Coal India and its subsidiaries are helping each other with loans in order to be able to pay salaries and tide through the acute liquidity crisis from rising consumer fees and falling cash flow during the lockdown.
Coal India has lent Rs 300 crore to its subsidiary Central Coalfields, while Bharat Coking Coal is in talks with its subsidiary Northern Coalfields for another Rs 300-400 crore loan to meet labor capital requirements, including salaries. The Central Mine Planning & Design Institute, the exploration arm of the company, has also been granted a Rs 15 crore loan for the salary payment of its executives to Coal India.
Sales of Coal India decreased by 26% in April. Among its seven manufacturing subsidiaries, Central Coalfields and Bharat Coking experienced a major drop in sales, while the revenues from power companies crossed Rs 3.000 for each during the lockdown. This has resulted in an acute shortage of funds for both companies. Today, they can not completely meet their fixed expenses, including wages and legislative payment commitments.
Bharat Coking Coal is also in talks with Rs 400-500 crore banks, which they are planning to raise through billing discounts on their past fees from power companies. Since the loan is yet to come, the subsidiary has engaged in dialogs with other subsidiaries for either loans or transfers of funds.
A senior executive from Central Coalfields said that its statutory payment obligations including GST, provident fund and tax deducted at source is around Rs 420 crore for the month of April, while its realisation during the month was Rs 500 crore, compared with Rs 1,200-1,300 crore in January and February this year.
“We need working capital to at least keep producing coal for which an expenditure is necessary for topsoil removal too. Our estimates showed that outgo would outstrip income and hence we opted for the loan from Coal India,” the executive said.
In March, Bharat Coking Coal managed to pay salaries and continued production in April by raising finances against its bank fixed deposits, the limit for which has since been exhausted. As its major customers, Damodar Valley Corporation and West Bengal Power Development Corporation, continued to lift coal on credit, its working capital for the May has been almost exhausted so much that it did not have money to pay salaries. “We are in talks with banks as well as other subsidiaries for loans. Whichever comes first will help us in temporarily tiding over the tight liquidity situation. However, nothing has materialised yet,” a Bharat Coking Coal executive said.
