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(Bloomberg) — Coal India Ltd., one of the world’s largest fuel producers, reported a 17% drop in profit after a 12-fold increase in offering employees higher wages.
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Net income at the state-run miner fell to 55.33 billion rupees ($676 million) in the three months to March from 66.93 billion rupees in the same period a year earlier, according to a stock exchange filing on Sunday. That compares to an average of 77.5 billion rupees by analyst estimates compiled by Bloomberg. The company made 58.7 billion rupees in provisions for higher wages to its non-executive employees during the quarter versus 4.8 billion rupees a year earlier, which targeted revenue gains, according to the earnings statement.
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The Kolkata miner reported a jump in other key operating metrics, including cargo volumes and average rates earned on each ton of sales. “Profit after tax would have been the highest ever in any quarter had the provision not been made,” Cool India said in a separate press release. The company said profits for the full year through March rose to a record high.
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Coal is used to generate about three-quarters of India’s electricity, and increased consumption by suppliers has boosted production and sales in recent months. Electricity demand reached a record high in April, raising fears of a repeat of last summer’s disruption, when a surge in industrial and residential power consumption overwhelmed supply.
Shortages of supplies help boost coal mine profits, as they can prompt customers to pay higher premiums in open market auctions to secure uncontracted supplies.
Coal India said it had ample inventories to meet summer demand, although limited rail capacity continued to challenge some producers to reach consumers in remote areas. Temperatures are also expected to rise sharply in several parts of the country in the coming weeks, putting more pressure on supplies.
Overall product costs increased 30% during the quarter, driven by provisions for salary increases. The miner reached an agreement with trade unions in January to raise the basic salaries of its non-executive employees.
– With assistance from Debit Chakraborty.