September 08, 2008

CIL profits in 2007-08 likely to dip - Report

BL reported that Coal India Limited may witness a dip in its profits for the second consecutive year in 2007-08 after a 5.3% drop in profit to INR 8,676 crore during 2006-07. According to sources, non revision of notified price for over 3 years vis a vis 15% 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 felt the brunt.

As per report, CIL’s subsidiary Eastern Coalfields Limited and Bharat Coking Coal Limited, which had made a dramatic turnaround 2 years back, after a few decades long sickness may once again, slip into the red. The report cited an official of CIL as saying that “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 realization.”

Meanwhile CIL’s 4 top notch subsidiaries namely Northern Coalfields, Western Coalfields, South Eastern Coalfields and Mahanadi Coalfields, are expected to maintain profits at the same level as the last year.

E auction had played a major role in turning around both these companies through higher realization, till e auction was suspended from operation due to a Supreme Court order during 2006. Though e auction has resumed on November 26th 2007 in a new format, CIL is expecting to sell not more than 15 million tonnes of coal through the system during the remaining 4 months of 2007-08. Meanwhile, e auction registered 50% higher average realization 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.

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.