Kolkata: Coal India Ltd (CIL) said on Monday that its consolidated net profit in the quarter ended 31 March declined 4.93% to Rs 4,013 crore from a year earlier despite a 22.7% jump in net revenue because money had to be set aside for increased wages.
CIL raised the wages of its 365,000 workers with retrospective effect from July last year, for which the company will have to provide at least Rs 7,000 crore in the current year, according to chairman and managing director S. Narsing Rao. In the January-March quarter, CIL put aside Rs 3,420 crore for the wage hike.
Increased liability: Coal India CMD S. Narsing Rao. CIL raised the wages of its 365,000 workers with retrospective effect from July last year for which it will have to provide at least Rs 7,000 crore this year. By Indranil Bhoumik/Mint
Consolidated net revenue rose to Rs 19,419 crore from Rs 15,004 crore, thanks to an increase in coal prices in February last year. Production rose 9.6% to 144.6 million tonnes (mt). The price increase resulted in an additional revenue of Rs 10,000 crore in fiscal 2012, according to Rao.
In fiscal 2012, CIL produced 436 mt of coal, marginally short of its target of 447 mt for the year. For the current year, CIL has set itself a production target of 464 mt, which according to Rao is challenging.
Consolidated cash reserves rose Rs 13,000 crore from a year ago to Rs 58,000 crore at the end of March. Income from interest in fiscal 2012 at Rs 5,345 crore is up 44.5% from last year’s Rs 2,964 crore.
It is not clear how CIL proposes to deploy this cash except to expand mining in India, which is facing delays in getting clearance from the environmental authorities and difficulties in acquiring land.
Asked if CIL was planning to raise coal prices to recover the higher wage cost in the current fiscal, Rao said the company would look to cut costs and shore up production to mitigate the effect of the wage hike. Analysts across broking firms are expecting a price hike even while admitting that there are political constraints to such a move. Though Rao didn’t rule out a price hike, he said there was no plan to do so immediately.
CIL said it may be able to supply only 60-65% of the coal required by the power companies with which it has long-term fuel supply agreements (FSAs) despite raising the target for supplying coal to such consumers to 347 mt from 312 mt in fiscal 2012.
It could bridge this gap by importing coal, but will do so only if the consumer agrees to pay for the higher cost of doing so, according to Rao.
One of the constraints faced by CIL is the lack of availability of railway rakes. While it needs around 205 rakes per day to support peak production, according to Rao, only 184-185 are currently available.