CIL profit to be hit by about INR 2000 crore post new mines law

Tuesday, 04 Oct 2011

Maharatna Coal India today Profitability would be eroded by about INR 2,000 crore per annum post enactment of new mines legislation which mandates coal miners to share 26% of their profits with project affected people.

Mr NC Jha Coal India Chairman said "It would hit the profitability of the company by about INR 2,000 crore.”

He added that added that if the government wanted to maintain the profit of the state run PSU, it would have to resort to hike in coal prices. Mr Jha said "If the profit of the company has to be maintained it has to be done by increasing the prices of coal. Therefore, it is for the government which is the major shareholder of the company to decide whether to go for price hike or not."

Mr Jha earlier this month had said that the additional cost impact, due to the new act will eventually be passed on to the consumers. The Federation of Indian Mineral Industries too had said recently that prices of all minerals will go up due to the new Mines Bill.

He confidence that despite a dip in company profit post enactment of the new law, the state own firm would stand benefited in the long term by getting land without hindrances and would improve its bottomline.

Mr Jha said "In the short term Coal India would of course witness a dip in its profit but in the long term it would be beneficial as with more land with the public sector firm the business volume would increase and the profit would automatically increase."

The state owned miner which accounts for about 80% of the country total production of coal had reported a consolidated net profit of INR 10,867 crore in 2010-11.

(Sourced from Economic Times)