New wage deal to hit CLL profits

Coal India Limited (CIL), a subsidiary of Western Coalfields Ltd (WCL), expects to make a profit of over Rs 1,000 crore, reaching a four digit figure for the first time in its thirty-year history.

However, this figure is only notional and will come down substantially when the coal company implements the National Coal Wage Agreement (NCWA) VII.

The NCWA VII is due for the entire coal sector from June 30, 2001. Negotiations with recognised unions are on at CIL and the new wage agreement is expected to be implemented anytime soon.

Already, the basic salary on minimum wages has been raised from Rs 3,300 to Rs 5,550. Other benefits will result in a substantial increase for all CIL employees including those of WCL.

Director (Finance), WCL, Shyamal Bhattacharya, admitted that the profits will have to be scaled down when the wage agreement is implemented. "We have made provisions," he said, but added that the provision may not be enough to absorb the impact of the entire wage rise.

A 15 per cent wage rise has been effected as an interim payout. "The profits will come down to three digit figures again if the new wage agreement is implemented this year," he added.

The coal company made a profit of Rs 744 crore over sales of Rs 3,882 crore last fiscal. This year the turnover has gone up to Rs 4,477 crore and profits, after a change in accounting practices in accordance with the new accounting standards 28 and 29 of Institute of Chartered Accountants of India (ICAI), are expected to cross Rs 1,000 crore.

Yet, this figure may remain just a notional amount for the coal company crossing a milestone as the impact of the NCWA VII will rob it of a substantial amount.

"I cannot pin the exact amount till the wage negotiations are through and the impact is assessed. But if the NCWA VII is considered and absorbed, the profits will be again in three digits," said Bhattacharya.

The coal company is on a work force reduction drive for several years now, but success has been marginal. It had about 78,000 employees in January 2001 and now has 68,938. It was able to reduce the employee strength by a mere 1,577 in the financial year 2004-05.

Of this only 565 took VRS and 236 opted for the "female VRS" scheme offered by CIL. Director Personnel, WCL, S F Yusuf said the natural waste through superannuation was about 800 in WCL and stood at 852 in FY 2004-05.

The wage bill of the coal company comes to a staggering Rs 90 crore per month and is 45 per cent of the turnover. The earning per man shift comes to a mere Rs 670.

Chairman-cum-managing director of WCL, G S Chugh, like his predecessors, is pushing for increased mechanisation in mines, but the progress has been tardy and process strenuous.

Unable to meet capital expenditure requirements for increased mechanisation, WCL has also resorted to hiring machinery for over-burden removal, transportation of coal and other allied works. "We are not hiring anybody for mining. This is our core activity that we are doing ourselves," said Chugh.

The problems of WCL are unique for 60 per cent of its employees are deployed in underground mines where productivity is pretty low. Of its total production of 41.41 million tonnes, underground mines produced 9.646 million tonnes while open cast yielded 31.76 million tonnes.

Both were an improvement over the last year, but the fact remains that 60 per cent employees are deployed for a fourth of the total production.

The coal company works 83 mines out which 44 are underground, 35 open cast and 4 a mix of underground and open cast. Of these 33 underground mines and one open cast are loss making.