KOLKATA (miningweekly.com) – Coal India Limited (CIL) has hardened its stance in negotiating a coal wage agreement, with the miner this week citing an adverse business environment as a limitation to effecting a wage hike for its estimated 370 000 workers.

After eight rounds of negotiations hit a logjam, CIL stated that its inability to maximise sales, a glut of dry fuel at thermal power stations and the high costs of land acquisition for greenfield projects made it difficult for the miner to match the 25% wage hike agreed to in the previous National Coal Wage Agreement IX.

That agreement expired in June 2016 and the new wage deal, National Coal Wage Agreement X, would need to be retrospectively effective from that date.

At the start of current negotiations, trade unions submitted a demand of a 50% wage increase, which was later lowered to a minimum of 21%.

However, in the last round of three-day meetings earlier this week, CIL maintained that its balance sheet did not permit an across-the-board commitment on the percentage of an increase and instead stated that any higher wages would be “dependent on availability of funds with the company”.

According to estimates, a 21% hike in wages would translate to a yearly incremental outflow of $703-million, inflating the miner’s existing wage bill of $4.37-billion.

CIL has maintained that it is committed to supply thermal power stations, despite a glut of coal in the market, at lower margin realisations and this crimped volumes available for open market sales, including higher margin e-auctions.

This was reflected in the consolidated net profit, which was down 54% during 2016/17. Barring 2015/16, CIL’s net profits have been on the decline since 2013/14.

The government-owned and -operated miner, accounting for over 80% of domestic supply of coal, has also pointed out that any wage hikes will risk greenfield projects, since land acquisition for the latter generally involves giving employment to around 3 000 people affected by the project, in addition to the costs of buying the land and of paying compensation.

Wages constitute around 52% of the cost of each ton of coal mined by CIL and officials said that such a percentage was high even in “good times”. The wage costs could cripple the company’s balance sheet in the long term at a time when the market is in a glut and more competition is round the corner with the government opening up coal mining and free merchant sales to private miners.