Coal India Ltd (CIL), which meets over half of India’s energy requirements, could raise the commodity’s prices next quarter.
The move is aimed at offsetting the financial impact of the 25 per cent wage rise announced for its mammoth workforce in January. The news saw the company’s shares on the Bombay Stock Exchange (BSE) rise 1.8 per cent to close at Rs 342.2 on Tuesday.
Coal India is the world’s largest producer and accounts for 82 per cent of domestic coal supply. Any price hike by the state-owned miner creates a ripple effect in output prices across major consuming sectors, including power, steel, cement and fertilisers. “Coal India may revise prices in the first quarter of next financial year (2012-13),” coal secretary Alok Perti said at the sidelines of sector event, without giving details. “It will first have an assessment on prices (which were rolled back earlier this year).”
The company was forced to roll back an average 12.5 per cent price rise under Gross Calorific Value (GCV)-based system, on January 31 following severe protests from domestic consumers led by the power industry. The roll-back had eroded CIL’s cushion against the Rs 6,500-crore impact of wage hike for its 3,63,000 workers. The new grading system would have given CIL an additional Rs 6,250 crore annually. The government had later decided to review the new system after three months.
The miner had decided to do away with the system of pricing based on useful heat value (UHV) to align with global practices. Under the UHV system, the highest quality coal in A-grade – with heat value exceeding 6,200 Kcal per kg – was sold at Rs 4,100 per tonne. Under the GCV system, the highest band coal — with a calorific value exceeding 7,000 Kcal per kg — cost Rs 4,900 per tonne. After the roll-back, this price was brought down to Rs 4,870 per tonne.
Experts say a price rise by CIL is long overdue. “Indian domestic consumers need to choose whether they want to restrict a price hike disallowing Coal India to invest in increasing productivity or want to pay much higher for imported coal,” James O’Connell, senior managing editor at Platts, global provider of benchmark energy price assessments, told Business Standard.
The company was initially expecting an annual outgo of Rs 6,000 crore on account of wages. Additional demands for perks and benefits from workers over and above a 25 per cent hike in minimum guaranteed benefits had finally raised the outgo to Rs 6,500 crore. The additional demands included initiating pension scheme and medical benefits for retired workers, starting a coal mine allowance for non-executives cadre at 4 per cent of basic and providing increased house rent allowance at 2 per cent of basic salary.
After the wage hike, the minimum basic salary of a non-executive worker stands at Rs 15,712 per month. Salaries and wages account for over 48 per cent — Rs 18,845 crore — of Coal India’s annual expenditure of Rs 38,566 crore. Wages for workers are revised every five years after multiple rounds of discussion in a joint bipartite consultative committee. The new wage agreement has come into effect from July 1, 2011.
