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Wage bill burns up Coal India profits

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Price hike vital to maintain margins, says Chairman.

Mr Partha S Bhattacharyya, Chairman, Coal India Ltd, addressing the media in Kolkata on Thursday.
Mr Partha S Bhattacharyya, Chairman, Coal India Ltd, addressing the media in Kolkata on Thursday.

Snapshot

The company’s wage bill has increased by approximately Rs 4,000 crore on account of wage revision

The company is now looking forward to acquire assets in Indonesia

Our Bureau

Kolkata, May 21 A Rs 7,856-crore impact on account of wage revision and the related incremental actuarial liability have led Coal India to end 2008-09 with a marginal Rs 96 crore net profit on a turnover of Rs 45,682 crore. The company posted a net profit of Rs 5,243 crore in 2007-08.

According to the CIL Chairman, Mr Partha S. Bhattacharyya, the company’s wage bill has increased by approximately Rs 4,000 crore on account of wage revision of workers and officers and unless coal prices are revised CIL’s margins will be severely dented beginning 2009-10.

“A total of 33 out of 78 projects undertaken by the company during this Plan period have become unviable due to the changed scenario. The projects were expected to add 28.37 million tonne to the production. We are yet to take stock of the projects in the pipeline. According to a rough estimate, we need an additional revenue generation of Rs 5,000 crore to make the projects viable and post a healthy net profit,” Mr Bhattacharyya said.

Though CIL officials are tight-lipped about the details of its proposal for price escalation, sources suggest that the company may have proposed 10-12 per cent hike in coal prices to compensate the cost push on account of higher wages.

Mr Bhattacharyya, however, said that CIL’s ailing subsidiaries, Bharat Coking Coal and Eastern Coalfields (ECL), would not survive the cost push without a proportionate escalation in price of coal. ECL has already decided to close a number of loss-making mines and re-deploy the workforce at other operations.

Overseas buys

On overseas acquisitions, the CIL Chairman said that following the company’s acquisition of two blocks in Mozambique, Coal India was now looking forward to acquire assets in Indonesia.

The idea is to cater to Western India with the coal produced in Mozambique and bring Indonesian coal for the customers in Eastern India.

CIL produced 404 million tonne of coal from its Indian assets the last fiscal, registering 6.4 per cent growth in production. The company is now targeting to reach the 500-million-tonne production mark in the next three years.

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CIL’s new wage bill likely to push up price of coal
Coal India plans to set up gratuity funds portfolio

(This article was published in the Business Line print edition dated May 22, 2009)
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