Coal India net profit declines nearly 60% in six years despite sales jump

Despite seeing a surge in sales, owing to a recent hike in coal prices, and customers bearing the brunt of additional charges, Coal India saw its profit decline by nearly 60 per cent in the last six fiscal years (FYs).

In 2012-13, its net profit stood at Rs 173.56 billion while gross sales was Rs 882.81 billion. However, in 2017-18, despite its gross sales surging to Rs 1271.62 billion, net profit fell to Rs 70.20 billion. This is despite coal sales increasing by around seven per cent to touch 581 million tonne (mt) and the company imposing additional loading & transportation charges as well as evacuation facility charges on buyers to make up partly for the rising costs.

Company officials attribute this dip in profitability in recent times to the impact of pay revision for non-executive employees, provisions for the pay revision of executive employees, retrospectively, since January 2017 and an actuarial impact of Rs 73.84 billion due to increase in the ceiling of gratuity payments from Rs 1 million to Rs 2 million. 

“In terms of gross profit, there has actually been an increase of 31.35 per cent in the last fiscal year. However, higher provisioning had impacted the net profitability of the company,” a senior Coal India executive said. In the last six years, according to the norms, Coal India had to revise the wages for workers twice – once in 2012, when a 25 per cent hike was agreed upon and then in 2017 when an impending hike resulted in Rs 56.67 billion of additional outflow as wages shot up by another 20 per cent. 

Salaries of executives were also revised and this led to an estimated outflow of Rs 10 billion. “Provisioning is a necessity to accommodate such hikes which gets reflected in the profitability,” the executive said.

According to the company, a provision of Rs 21.01 billion was made in 2016-17 for this wage revision and further during 2017-18, an amount of Rs 28.50 billion was also provided pending final settlement, which included an amount of Rs 8.93 billion towards shortfall of provision for the 2016-17 fiscal year.

Rupesh Sankhe, research analyst at Reliance Securities is of the view that apart from wage revision, provisioning for it and gratuity revision and sharp decline in e-auction prices have led to a fall in profits.