WCL faces cash crisis as coal offtake falls in state, MP

Nagpur: City-based Western Coalfields Limited (WCL), a subsidiary of Coal India Limited (CIL), is facing a liquidity crunch due to defaults from power utilities. This is reminiscent of the situation over a decade ago, when recovering dues from state owned power utilities was a major problem for this mining PSU. The company had to scrap the bottom to pay recent salaries due to the cash crunch, though the pay checks were released in time, say sources.
Madhya Pradesh Power Generation Company (MPGENCO) has not paid Rs500 crore to WCL for coal lifted during last 3-4 months. This comes to around half the yearly proceeds of the company, said a source. The management has already issued a letter saying that there is a major mismatch between revenue and expenditure due to which organizations will have to remain tight-fisted.
WCL officials are holding hectic talks with authorities in Madhya Pradesh government to get the dues released. However, the defaults from MPGENCO are due to a chain effect, say sources. In a typical arrangement at state government run utilities, a generation company sells power to the transmission arm. This, in turn, passes it on to the distribution company. Due to defaults from consumers, the distribution company is not in a position to clear its dues, ultimately effecting the generation arm.
The crisis for WCL comes when the overall offtake from power sector has come down, hampering its revenues. WCL last month supplied around 30 lakh tonnes to the power sector. The figure has come down to 23 lakh tonnes this month.
To make things worse, two of the power plants in Madhya Pradesh have shut down leaving a major vacuum. The plants at Sarni and Khandwa have been closed due to the state government’s policy promoting cost-efficient running of power plants. With these plants not able to met the norms, orders have been issued to put the operations on hold. Coal to the tune of 4 lakh tonnes and 1.34 tonnes respectively was supplied to the two power houses in the neighbouring state.
The offtake from Maharashtra’s side is also down. Chandrapur Super Thermal Power Station is down from the monthly level of 8.5 lakh tonnes to 5 lakh tonnes. The power plant at Parli is already shut down due to water shortage.
If the crisis continues, the company will have to further depend on its reserves to meet liabilities like salaries, said a source. The PSU is among the biggest employers of the region having a workforce of 48,000.
IN A NUTSHELL
WCL has to recover Rs500 crore from Madhya Pradesh Power Generation Company
This has hampered its liquidity
There were problems in paying wages, which were paid just in time
Company has issued orders to observe austerity due to mismatch between income and expenditure
Overall fall in offtake of coal by power sector has also hit revenues
As against 30 lakh tonnes supplied to power companies last month, dispatches are down to 23 lakh tonnes this month