State-run mining giant Coal India, which is under pressure from labour unions for a salary hike, could see its wage costs rise by as much as 19 per cent this fiscal, investment banking major JP Morgan says.
"The wage cost increase from July 1 would impact the non-executive segment, which is 85 per cent of the wage bill. We are building in a total wage cost increase of 19 per cent in FY12E, which includes the inflation impact and the wage agreement hike," JP Morgan said in a research note.
Four of the five trade unions of Coal India have put up their wage demands to the management, demanding salary hikes ranging from 100 per cent to 500 per cent, which is likely to put severe financial pressure on the company.
The current average basic salary of Coal India worker is about Rs. 8,320 per month. While the Left-backed All-India Trade Union Congress (AITUC) has asked for a revised salary ofRs. 16,000 per month, the Hind Khadan Mazdur Federation has asked for a minimum revised basic salary of Rs. 40,000 per month.
At present, Coal India and its subsidiaries spend about Rs. 20,000 crore on salaries every year, accounting for over 40 per cent of the cost of production.
The unions have also demanded better parity between workers on its payroll and workers on a contract, as well as between workers and officers. There are some 30,000-odd workers on contract at CIL, while around 3.7 lakh are on the state-run firm's payroll.
JP Morgan further said that Coal India's second quarter production and sales volume are likely to witness a decline from first quarter levels due to complications in August, 2011.
"Last year, dispatches stood at 99 MT and even factoring in a strong September, we see volumes down 1-2 per cent from Q1 levels," the note added.
Shares of Coal India have tanked by as much as 4 per cent to a low of Rs. 380.40 on the Bombay Stock Exchange since the news of the salary hike surfaced on August 22. The stock was trading at Rs. 381.75, down 2.59 per cent on the BSE, at 1253 hours on Wednesday.
The Coal India scrip had, however, outperformed the broader market in the June quarter, gaining 13.05 per cent, in contrast to a 3.08 per cent decline in the Sensex.
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