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Coal India's profits may fall 9% post wage negotiation

The company is estimated to have conceded to a Rs 5,000 crore wage hike

Avishek Rakshit  |  Kolkata 

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Coal India's expenses are likely to shoot up by Rs. 5,500-6,000 crore every year, as the company has conceded to a 20 per cent wage hike apart from other benefits. This in turn, is likely to pull down the company's projected profitability by a minimum of nine per cent.

Projecting a boost in coal demand, sector analysts had projected a Rs 11,000-13,000 net profit for for the entire year, however, post the wage revision, the same has been downgraded to range between Rs. 9,000-10,000 crore.

Trade union sources, who participated in the four-day negotiation process in New Delhi, opined that although the wage hike is to the tune of 20 per cent, other benefits like hiking the contribution towards pension by 5.84 per cent and creating a post-retirement medical benefit corpus fund of Rs 1,700 crore have been agreed upon.

"As per estimates, would have provisioned Rs 4,500 crore for the against the union's last demand of Rs 5,600 crore. Since the provisioning was done, and the difference is to the extent of Rs. 1,000 crore, I think the company will be able to post profitability although it would decline considerably," Rupesh Sankhe, research analyst with Reliance Securities told Business Standard.

In the last wage revision five years ago, the company is estimated to have conceded to a Rs 5,000 crore wage hike.

officials previously maintained that although the company's profitability was under stress, coal price realisations from fuel supply agreements as well as e-auction are expected to go up in the second half of the current fiscal year on account of improved demand. In turn, it will help the company maintain its margins as well as further the topline.

In the 10th National Coal Wage Agreement, the company's senior management had vied to contain the wage hike between 10-15 per cent citing stress on profitability.

D D Ramanandan, president of All India Coal Workers' Federation, the third largest trade union in the company, opined: "It is just a jugglery of words. After the increase in expenses, will still be able to post a Rs. 9,000 crore net profit."

The salary hike will be applicable from June 2016 onwards and will be paying arrears to clear the pending dues.

In the last fiscal year, the company's consolidated employee benefit expenses stood at Rs 33,514.29 crore, up by 11 per cent as compared to the 2015-16 fiscal year. While the company paid Rs 25,995.43 crore as salary and bonus to the workers, contribution to provident fund and other funds stood at Rs 2,666.44 crore and another Rs 1,029.68 crore was spent on gratuity.

During 2016-17, Coal India's consolidated pre-tax profit of Rs 14,433.71 crore and a net profit Rs 9,265.98 crore.

The wage agreement is valid for till July, 2021 post which, another round of will take place.

First Published: Tue, August 29 2017. 00:32 IST
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