CIL lowers expenses for having to fork out less towards employees benefit

The PSU miner Coal India (CIL) has been able to bring down its overall expenses by 3.3% during the nine months to Rs 54,241 crore this fiscal from that of Rs 56,079 crore during the corresponding period last fiscal. The reduction mainly happening for the squeezing of employees’ benefits didn’t reflect any operational efficiency, said an analyst.

The PSU miner claimed that the reduction in expenditure despite the increase in production during the nine months is a silver lining on the 21.4% year-on-year (y-o-y) fall in its consolidated net profit at Rs 3,085.4 crore during the third quarter this fiscal. But its 54% y-o-y fall in income from other sources during the quarter has dented its bottom line.

The reduction in employees benefits mainly includes salaries, performance-related pay of executives, performance-linked reward of non-executives, and coal mines provident fund contributions saved the company Rs 735 crore during the nine months. It saved another Rs 126 crore bringing down miscellaneous expenses during the same period.

In recent years CIL has become leaner through superannuation of around 13,000 employees a year. Its manpower stood at 2.72 lakh at the beginning of the current fiscal compared to 3.22 lakh employees four years ago. During the nine months of the current fiscal, the manpower reduced by 13,800. This reduction is expected to continue for a few more years which would further shrink the employee benefit expenditure, at present standing close to 50% of CIL’s overall revenue expenses.

However open cast production during the nine months was up 16.1% despite lower manpower. But due to lower supplies to the power sector until the beginning of January, the third-quarter net profit got impacted but consolidated revenues grew 2.1% y-o-y to Rs 23,686 crore.

During the Covid-19 led slowdown CIL gave benefits to its power sector consumers worth above Rs 700 crore waiving off the performance incentive for increased supplies made above the committed contracted quantity. As most of the customers were cash strapped the company did not press for a penalty for lifting lower quantities than the contracted quantity.

For the third quarter, expenditure climbed down by an average of Rs 200 crore, while the company clocked 6.3% output growth, 9.1% coal off-take growth and 17.3% overburden removal (OBR) growth. OBR is one of the significant components of expenditure and the company despite growth in OBR during the third quarter has made lesser provisioning by Rs 2,894 crore, a CIL executive said.

OBR has been consistently on an upward trend during the current fiscal despite the Covid-19 led slowdown. OBR growth was 20.3% ending December at 967.26 million cubic metres. The OB growth peaked at a record high of 70.5% during September this fiscal.