The coal ministry has ruled out divestment of Coal India subsidiaries. The department of divestment had proposed 10% divestment in profit making CIL subsidiaries.
"In a meeting held last week, the coal ministry has conveyed to the department of divestment that if profit making subsidiaries of CIL are divested, it might not be possible for Coal India to support turn around two of its ailing subsidiaries - Bharat Coking Coal and Eastern Coalfields. It will also not be able to give the government dividends of at least 6,000 crore every year," a senior CIL officials told ET.
"Post divestment it may not be possible to channel funds to support ailing ECL and BCCL and turning around of these two companies will be impossible. Hence, the divestment should be held back till BCCL and ECL turns around. The ministry has conveyed to the department of divestment," he said.
"We are not in favour of this divestment proposal," Alok Perti, secretary at the Coal Ministry had earlier told ET.
These two companies are integral part of CIL which produces premium thermal and coking coal. BCCL is the only company in India that produces coking coal.
"CIL is a marketing company. It does not produce any coal and its income is based on the coal that its subsidiaries produce. Its IPO was done on the basis of the strength of the subsidiaries," he said.
According to the proposal mooted by the department of divestment, 10% in Central Coalfields, Mahanadi Coalfields, South Eastern Coalfields, Northern Coalfields, and Western Coalfields would be divested.
"The divestment proposal includes listing only the profit making companies and leaving the two large subsidiaries that are incurring losses. This will tell on the valuation of CIL," he said.
"The Initial Public Offer met with heavy resistance from the unions. During that period, the management had promised the divestment of CIL will be restricted to 10% only. This promise will be dishonoured if the subsidiaries are divested too," a senior CIL official said.
In 2010-11, the six subsidiaries together posted a profit before tax of over 14,700 crore. MCL ( 4,039 crore), NCL ( 3,956 crore) and SECL ( 3,777 crore) were the major profit churners. CCL and WCL posted a PBT of 1,860 crore and 1,068 crore respectively. CMPDI, being a consultancy wing, has a smaller balance sheet and posted approximately 24-crore profit.
The investment into alternative power generating technologies such as nuclear energy may need to be measured against the potential cost when things turn against you as unfortunately happened this year in Japan. Coal prices and coal statistics show developing economies are more likely to increase their investment into & their use of coal mining in coming years because of coal's affordability and ability to quickly meet increasing demands for electricity and steel. www.coalportal.com
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