The Hindu : Business : BCCL readies plan to come out of BIFR

Online edition of India's National Newspaper
Friday, Jan 27, 2006

Business

Business

BCCL readies plan to come out of BIFR

Indrani Dutta

Set to report first ever profit; revival plan is to be vetted by rating agency CARE

KOLKATA: Perennial loss-maker Bharat Coking Coal Ltd. is set to report its first-ever profit of Rs. 70 crore this fiscal. Set up in 1971, the Coal India Ltd (CIL) subsidiary has a negative net worth of Rs. 4,925 crore and it has crafted a plan to turn positive in five years and come out of the Board for Industrial and Financial Reconstruction (BIFR)-fold. BCCL Chairman and Managing Director, Partha S. Bhattacharyya, told The Hindu that a Rs. 3,400 crore loan and interest waiver plan along with a blueprint for raising Rs. 1,500 crore through increased production had already been sent to the government after being approved by the CIL board.

The revival plan, which enabled this rather dramatic turnaround, is to be vetted by rating agency CARE, in line with the suggestions made by Board for Reconstruction of Public Sector Enterprises (BRPSEs). In reality, however, the turnaround of BCCL, whose accumulated losses top Rs. 10,000 crore is not that dramatic.

The February 2004 revival plan actually hinged on a series of initiatives, the cornerstone of which was arresting the falling production trend on the one hand and focusing on value-addition on the other, says Mr. Bhattacharyya. It may be mentioned here that coking coal is a crucial input for the steel industry.

For BCCL, till 1999-2000, poor bottomline did not impact production thanks to support from the government and the CIL. However, with these funding sources drying up, under-investment followed leading to lesser production. Between 1999 and 2004 BCCL lost five million tonnes of production owing to poor equipment performance with output standing at 22.7 million tonne in 2003-04.

With BCCL's capital expenditure falling short of even annual depreciation by nearly 60 per cent, replacing machinery became a major plank of the revival strategy. Help came from CIL, the holding company, which provided Rs. 300 crore and machinery started arriving by August 2005.

A month later, production started inching up. However realising that it would not be possible to jack up production only through BCCL's own investments and efforts, alongside a decision was taken to increase contractual production to 15 per cent from less than one per cent earlier in 2003-04.

This, coupled with a pioneering gameplan to e-market its coal, helped BCCL to yank down the earlier breakeven 30.68 million tonnes production level to 22.5 million tonnes which had already been achieved.

The production grades were also altered to increase the output of the best variety and Steel Authority of India agreed to pay higher prices to replace its imports.

For other mixes, e-marketing was introduced to encourage disintermediation and improve earnings.

This reflected in improved earnings and BCCL expects to earn an additional Rs. 200 crore by selling three million tonnes through the net.

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