The Hindu Business Line : Coal India plans to set up gratuity funds portfolio

The Indian coal major has already roped in Life Insurance Corporation for managing about Rs 1,500 crore of such funds through trusts on behalf of three of its subsidiaries and the holding company.

The company is now planning to rope in other financial institutions for managing funds worth an additional Rs 1,000 crore on behalf of four other subsidiaries.

Apart from ensuring secured payment of gratuity to its 4.25 lakh employees, the initiative would also enable CIL and its subsidiaries to avail themselves of tax benefits. This apart the fund will also accrue interests to compensate part of the regular outgo.

“CIL, Western Coalfields, Mahanadi Coalfields and South Eastern Coalfields have already provided for approximately Rs 1,500 crore towards creating gratuity funds with LIC.

“To create a diversified portfolio, we are now planning to rope in other banks and financial institutions for creation of such funds for other subsidiaries,” the CIL Chairman, Mr Partha S Bhattacharyya, told newspersons here today.

According to him, Northern Coalfields and Central Coalfields will provide the necessary amounts in for creation of such funds in 2008-09.

While the financial condition of two ailing subsidiaries Bharat Coking Coal Ltd and Eastern Coalfields are still not suitable for making such provisions immediately, Mr. Bhattacharyya is hopeful to take up the issue in due course.

Gratuity apart, Coal India and its subsidiaries are also providing for the liabilities on account of leave encashments, leave travel allowance, life cover scheme, group personal insurance scheme and other employee benefit schemes.

Net drops

CIL has registered eight per cent drop in net profit from Rs 5,709 crore in 2006-07 to Rs 5,343 crore in 2007-08. This is against a 10 per cent increase in turnover to Rs 38,617 crore during the last fiscal. Profit before tax increased marginally from Rs 8,622 crore to Rs 8,738 crore.

According to Mr. Bhattacharyya, while net profit was impacted by Rs 500 crore higher provision for taxation, the profit before tax was impacted by the Rs 1,561 crore provisioning towards 10 per cent increase in wages and DA as per the interim recommendation of the ongoing coal wage agreement negotiations.

Interestingly, the CIL has received about 64 per cent higher dividend to Rs 3,504 crore from its subsidiaries. Overall the company has received a higher dividend of Rs 1,378 crore in 2007-08 compared to the previous year. The dividend payment to the Union government has increased by about Rs 205 crore to Rs 1,705 crore.

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