State-owned Coal India Ltd (CIL) reported a 18 per cent drop in consolidated net profit at Rs 4,434.19 crore for the quarter ended March 31, 2014, due to a write-off on account of fuel quality dispute with NTPC.
The company had posted a net profit of Rs 5,413.91 crore in the corresponding quarter of FY'13, Coal India (CIL) said in a filing to BSE.
"On the basis of this settlement formula and pending final reconciliation/settlement of all the subsidiaries of CIL with NTPC Ltd, provision /write off of Rs 876.45 crore ... for such deemed lowering of grade as compared to the grade of coal supplied and billed has been considered in the accounts during the quarter/year," Coal India said.
Total income from operations was flat at Rs 19,997.98 crore, over Rs 19,904.57 crore in the same quarter of year-ago period, the company said. Expenses for the quarter were at Rs 15,474.47, registering an increase of 8.5 per cent.
CIL's consolidated net profit for full 2013-14 fiscal also dropped to Rs 15,111.67 crore, from Rs 17,356.36 crore in 2012-13.
Total income from operations was flat at Rs 68,810.02 crore in FY14, over Rs 68,302.74 crore in FY2012-13.
"With the introduction of Gross Calorific Value (GCV) system of grading of coal w.e.f January 1, 2012, supply of coal to NTPC (a major coal customer) was billed at declared grade of coal corresponding to the GCV range of the coal supplied," CIL said.
"Wth effect from October 2012, NTPC Ltd released payment based on GCV determined unilaterally at the receiving end, contrary to the provision of fuel supply agreement which stipulates that the GCV is to be determined at the loading end by joint collection, preparation, testing and analysis of the coal being supplied, and withheld the balance amount," it added.
For an appropriate resolution, the government advised for "extrapolation of the result of the third party sampling/analysis during October-December, 2013 to the supplies during the past period from October 2012 up to September 2013."
Coal India, which accounts for over 80 per cent of the domestic coal output had produced 462.53 million tonnes (MT) of coal in FY 2013-14, missing its target of 482 MT.
Shares of the company dropped by 1.77 per cent to settle at Rs 373.60 on BSE on Thursday.