Coal India, the world's biggest coal miner, on Monday reported a five percent drop in quarterly profit from a year earlier after staff costs doubled.
Net profit for the three months through March fell to 40.13 billion rupees ($727 million) from 42.21 billion in the same period a year ago.
The Kolkata-based company's sales rose 29.5 percent to 194.19 billion rupees from 150.05 billion.
The profit, however, was marginally better than analysts' estimates.
Coal India's staff costs almost doubled to 90.69 billion rupees from 48.06 billion a year earlier, the company said in a statement.
"The national coal wage agreement... was finalised on January 31, 2012. The impact on wage arising out of the agreement has been considered in the financial results," the company said in the statement.
Coal India agreed to hike by 25 percent the wages of its 365,000 mine workers and pay higher allowances with the agreement backdated to July of last year.
Coal India raised $3.4 billion in November 2010 when it sold a 10 percent stake in an initial public offering (IPO) that was hugely oversubscribed.
Coal India produces more than 80 percent of India's coal at close to 500 mines across eight states.
It also holds the largest extractable coal reserves in the world with over 22 billion tonnes, ahead of rivals China Shenhua Energy and the world's largest private miner, Peabody Energy in the United States.
Coal accounts for more than half of India's energy use and consumption is set to increase as the country's economic development accelerates in energy-intensive sectors such as steel and cement manufacturing.