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Www.coalindia.org - Third largest coal producer in the world

My-India.Net: India Forum: General: Www.coalindia.org - Third largest coal producer in the world

By Anonymous on Thursday, July 02, 2009 - 09:57 am: Edit Post

Coal India (CIL) may need to hike coal prices by at least 13% if it has to take up all its proposed expansion projects and retain its

earlier profit trends in 2009-10. Indications are that the company will take a decision on hiking coal prices this year.

"According to rough estimates, we need an additional revenue generation of Rs 5000 crore to make all our planned projects viable and post a healthy net profit during 2009-10," said CIL chairman Partha S Bhattacharyya. Estimates also show that a 1% rise in coal prices on the present price levels results in additional revenue generation of about Rs 380 crore. The two coupled together suggest that a 13% rise in prices may generate the much required additional Rs 5000 crore.

But Mr Bhattacharyya did not provide any indication when prices would be raised or by how much it would be raised. All he said on the topic was: "Unless coal prices are revised, CILís margins will be severely dented beginning 2009-10."

Events took a turn for the worse at CIL when it saw profits for 2008-09 virtually vanish on account of a hefty rise in wage bills. It registered a modest Rs 96 crore PAT after paying Rs 7,856 crore of arrears as a result of the recent salary hike for officials and employees. During the previous year CIL registered Rs 5,243 crore PAT.

Despite, a declining profit, CIL paid a Rs 1,705 crore dividend to government. The impact of salary hike has been estimated at Rs 4000 crore per year and this is also expected to dent profits in the the current fiscal unless prices are increased. Additionally, about 33 projects have been rendered unviable as result of increased outgo on account of salaries and wage.

"About 33 new projects that were otherwise viable before the salary hike, have now been rendered unviable since these projects had very high cost components. Now that outgo on account of salary has increased by about Rs 4000 crore per year, we cannot take up these projects now," said Mr Partha S Bhattacharyya, chairman CIL.

"The projects were expected to add 28.37 million tonnes of additional production. We are yet to take stock of future projects in the pipeline. According to a rough estimate we need an additional revenue generation of Rs. 5000 crore to make the projects viable and post a healthy net profit," Mr. Bhattacharyya said.

Mr Bhattacharyya, also said that two of its loss making subsidiaries Bharat Coking Coal and Eastern Coalfields will be badly hit without a proportionate coal price hike. ECL has already decided to close a number of loss-making mines and re-deploy the workforce to other operations.

CIL produced 404 million tonne from its Indian assets during the last fiscal, registering 6.4 per cent growth in production. The company is now targeting a 500 million tonne production mark within three years.

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