Sunday, August 28, 2011

Coal India wage talk : Labour unions asks for 100% rise, actually likely to 20% hike.

Share prices of Coal India fell by over 3 percent on reports that its labour unions have asked for a 100 percent hike in wages. Salaries and wages account for nearly a fourth of the company’s expenditure. The shares recovered towards close, but the concerns remain.

Employee cost, according to the company’s estimate, was Rs 18,201.45 crore for the financial year ended March 31, 2011. For the same period, the company posted an operating profit of Rs 18,278 crore and a net profit of Rs 10,867.35 crore. It is obvious that if the hike demanded by the labour unions is implemented, the company will barely make any operating profit. Thus, the 3 percent drop in prices is too small, given the magnitude of the problem.

 The management has said it has provided for Rs 2,500 crore in the books, which corresponds to nearly a 20 percent jump in the base salary. Analyst reports suggest that the market is also factoring in a 20 percent wage hike.
Coal India is entering into a five-year agreement with its five labour unions, who represent its 400,000 employees. Its previous wage hike was 24 percent. The earlier wage agreement ended in June 2011. The new wage agreement will have to made effective from 1 July 2011

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