Coal India and subsidiaries helping each other with loans to tide over liquidity crisis

Kolkata: Coal India and its subsidiaries are helping each other with loans to be able to pay salaries and tide over the acute liquidity crisis from rising dues from consumers and falling cash flow during the lockdown.

Coal India has lent Rs 300 crore to subsidiary Central Coalfields while Bharat Coking Coal is in talks with subsidiary Northern Coalfields for another Rs 300-400 crore loan in order to meet working capital requirements, including salaries. Central Mine Planning & Design Institute, the exploration arm of the company, has also been given a Rs 15 crore loan for salary payment of its executives by Coal India.

Coal India’s sales dipped 26 per cent in April. Among its seven producing subsidiaries, Central Coalfields and Bharat Coking have suffered a substantial fall in sales while dues from power companies have crossed Rs 3,000 crore for each during the lockdown. This has resulted in acute fund shortage for both the companies. They cannot currently cover their fixed costs including salaries and statutory payment obligations fully.

Bharat Coking Coal is also in talks with banks for Rs 400-500 crore, which they are planning to raise through bill discounting on their past dues from power firms. Since the loan is yet to come, the subsidiary has initiated dialogues with other subsidiaries for either loans or transfer 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 top soil 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 so that it did not have money to pay salaries. “We are in talks with banks as well as other subsidiaries for loan. 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.

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