The Centre is likely to allow Coal India Limited (CIL), the world’s single largest coal miner, to raise prices of all grades of coal by 10 per cent before the end of this financial year.
Though CIL officials are tightlipped on the issue, sources close to the development said that the coal major might get the government nod to go for the hike by March 2010.
When contacted, a senior CIL official said, “We have sought a moderate increase in coal prices but are yet to receive any communication from the Union coal ministry in this connection.”
“CIL’s coal prices have never been linked to international prices. Even when the global prices of different grades of coal touched an all-time high, CIL did not go for a hike”, said an industry source.
The average price of coal sold by CIL in the domestic market was 30-40 per cent lower than the prevailing international prices and this has necessitated a revision. CIL had last revised its coal prices in December 2007. The price hike was also needed to shore up CIL’s bottomline which was seriously affected in 2008-09 due to the implementation of the National Coal Wage Agreement (NCWA)-VIII. This agreement was to be implemented with retrospective effect from July 2006 for the labourers and November 2007 for the officers.
CIL’s net profit in 2008-09 stood at only Rs 96 crore after the navratna coal firm paid arrears worth Rs 7,856 crore to its employees as per NCWA-VIII.
According to this agreement, the salaries of over 4.33 lakh employees of CIL had to be revised. The salary hike meant an annual financial burden of around Rs 4,000 crore to the coal public sector undertaking (PSU). The implementation of NCWA-VIII had also rendered as many as 33 projects of CIL in the 11th Plan Period (2007-12) unviable. These projects were to add 28.37 million tonnes to CIL’s total production which was projected at 520 million tonnes by the end of 2011-12.
CIL has set a tentative target of hitting the capital markets by September 2010. CIL’s retained earnings stood at Rs 300 crore by the end of 2008-09 on a turnover of Rs 45,000 crore. The coal PSU needed a strong bottomline for coming out with an initial public offer and towards this objective hiking coal prices is a strategic requirement.