ICICI had placed its report on this chronic loss-making subsidiary of Coal India before the government a month back. ECL, which is now under the Board for Industrial & Financial Reconstruction (BIFR), is likely to incur a loss of around Rs 675 crore this fiscal. In 1998-99, its networth had gone down to a negative Rs 10.9 crore.

The company has a financial liability of more than Rs 1,000 crore comprising various statutory and non-statutory payment obligations such as pension, cess arrears, gratuity and other operational liabilities. The next pay revision of workers under National Conference for Wage Agreements-VI and that of the executives will be an additional burden which the company will find almost impossible to bear.

ECL's financial restructuring may consist of the government's taking over of its current liability of more than Rs 1,000 crore and conversion of the loans given by Coal India Ltd into equity.

The physical restructuring may comprise segregation of six loss-making areas identified earlier and their transfer to the government for announcing phase-wise closure of the mines and providing voluntary retirement scheme to the employees, invitation of private sector participation in the residual ECL, implementation of initiatives to improve the viability of the residual ECL in the interim period by exploring the possibility of manpower rationalisation, productivity improvement and utilising assets from the six loss-making areas.

The ECL management has already opted for downsizing manpower through VRS. In past three years, it reduced manpower by 25,000 through VRS and natural separation. It intends to bring down the total number to 134,000 by the end of the current fiscal and further down to around 120,000 in the next couple of years.

The fall in production is affecting ECL. It produced 27.44 million tonnes (mt) in 1997-98, which fell to 27.16mt in 1998-99 and is likely to go down further to 25mt this fiscal.

Company insiders believe that even if it has the potential to increase the volume of production, it will require additional funds to invest in the ongoing projects and also for the modernisation of existing mines. "The funds crisis restricts such investments and the company cannot gain further in the production front," they argue.

While ECL's loss-making areas continue to stumble, the few genuine profit-making areas are not getting sufficient funds for expansion. All their profits were being drained out and put into the loss-making mines to keep them running, they pointed out.

Only five out of 99 underground mines have registered a meagre profit of Rs 21 crore in 1998-99. The rest are in moderate to heavy loss with 25 underground mines registering a total loss of Rs 215 crore in the last fiscal.