Coal India reported 38 per cent drop in net profit to ₹2,716 crore in the March quarter. The consolidated net for 2016-17 fiscal declined by 35 per cent to ₹9,266 crore.
The sharp decline is partly attributed to rise in employee cost due to provisioning for the forthcoming wage settlement for workers and officers which will be effective from last fiscal.
During the year, the company provided for ₹2,101 crore towards incremental staff expenses and ₹95 crore towards salaries of executives. Nearly 60 per cent of the provisioning of over ₹1,200 crore was made in the March quarter.
The provisioning, however, merely added to the woes of the miner which is suffering from low demand from the country’s thermal power sector which is affected by overcapacity.
In 2016-17, CIL produced 15 million tonnes (3 per cent growth) more coal than the previous year. Approximately 11 million tonnes or more than 70 per cent was dumped at the pit head because the off-take increased by only 1.7 per cent.
Since CIL books pithead stock as deemed sales, the pithead stock has artificially boosted the miner’s revenues. But, such high pithead stock (equivalent to approximately two months’ production) also came in the way of increasing production.
With RE share rising in total generation and, power plants maintaining lower inventories (13 days as in April), contrary to the CEA (Central Electricity Authority) prescription for 21 days, things haven’t improved in the first quarter.
In the past, CIL enjoyed the support of huge interest earnings from its $10-billion cash pile to resist operational declines.
Increasing demand from the government over the last couple of years to part with the cash, saw the cash pile exhausting.
In 2016-17, the company board declared two interim dividends totalling ₹19.90 per equity share of ₹10 face value. At its meeting on May 29, the board decided against declaring any further dividend.