Chart Beat: How Coal India is coping with high staff costs
One problem that Coal India Ltd has is that its staff costs are elevated. The state-run coal producer’s employee expenses as a percentage of operating revenues stand at about 35%. This is the largest operating expense of the company.
To cope with this to some extent, it has been lowering its staff count. “The company has been able to partly offset the effect of big quinquennial wage hikes by reducing employee count by 39% over FY11-23 (-4% compound annual growth rate)," said analysts from Jefferies India in a report on 21 November. Coal India expects an annual about 5% reduction in staff count over the next ten years as well, added the brokerage.
In FY23, Coal India’s employee count stood at about 239,000. In a recent investor call, the company’s management said it expects staff cost in FY24 to be around Rs46,000 crore. In FY23, employee expenses stood at Rs49,409 crore.
The company had made wage provisions of Rs8,153 crore in the last financial year with a large part (worth Rs5,870 crore) being made in Q4FY23, which had impacted profitability during the quarter. “However, settlement of wages only formally concluded in Q1FY24 and accordingly, wages for Q1FY24 were also elevated at Rs12,027 crore (up 19% year-on-year)," said a report by Kotak Institutional Equities. Overall, in the half year ending September (H1FY24), Coal India’s employee expenses stood at Rs23,673 crore, up 13% year-on-year.
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