A levy of Rs 10 on every tonne of coal produced will be imposed by the Coal Mines Provident Fund Organisation (CMPFO) on its member producers, including Coal India and Singareni Collieries. The levy will help bridge an asset-liability mismatch that was predicted to completely deplete the pension fund by 2028.
The levy is estimated to raise Rs 650 crore from Coal India this year if it manages to meet its yearly production target. The resulting increase in the cost of power generation would be less than 1 paisa per unit, a Coal India executive said. It will, however, benefit some 5 lakh pension holders and ensure provisions for future pension payments for another set of at least 4.8 lakh coal employees in the future.
The trustee board of CMPFO, at a meeting chaired by the coal secretary, last week decided to adopt some of the recommendations by an in-house panel, including enhancement of the government’s monthly contribution to Rs 249 per employee into the pension fund instead of Rs 26.56 paise per employee per month earlier.
“CMPFO is a statutory body under the coal ministry, and decisions taken by its trustee board are binding on member companies and the Centre will accept the recommendations,” said DD Ramanandan, president, All India Coal Workers Federation.
Employees of Coal India, Singareni Collieries, the mining division of DVC, coal mining workers of Sail, Jindal Steel & Power, Jindal Power, Usha Coal Mine, Jayaswal Neco Industries, Monnet Ispat & Energy and Sarda Energy & Minerals are covered by CMPFO.
At the meeting, the trustee board decided against imposing an upper cap of Rs 45,000 on monthly pensions as recommended by the in-house panel. There will be no upper limit on monthly pension payments.
Pensions will be calculated on the basis of 10 months average salary drawn by an employee before retiring – the current practice. The inhouse panel had recommended it be increased to 30 months.
Member employees of CMPFO contribute a monthly amount that is matched by their employers. The bulk of this fund, along with interest and bonus, is returned to the employees as provident fund after they retire. A portion of this contribution goes into a pension fund that provides a steady pension.
According to the last actuarial study, the pension fund was expected to completely go dry by 2023. The study indicated that employees and member companies jointly needed to increase their contribution by some 14% for the fund to sustain in the long run. It was, however, increased by 7% for Coal India recently, which would help the fund sustain until 2028.