Outsourcing gathers steam at Coal India

Trade unions say 52 per cent of output now mines by outsourced workers

Coal India’s bid to cut down its expenses on wages and rationalise its manpower structure while pursuing the ministerial directive to produce 908 million tonnes (mt) of coal by 2020 has resulted in the company resorting to massive outsourcing of labourers.

During the April-December 2015 period, the state-owned firm paid Rs 22,070 crore to its 326,032 direct employees, while Rs 3,853 crore was spent on wages to 65,000-odd mine workers and other staff who are under the payroll of contractors. Other contractual expenses accounted for another Rs 3,853 crore.

The company expects the number of outsourced personnel to increase in 2016-17 after new agreements with contractors are signed this year.

 

“We outsource the greenfield projects mostly if the estimated life of the mine is short where investing in equipment and machinery isn't feasible. Also, when the direct wages are considerably high compared to outsourced one, outsourcing is an option”, a senior official in Coal India told Business Standard.

During the first three quarters of 2015-16, Coal India’s expenses on direct employee wages and related benefits rose marginally by one per cent at Rs 230 crore, while its expenses on contractual workers rose substantially by 35 per cent at Rs 999 crore.

Going forward, its expenses on direct wages and other employee benefits are likely to increase nominally after the new wage agreement is rolled out. Nonetheless, contractual expenses will continue to increase.

Apart from hiring miners sourced from contractors, the company also has a range of other outsourced staff engaged in operations and logistics.

During 1975, the year Coal India was born following nationalisation of coal mines, the company had 650,000 staff on its payroll, which fell to 333,000 in 2014 and further to 326,000 following retirement and voluntary schemes.

The company, however, didn't replenish the number of staff to the original.

“Every year, on an average 15,000 employees retire. In turn, we are inducting between 3,300-3,800 staff to fill in the requirement. It must be noted that at the time of nationalization, we had to induct staff more than our requirement which is now getting rationalised”, the senior official said.

The coal behemoth, as per its estimates needs 2,80,000 staff at the most to meet its operational requirements under the present cost structure.

However, opening and completion of new mines which will generate 743.14 mt of coal by 2020 requires to company to increase its strength of miner-workforce which the company is catering to by resorting to outsourcing.

According to another company official, the key reasons behind nationalization of the coal mines under Coal India was to extract coal in a scientific manner as well as ensure social security to the workers besides removing disparities.

However, with the pace of outsourcing picking up fast, the income disparity of the workers is increasing while trade unions allege social securities are not being looked into. As per estimates, the average monthly remuneration for workers under direct payroll is as high as 207.69 per cent in comparison to the salary of contractual workers.

As per trade unions in the company, as high as 52 per cent of the 492 mt coal mined during 2014-15 was carried out by contractual workers while this ratio is poised to increase to atleast 55 per cent in the ongoing fiscal year. The contribution from direct workers to total output had fallen from 35 per cent five years back to 18 per cent in 2014-15.

“Five years back, contractual employees accounted for about 40 per cent of the total production which has went up steeply now and will increase further in the coming days. Since the last 3-4 years, the number of contractual labourers has risen considerably”, S. Q. Zama, president of the INTUC-backed Rashtriya Koyla Khadan Mazdoor Sangh told this newspaper.

Trade unions are of the view that a ratio of 70:30 for direct and outsourced employees is desirable to retain Coal India's profitability while senior managerial officials in the company want to keep the ratio at 55:45.

Even as Coal India continues to save considerably on its wages cost to step-up its bottomline, trade unions throughout 2015 have been pointing out at this trend as a cause of concern which can culminate into strikes and other union-related militant activities to jeopardise coal production in the coming years.

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KEY TAKEAWAYS

• During Q1-Q3, Coal India’s wage expenses on direct employees rose by 1%, while expenses on contract labourers rose by 35%
   
• Against a total estimated workforce of 3,91,032, over 16% is contractual. Number likely to increase in 2016-17
   
• In course of staff rationalisation, Coal India is hiring a maximum of 3,800 people per annum, while 15,000 are retiring each year
   
• Trade unions claim salary and other remuneration disparity is as high as 207.69% between direct and contractual workers
   
• Contractual workers contributed 52% of the output in 2014-15, which will rise to 55% in 2015-16
   
• Coal India wants to keep a ratio of 55:45 between direct and outsourced staff, while trade unions want it at 70:30