Coal India to cut manpower annually by 5% for 5 -10 years

Coal India, the government-owned mining and refining corporation, announced the plan to reduce its workforce by 5% every year in the coming 5 to 10 financial years. It will close its unviable mines as well in this due tenure.

This news came just a day after Coal India Limited registered a 23.9% deficit in its profits for the financial year 2020-21. The effects of Covid-19 and a sloth-like movement of the Indian economy have reduced the demand for coal significantly, and the premier coal supplying agency has not managed to escape its effects.

Reasons for this fall

As per CIL standard, this is a noticeable fall in revenues since the company lost about 8.5% of its income in the previous fiscal year. In FY 2020-21, Coal India registered a total income of Rs. 93,818 crores. Additionally, its earnings from operations have also taken a year-on-year hit by around 6.3%, which amounts to Rs.90,026 in FY21.

Factors behind this drastic change in earnings are down to the implications of the Covid-19 crisis. Like other sectors, restrictions of this pandemic situation have had a toll on the operations of Coal India.

This steep decline in demand for coal is largely due to their power customers. As stated in their report, CIL mentioned that electricity demand in the peak summer months dropped by almost 24% in FY21. Lockdown induced by Covid-19 and a slowdown in industrial and commercial activities were the primary factors of this fall in demand. Moreover, the second wave of the novel coronavirus impacted the demand for coal even further.

Heart of the matter

Coal India is the world’s largest mining company and contributes more than 80% of the national coal output. It has an employee strength of 2,72,445 since FY20, as mentioned in its recent reports. This report further stated that it has 158 underground mines that engage about 43% of the total workforce but makes only a 5% contribution to its full production capacity.

The company has plans to close such unviable mines in different phases, and they have already taken a call on 11 such facilities.

Onto some good news

This report further added that Coal India has plans to set up 15 new projects under its new control measures. The aim is to increase the efficiency of their Greenfield projects. In this regard, the company has plans to engage 15 MDOs (5 UG and 10 OC). They will have a combined production capacity of 160 MTY. Currently, out of these 15, the work order for two projects with 45 MTY has been approved, and the rest are in different stages of approval.

Moreover, in its recent reports for the January to March quarter of FY21, expenses have dropped to Rs. 21,565.15 crores. Also, the company mentioned that in FY21, they have reached a production capacity of 596 lakh metric tons and are planning to increase it to a billion-ton by FY2023-24.

Investor’s lookout

• Coal India, on Monday, announced an extra 35% or Rs. 3.5 dividend per share on equity share of Rs. 10 each.
• This will allow its largest stakeholder, i.e., the Indian Government, with a 66.1% stake, to earn Rs. 1426 crores as dividends.
• The total Coal India dividend pay-out remains at Rs.16 per share or 160%.
• The closing Coal India share price on 15th June was Rs. 157.15 per share.

Final word

Even in such a situation, all is not doom and gloom for the country’s largest coal producer. Considering the factors and the future directives presented by the management, it remains lucrative for stakeholders.

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