Calcutta, Feb 25: Eastern Coalfields Ltd, the largest subsidiary of Coal India Ltd, is likely to report a loss of Rs 500 crore in 1997-98 fiscal, with the production now projected to drop further to 28 million tonnes, according to sources.This will take ECL's accumulated loss to over Rs 1700 crore and a cash loss of about Rs 250 crore, following which it will not be able to pay its employees and even suppliers.
"There is every possibility that we will not be able to pay wages to the employees from March," a source in ECL told The Financial Express on condition of anonymity.
"Despite all efforts, there seems to be no substantial improvement and the company is heading towards a staggering loss of over Rs 500 crore in the current fiscal. If it is not checked, it will lead to closure of many of its loss-making units," he said.
ECL was referred to the Board for Industrial & Financial Reconstruction (BIFR) in October 1997 after it reported a negative net worth of Rs 138.40 crore and an accumulated loss ofRs 1186.72 crore in 1996-97.
"This was felt as a mere technical reference, ahead of a financial restructuring proposed by CIL which would have raised the equity of the company. However, the strategy failed because of the mounting losses during the current fiscal and now the chances of ECL coming out of BIFR in near future are bleak," he said.
For the current fiscal, ECL had set for itself a coal production target of 32.5 million tonnes, which it reckoned would have fetched enough revenues to give it a breather and effect a turnaround.
However, there has been no improvement in the dismal rate of production, particularly in the prime Raniganj coalfields and ECL expects to report a production fall over 1996-97.
The first signs of trouble were the failure of the longwall face of the Kotadih underground project, delays by National Thermal Power Corp in lifting its commitment from Rajmahal and delays in commissioning new equipment at Jhanjra.
The ECL management is blamed for the latest crisis, as it isfelt that the company failed to muster the support of its employees. Earlier this year, the management appealed for efforts to increase production by at least 10 per cent and to cut costs by five per cent.
Some other cost cutting measures were identified, with the aim of saving at least Rs 100 crore and thus averting a cash loss. Matters did not improve and hence, the latest production forecast of only 28 million tonnes.
The official said all is not bad in ECL. Some production areas are still in profit and some are making only marginal losses. But heavy losses elsewhere are draining the performance of these units. The management is also considering stopping or deferring payments of leave travel concession, leave encashment and other perks. At the organisation level, ECL may close uneconomic mines and areas, transfer surplus manpower and enforce the voluntary retirement scheme strictly.
"Some of these actions may lead to inconvenience to the employees, but there is no other option if the company is to besaved," a senior official said.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
