Tussle Over $5 Billion Wages A New Risk to India Coal Supply

A key trade union at Coal India Ltd. has warned workers may strike over delays in finalizing salary increases, a move that would risk complicating efforts to meet soaring fuel demand.

Talks held on July 1 failed to reach any agreement over a pay deal, said Sudhir Ghurde, who represented Akhil Bharatiya Khadan Mazdoor Sangh, one of the leading unions, at the meeting.

Workers are seeking a 47 per cent increase in wages -- having earlier demanded a 50 per cent hike -- while Coal India has offered a 3 per cent raise. A group of unions has written to Coal Minister Pralhad Joshi and urged him to intervene to help the sides conclude negotiations.

"Coal India aims to conclude the wage pact of its non-executive workforce at the earliest in a mutually agreeable manner," Coal India said in an emailed response to queries. The company "maintains amicable and harmonious relations with its unions and strives to avoid any discordance or strikes in view of the importance of coal sector in the country."

Negotiations are in progress and it usually takes time to conclude an agreement, it said. A separate email sent to the coal ministry received the same response as Coal India's reply.

A threat of potential unrest comes as the state-run miner is seeking to boost output as India contends with rising demand from a post-pandemic economic recovery and scorching summer heat. The efforts to avert a repeat of last year's squeeze on energy supply are also being challenged by the high costs of coal imports, with seaborne prices trading at about a record.

Wages of non-executive workers, which account for 94 per cent of Coal India's workforce, are revised every five years. The latest agreement is intended to cover salaries from July 2021, and will be applied retroactively once a deal is struck.

Coal India's salary bill was $5.2 billion in the 12 months ending in March, about 6 per cent higher from the previous year. The company, which is facing higher production costs, spent more than a third of its revenue on salaries.

"Both parties will need to come to a realistic number," said Rupesh Sankhe, vice president at Elara Capital India Pvt. in Mumbai. "Coal India's target will be to keep costs down so that it's able to carry on with expansion plans and dividend payments."

The wage talks are happening as rising global costs of food and fuel and a depreciating rupee are stoking inflation and denting government finances.