The past month has been quite a significant one for Coal India Ltd. For the first time since its inception nearly four decades ago, the monopoly has rolled back its decision to revise prices , that too within a month, on January 31.
The ‘correction' apparently has taken away a large part of the over Rs 6,000 crore in notional profit growth (arising out of the now-abandoned price list issued on December 31) it had estimated for in 2012-13 at the current level of production.
Largely credited to valid criticism from consumer groups, the entire episode took place on the back of a sharp rise in wages for the company's 3.55 lakh workers for a five-year period beginning July 2011.
In fact, the decision to roll back prices was taken within hours of arriving at a consensus with four out of five registered unions about a minimum 25 per cent hike in wages, burdening CIL with an additional annual liability of nearly Rs 5,500 crore. One union, demanding an even sharper hike, stayed away from the wage pact.
But that is not the end of the story. CIL's production has remained stagnant at 431 million tonne since 2009-10. During this fiscal, the company produced 335 mt of coal till January 30. And, even if it repeats last year's performance for February and March, CIL may still end this fiscal with a drop in production.
And, that was exactly the logic forwarded by the CIL management in September 2011 — approximately a month after it initiated the proceedings for wage negotiations in August — when it put its foot down against the workers' demand for an over 50 per cent hike in festive bonus as against CIL's offer for a 13 per cent increase.
Former chairman Mr N C Jha described the demand from trade unions as “unreasonable and beyond the capacity of the company, especially when the production is lagging behind”. The company was subsequently forced to grant a 40 per cent hike in bonus, in the face of a strike call. Relatively speaking, the wage agreement went ahead smoothly and was practically concluded within two months since December when trade unions placed a firm demand. CIL agreed to a minimum 25 per cent hike in almost no time, without any change in the ground realities with regard to production.
The contradictions were equally prevalent in CIL's logic over revenue gain through price revision. Soon after switching over to a GCV-based pricing in December, Mr Jha said that there will be minimal revenue impact on the company. Within two months, the same management has admitted to a 12.5 per cent revenue gain and cut back prices.
Perhaps it's only a CIL management — with its nearly $10 billion-cash in reserve earning fixed deposit interests in the absence of much investment in mining — and the the Union Government, which owns this monopoly producer and is reportedly expecting a handsome interim dividend next week, that can explain such flip-flops.