Coal price hike unavoidable, says CIL chief

State-owned Coal India Ltd, the country's largest coal producer, has strongly hinted that it may hike coal prices by up to 13 per cent in order to meet its increased salary bills. The wages of the companies workers and executives were raised in January this year.

''We had to provide for Rs 7,864 crore in 2008-09 to meet the increased salaries, gratuities and arrears of our employees following the implementation of the National Coal Wage Agreement (VIII) and pay revision for executives in January this year,'' CIL chairman Partha S Bhattacharyya said in Kolkata today.

Announcing the company's financial results, Bhattacharyya said CIL aims to increase output in this financial year, but for this would be difficult without hiking prices. At the same time, higher imports would be needed to feed to the growing energy needs of domestic industries, he added.

The annual incremental impact of the pay hike is put at Rs4,000 crore. Coal India's subsidiaries - Eastern Coalfields Ltd and Bharat Coking Coal Ltd - have also added to the salary burden. After providing for the hiked gratuity and arrears, ECL and BCCL ran into losses of Rs1,000 crore each for the last fiscal.

The impact of the pay revision of over 433,000 CIL employees is likely to erode CIL's operating margin level well into 2009-10. Bhattacharyya said, ''The company would require an additional revenue generation of Rs5,000 crore to implement projects, keep the coal firms profitable and also keep the uptrend in government payouts. For this, there has to be a price rise.''

A study by the Central Mine Planning and Design Institute has revealed that 33 of the 78 planned projects have become financially unsustainable under the new salary structure. ''While ECL and BCCL cannot survive without a hike in prices, we also need to increase the price to make the 33 projects viable,'' Bhattacharyya said.

On a positive note, he said CIL is targeting a production of 435 million tonnes in 2009-2010 against 403.73 mt achieved in 2008-09. ''We are moving on a higher growth trajectory with annual coal production growth rate at 6.4 per cent. We hope to touch 500 mt by the end of 2011-12 with a growth rate of 10 per cent,'' he said.

CIL is also keen to tap the capital markets and get listed on the stock exchanges soon. ''We have proposed to reserve part of our public issue for the people who will be displaced because of the new projects or expansion,'' Bhattacharyya said.