Govt may hike cess levied on coal production to boost pension corpus

Move to raise cess from Rs 10/tonne to Rs 25 aims to address pension fund shortfall

In a move to secure the post-retirement benefits of more than half a million pensioners of public-sector coal mines, the Centre is planning to raise the cess levied on coal production — the cess funds the pension corpus — from Rs 10 per tonne to Rs 25 per tonne. 

Senior government officials who attended the latest Board of Trustees (BoT) meeting of the Coal Mines Provident Fund Organisation (CMPFO) in Hyderabad on January 17 told Business Standard the matter was deliberated upon at length. 

“The idea of increasing the cess to support the pension pool was largely agreed upon. It was discussed among all stakeholders and the response was positive. Further decisions will be taken according to the process,” the official said.  

Another official added a final decision had not been taken because it would require approval from Coal India Ltd (CIL) and the Union government.  

The pension corpus of CIL stood at around Rs 1.35 trillion in FY24. Worker organisations have been demanding an increase in the cess on coal production to replenish the pension pool because the pension beneficiaries are outweighing the contributors. 

According to the September 2024 data of the CMPFO, there are 90,000 contract workers on its membership list and 

the number of pension beneficiaries stands at 625,000. 

“The gap between contributory members and pensioners is increasing and CIL has acknowledged it. Worker strength is not rising so cess is a strong option for the company,” said the official cited above.  

The Coal Mines Pension Scheme (CMPS), 1998, which covers pensioners of CIL, Singareni Collieries (SCC) and some other coal firms, is administered by the CMPFO, which comes under the coal ministry.  

In March 2021, a report by the Public  Accounts Committee, chaired by Congress leader Adhir Ranjan Chowdhury, had said the financial mismanagement of the pension scheme had depleted the corpus amount. 

“The committee notes that the Ministry of Coal has been apparently found severely wanting in discharging its nodal administrative role, which resulted in financial mis-management by CMPFO,” the report noted. 

In September last year, P M Prasad, chairman and managing director, CIL, in an interview to Business Standard had indicated reducing headcount as a means of revenue maximisation. This, in turn, is a result of the rise in contractual mining by the company rather than relying on internal resources.  

Prasad had said the company was pursuing automation and digitisation of the mining processes and fuel-efficient machines, which bring down the operational costs.  

“There is also a net fall in our headcount annually almost to the tune of 10,000-12,000. We are going in for mine developer and operator (MDO) mode and contractual mining. Contractual production cost is less than that of departmental cost and this helps in keeping the costs low,” Prasad had said. 

D D Ramachander Rao, president, Singareni Retired Employees Welfare Association, said it was high time that Union government took a call on this issue because nearly two-thirds of pensioners were receiving a paltry amount of Rs 5,000 as pension. 

“Most of these people are old and require frequent medical assistance. They have not seen their pensions rise in more than two decades. Once the government takes a call on this matter, it will be a great relief,” he said. 

Funding woes  

 

*  Coal Mines Pension Scheme covers over 625,000 pensioners, with beneficiaries outweighing active contributors (90,000 contract workers as of Sep 2024)

 

*  Centre deliberating raising cess to replenish Rs 1.35 trn pension corpus of CIL 

 

*  The proposal received positive feedback, but final approval is needed from CIL and Centre 

 

*  A 2021 parliamentary accounts committee report highlighted financial mismanagement of coal mines provident fund organisation, depleting the pension fund

 

*  CIL’s shift towards automation, digitalisation, and contractual mining reduced annual headcount by 10,000-12,000 annually