Date:05/12/2007 URL: http://www.thehindubusinessline.com/2007/12/05/stories/2007120550370300.htm

Back Coal India may see dip in profits

In a squeeze due to non-revision of notified price for over 3 years

Pratim Ranjan Bose

Kolkata, Dec. 4 But for a dramatic increase in production and realisation, Coal India Ltd may witness a dip in its profits for the second consecutive year in 2007-08. CIL posted a 5.3 per cent drop in profit to Rs 8,676 crore during 2006-07.

Eastern Coalfields Ltd (ECL) and Bharat Coking Coal Ltd (BCCL), which had made a dramatic turnaround two years back — after a few decades-long sickness — may once again slip into the red.

Four top-notch subsidiaries — Northern Coalfields, Western Coalfields, South Eastern Coalfields, and Mahanadi Coalfields — are expected to maintain profits at the same level as the last year. Central Coalfields Ltd (CCL) may manage to book profits.

“The situation is a bit tight this year. Both ECL and BCCL are incurring losses till date. While BCCL has changed its product profile according to the market demand and is trying its best to break even, ECL is in deeper trouble due to lower production and lower realisation,” a company source told Business Line.

e-auction

It may be mentioned that e-auction had played a major role in turning around both these companies through higher realisation, till it (e-auction) was suspended from operation due to a Supreme Court Order during the last year. Though e-auction has resumed on November 26 in a new format, CIL is expecting to sell not more than 15 million tonnes of coal through the system during the remaining four months of 2007-08.

According to sources, non-revision of notified price for over three years vis-a-vis 15 per cent increase in costs has led to a drastic squeeze in CIL’s profit margin. While the subsidiaries such as NCL, WCL, SECL and MCL could maintain the profitability by reducing costs accordingly, ECL, BCCL (and partly CCL) felt the brunt.

Production

On the production part, heavy rains during this year has impacted the production of the open cast mines, which are the major profit churner of CIL.

Meanwhile, e-auction registered 50 per cent higher average realisation than the notified price during the first week of resumption of services. CIL sources are hopeful that the trend will continue for the residual part of the year.