Coal India’s $5 billion wage bill set to rise amid negotiations with trade unions

Coal India Ltd., the world’s largest miner of the fossil fuel, is about to enter negotiations with trade unions over potentially hefty pay hikes at a time when the global push for clean energy is putting the industry’s future into doubt.

The Indian coal giant is expected to begin talks this month that could result in paychecks climbing 20% or more, bloating its more than $5 billion annual wage bill. The Kolkata-based company revises salaries of non-executive staff every five years, and the next change is due starting in July.

This is a crucial period for the coal sector. India, the third-biggest emitter of greenhouse gases, is under pressure to reduce its dependence on the fuel, which accounts for nearly 70% of electricity generation. India seems determined to take more ambitious climate action. A global rebound in coal demand this year — driven by China — will be short-lived amid the rise of renewables, according to the International Energy Agency.

Coal India’s fortunes have swung dramatically, with profits sliding, production and shipments falling and cash drying up. Any large jump in its wage bill could force the company to raise prices for the first time in three years, just as its customers are struggling to pay and arrears are piling up.

While Coal India’s headcount has fallen by one fifth over the past five years, it is still one of the country’s largest corporate employers, with 259,016 staff on its rolls. An increase in pay will put more strain on Coal India’s balance sheet. It may also force CIL to raise prices.

While global coal prices have been soaring to the highest level in years, state-controlled Coal India sells at a discount to help generators keep electricity prices in check. The benchmark price in Indonesia, India’s biggest supplier of coal from overseas, has risen 50% this year, giving Coal India headroom to raise prices without losing customers to imports. But that advantage can be lost if international prices reverse sharply.

Coal India has seen profits fall for five straight quarters. The miner reported a 1% decline in output and shipments for the year ended March, even as inventories at its mines swelled to a record. The brutal second wave of the pandemic has triggered periodic lockdowns across the country, threatening a recovery in electricity and coal demand.

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