CIL profit to be hit by about 2000 cr post new mines law

CIL profit to be hit by about 2000 cr post new mines law

New Delhi: Maharatna Coal India on Sunday said its profitability would be eroded by about 2,000 crore per annum post enactment of new mines legislation which mandates coal miners to share 26% of their profits with project affected people.

“It (new mines bill) would hit the profitability of the company by about 2,000 crore," Coal India chairman N.C. Jha told PTI.

Jha, however, added that if the government wanted to maintain the profit of the state-run PSU, it would have to resort to hike in coal prices.

“If the profit of the company has to be maintained it has to be done by increasing the prices of coal. Therefore, it is for the government, which is the major shareholder of the company, to decide whether to go for price hike or not," Jha said.

Jha earlier this month had said that the additional cost impact, due to the new act, will eventually be passed on to the consumers. The Federation of Indian Mineral Industries (FIMI) too had said yesterday that prices of all minerals will go up due to the new Mines Bill.

The domestic coal prices range between 770 and 1,700 a tonne at present.

The government on Friday approved the landmark the Mines and Minerals Development and Regulation (MMDR) Bill which provides for miners to share 26% of their net profits for the people affected by the coal projects, while the burden on the non-coal miners will be amount equivalent to royalty.

Jha exuded confidence that despite a dip in company’s profit post enactment of the new law, the state-own firm would stand benefited in the long-term by getting land without hindrances and would improve its bottomline.

“In the short term Coal India would of course witness a dip in its profit but in the long term it would be beneficial as with more land with the public sector firm the business volume would increase and the profit would automatically increase," Jha said.

The state-owned miner, which accounts for about 80% of the country’s total production of coal, had reported a consolidated net profit of 10,867 crore in 2010-11.

Industry bodies FICCI and ASSOCHAM, which have opposed the new law have said that post its enactment tax incidence on coal will increase to 61% and would deter any investment in the sector.

Coal India shares had plunged by 5.15% to close at 332.75 on Friday last after the new bill was approved by the Cabinet.