Coal India net down 18% on NTPC write-offs

Blames NTPC for violation of supply pact

Coal India Ltd (CIL), India’s largest coal miner, posted an 18 per cent drop in net profit for the quarter ended March, owing to the write-off of Rs 876 crore as settlement for a quality dispute with its largest customer, NTPC Ltd. On a consolidated basis, the company’s March-quarter profit stood at Rs 4,434 crore, compared with Rs 5,414 crore during the corresponding period last year.

“Pending the final settlement of all the subsidiaries of CIL with NTPC, write-off of Rs 876 crore for deemed lowering of grade has been considered in the accounts,” CIL said.

With the introduction of the gross calorific value (GCV) system of grading coal in January 2012, supply of coal to NTPC was billed at the declared GCV. However, from October 2012, NTPC released payments based on the GCV determined unilaterally, at the receiving end. CIL said the withholding of payments by NTPC was against the provisions of the fuel supply agreement (FSA). The FSA provides for determination of GCV at the loading end, by joint collection, preparation, testing and analysis of the coal sample supplied.

With the dispute escalating into a controversy, the government had advised extrapolation of the result of the third-party sampling between October and December 2013 to the period between October 2012 and September 2013.

For the March quarter, CIL’s total income remained flat at Rs 19,997 crore, in line with the flat production of 143 million tonnes (mt) and offtake of 129 mt. Total expenses rose 8.5 per cent to Rs 15,474 crore, even as employee-benefit expenses (which account for less than half the total spending) dropped 4.5 per cent to Rs 7,002 crore.

For FY14, CIL recorded a 13 per cent decline in net profit at Rs 15,112 crore, against Rs 17,356 crore in FY13. Total income grew 0.7 per cent to Rs 68,810 crore. The company’s annual expenditure rose 5.4 per cent  from Rs 52,032 crore in FY13 to Rs 54,843 crore.

On Thursday, the CIL stock closed at Rs 373.6 on BSE, down 1.7 per cent. The stock has gained eight per cent since May 16, the day the results of the Lok Sabha elections were announced, on speculation the new government might end CIL’s monopoly on coal mining in India and spin-off its subsidiaries into independent mining companies. The company operates through eight domestic and one foreign subsidiary.