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| Coal India may up prices to offset wage pressure |
| BS Reporter / Kolkata May 22, 2009, 00:33 IST |
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Public sector coal behemoth Coal India Limited (CIL) is eyeing a price increase to offset the Rs 4,000 crore annual incremental impact of increased wages under the National Coal Wage Agreement VIII and also remain profitable.
The impact of the NCWA VIII which revised the salaries of over 433,000 CIL employees is likely to erode CIL’s operating margin level as well in 2009-10. The only way the Navaratna company can avoid such an erosion of its operating margin is through a price rise.
Partha S Bhattacharyya, Chairman, CIL, told reporters in Kolkata: “The company would require an additional revenue generation of Rs 5,000 crore, to implement projects, keep the coal firms profitable and also keep the uptrend in government payouts for which there has to be a price rise.”
However, Bhattarcharya did not mention the quantum of price rise CIL was looking for but hinted that the government was convinced of the need for a price increase. Coupled with the price increase, CIL is also looking at a higher production. CIL is targetting a production of 435 million tonnes (mt) in 2009-2010 as against 403.73 mt achieved in 2008-09.
“The target of 405 mt for 2008-09 was based on assumptions in terms of project viability and early clearances from the forest department. But, certain projects did not contribute on expected lines,” said Bhattarcharyya.
“We are moving on a higher growth trajectory with annual coal production growth rate at 6.4 per cent. We hope to touch 500 MT by the end of 2011-12 with a growth rate of 10 per cent. We are not ruling out a price increase to keep the uptrend in dividend pay out to the government and to implement future projects. Additional revenue generation is a must which can only happen through a price rise,” he added.
However, only an increased production would not help offset the impact of a wage increase because even for increased production, there has to be new projects.
Of the 78 projects identified in the present fiscal requiring an investment of Rs 4,400 crore for producing 28.37 mt of additional coal, 33 projects have been declared unviable because of the lack of investments, thus calling for additional revenue generation through a price increase.
During the 11th Plan (2007-2012) CIL has planned 134 projects for an approximate investment of Rs 26,000 crore with an annual production capacity of 309 mt.
Of this, 65 projects entailing investments of Rs 8,594 crore stand approved with an annual capacity of 155 mt, balance projects are at their different stages of approval, said N C Jha, director, technical, CIL. After taking into account the impact of NCWA VIII, with effect from July 1, 2006, profit before tax (PBT) for year-ended March 31, 2009, has been Rs 4,238.58 crore (provisional) against Rs 8,738.46 crore in 2007-08. PBT for 2008-09 fiscal without the impact of increased wages would have been Rs 12,103.31 crore otherwise.
“PAT will go up during fiscal 2009-10. We expect a PBT of little more than Rs 7,000 crore in FY 2009-10 since we would have to factor in 12 months wake hike unlike last fiscal,”said Bhattarcharyya. PAT stands at approximately Rs 96.58 crore in 2008-09 as against a PAT of 5,233.46 crore in FY 2007-08.
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