Coal India Draws Up Plan To Revive Eastern Coalfields, Bccl

Coal India has drawn up a six-point turnarond plan for its loss-making subsidiaries Eastern Coalfields Ltd (ECL) and Bharat Coking Coal Ltd (BCCL). BCCL was referred to the Board for Industrial & Financial Recontruction (BIFR) on November 24, 1995.

The need for a turnaround plan was felt as BCCL has failed to fulfill its commitments made in the revival package before BIFR. In ECLs case, a plan is being worked out with the idea that this will form the framework for a revival package before BIFR.

The outline of the turnaround plan is based on six principles: Production and disptaches of both ECL and BCCL will be increased by improving capacity utilisation to at least 85 per cent from the existing 70-75 per cent. Expenditure increase is controlled to within 5 per cent per year, manpower is rationalised and voluntary retirement scheme (VRS) offered to the surplus manpower. Uneconomic mines are either made viable or closed, controllable expenses including administrative expenses are cut and adequate internal resources are generated to implement new projects for growth.

 

Though in five years up to 1995-96, investment in ECL, BCCL and Central Coalfields Ltd (CCL) has been Rs 4,241 crore or 52 per cent of CILs total investment of Rs 8,065 crore, the aggregate increase in production in this period for the three companies is only 6 million tonnes against 42 million tonnes in other subsidiaries.

CIL has taken a policy decision to stop flow of money from the profit making companies to the loss making companies under CIL umbrella. Resources of profit making companies will henceforth to be conserved for their investment for growth.

Northern Coalfields Ltd (NCL), South-Eastern Coalfields Ltd (SECL), Western Coalfields Ltd (WCL) and Mahanadi Coalfields Ltd (MCL) together earned a profit of Rs 2,136 crore in 1996-97 to retain the status of profit making companies.

In contrast, the aggregate loss of ECL (loss Rs 500 crore), BCCL (loss Rs 524 crore ), CCL (Rs 30 crore) and North-Eastern Coalfields (loss Rs 41 crore) works out to Rs 1,095 crore. These are marked as loss making companies.

More disturbing for the loss making companies is that in the past five years, ECL had suffered an operating loss of Rs 2,125 crore, while that of BCCL was Rs 1,869 crore. CCL losses for the years 1994-95 and 1995-96 are Rs 338 crore.

Since these loss making companies are no longer allowed to draw resources from the profit making companies, CIL has initiated some action for providing financial relief to ECL and BCCL by converting Rs 1,903 crore from debt to equity with corresponding reverse swap in WCL, NCL and SECL.

CIL is also considering moratorium on loan repayment/interest payment to the extent that it does not affect CILs ability to service the loan it has taken.

CIL is also of the view that the two sick companies can make a turnaound through a reasonable dose of price increase, keeping in view the need to retain market share.

GROUND RULES

Increase in capacity utilisation to at least 85% from 70-75% currently.

Yearly expenditure increase within 5%.

Rationalised of manpower through VRS.

Uneconomic mines are either made viable or closed.

Slashing of controllable expenses.

Generation of internal resources for growth projects.