from CIL for first and second instalment by 2005-06 provided such loans are made available on interest-free terms.

ECL sources, however, point out that it is necessary to take immediate measures for making the company's net worth positive by financial restructuring so that the company comes out of the purview of BIFR and is in a position to implement the aforesaid survival/revival plan without any hindrance.

ECL was first referred to BIFR in 1997 under section 15 (1) of the Sick Industries Companies Act when its accumulated losses of Rs 1,299.52 crore had exceeded its net worth of Rs1,186.72 crore. The company came out of BIFR in 1998 as a sequel to financial restructuring. At that time, loan amounting to Rs 1,179.45 crore was converted into equity to improve the net worth to the level of Rs 2,227.77 crore. With the accumulated losses once again exceeding the net worth in the year ended March1999, the company was referred to BIFR which declared it a "sick company'' in February 2001.

Send this article to Friends by E-Mail

Stories in this Section
Breakdown in Indian Rayon unit

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line