CIL inflated productivity, says draft CAG report
Calculated productivity by including production outsourced to private companies
The world’s largest coal producer, Coal India Ltd (CIL), overstated its manpower productivity for five years between April 2006 and March 2011, according to the leaked draft report of the Comptroller and Auditor General of India (CAG) on the allocation of blocks and augmentation of production by the company. This assumes importance as over half of the commercial energy supply of India, Asia’s third largest economy, hinges on CIL’s productivity.
The draft report notes that CIL calculates Output Per Man-shift (OMS), a measure of worker productivity, of departmental workers by including the contribution through outsourcing of production. This allowed the company to overstate productivity. “While the OMS (departmental plus outsourcing) in respect of opencast mines ranged 8-10 tonnes, the overall OMS ranged 3.48-4.73 tonnes. Thus, the methodology adopted by CIL for calculating OMS inflated the productivity of departmental personnel,” says the report. A Coal India spokesperson declined to comment on the matter, saying he was not aware of the content of the draft report and would have to consult the department concerned. CIL chairman Zohra Chatterji was also not available for comments. An email sent to CIL, requesting comments, remained unanswered.
The draft report was quoted in a The Times of India news report on March 22 as having found undue benefits through the allotment of 155 coal blocks to various companies. The CAG had downplayed the draft report, calling it “exceedingly misleading” in a letter to Prime Minister Manmohan Singh the same day. The newspaper had uploaded the draft report on its website on March 24.
The Bombay Stock Exchange (BSE)-listed Coal India is the country’s largest listed employer. The company had 3,83,347 employees on its rolls, including 17,713 executives, as on March 31, 2011. The draft report notes that CIL’s OMS increased from 3.54 tonnes in 2006-07 to 4.73 tonnes in 2010-11 as against 5.54 tonnes desired by the Planning Commission in the terminal year of the 11th Plan period ended March 2012.
CIL calculates OMS by dividing total production by the total number of man-shifts. This methodology, however, has not been revisited for many years. Data show that over the past decade, CIL’s overall OMS almost doubled from 2.45 tonnes in 2001-02 to 4.75 tonnes in 2010-11. OMS in underground mines increased from 0.64 tonne to 0.77 tonne while that in opencast mines increased from 6.08 tonnes to 10.06 tonnes during the same period.
Around 40 per cent of the company’s input cost of around Rs 1,100 per tonne was on account of outsourced activities, a former Coal India chairman had told Business Standard in a recent interview. CIL typically outsources three kinds of work: coal mining, overburden removal and local transport in and around a coalfield.
Another former Coal India chairman, who did not wish to be named, acknowledged the company included contribution from outsourced activities while reporting final OMS figures. He, however, added it might not be proper to call the resultant increase in OMS as “inflated productivity”. “The difference in departmental OMS and outsourcing OMS can be explained by the fact that almost all outsourcing happens in opencast operations, which are generally more productive,” he said.
Coal India produces 431 million tonnes of coal annually from 471 mines across eight states. That includes 163 opencast mines, which contribute over 90 per cent of output, while the rest comes from 273 underground and 35 mixed mines. The former chairman also clarified that even outsourcing had a component of departmental activity. “Outsourcing is a managerial activity. Also, blasting and drilling is done by departmental personnel even in an outsourced work. If higher productivity is desired along with low costs, outsourcing becomes a must. Calling it inflation of OMS is a matter of perception,” he said.