Coal India faces pay hike stress amid tepid demand

After last revision in 2011, company's annual salary bill was raised by Rs 5,000 cr

Amidst the ongoing tepid demands for its coal which resulted in Coal India posting its worst result ever, the company is faced with a new challenge which may potentially stress its margins further by raising its expenses — workers’ and officers’ salaries needs to be revised this year.

While senior company officials are working out the means to arrange the extra income to fund the pay hike, trade unions have demanded a 50 per cent increase. Senior officials said given the demand situation, the company was not in a position to yield to union and would try to negotiate a fair hike considering the market conditions.

“Demand is already stressed and we are looking at means to arrange the necessary revenue to fund the hike,” a senior Coal India executive said, adding that collective bargaining would decide the outcome.

Sources in the company hinted that the pay hike this year might not be even 25 per cent — the rate of increase which took place five years ago. Following the last salary revision in 2011, Coal India’s annual salary bill was raised by Rs 5,000 crore.

“Things are different now. Previously, the demand for coal exceeded supply and now supply is exceeding demand,” the executive, quoted earlier, said.

As many as 265,876 workmen, 18,213 executives and 30,817 supervisors of the company await the hike.

Officials are worried as the average price realisation from coal sales has taken a hit by six per cent, at Rs 1,344 a tonne. Even e-auction prices, compared to the previous year, are down by 27 per cent which has led to a Rs 1,000-crore decline in income.

According to an official, Coal India will be offering more coal under the auction scheme — as prices in the auctions are usually 20 per cent higher than the notified rates — to help bring in more revenue to fund the pay hike. The company will also emphasise on offering more washed coal to consumers. Despite a decline in Coal India’s average price this year, the price of washed coking coal rose by 23.5 per cent while the washed non-coking coal variant’s prices soared by more than 12 per cent.

“E-auction and washed coal is a potential revenue earner we can look upon these days,” a Coal India official said.

Besides, after the company decided to hike coking coal prices by 20 per cent expecting a total Rs 792 crore extra inflow to the topline for the remaining period of the current fiscal year and a projected Rs 3,208 crore extra income during 2017-18, the company is also looking at controlling expenses. “However, unless the demand for coal picks up, things will be very tough,” one of the officials said.

According to analysts, the demand for power will not accelerate unless industrial activity picks pace in India, as there is a direct correlation of the state discoms’ industrial demand with the Index of Industrial Production numbers.

“As a result of lower power demand, coal uptake from Coal India by the power companies has been lower than earlier expected. This situation might prevail for the coming two quarters,” Debasish Mishra, a partner in Deloitte Touche Tohmatsu India LLP, said.