Coal news and updates

Coal India Board has a big task to do today

As the world's largest coal producer, Coal India Ltd is now saddled with the task of dealing with a strong workers' union force that plans to go on a strike from 17th December to prevent disinvestment plans of the company. As a first step to dissuade this threatened strike action, the Union Government has decided not to off-load 5% stake in the company!

In fact, at one time, there were plans to disinvest upto 10% of its holdings, out of the total of the total of 90% the government owns, and raise upto Rs20,000 crore. In the present circumstances, this is most unlikely as the government can ill afford to disrupt the entire economy that can be caused by a worker's strike and power generation can be in shambles.

What are the best alternatives that Coal India Board may have up their sleeves, when they meet on Monday, the 16th December?

Just to recapitulate the strong financial standing of CIL, it may be noted that it has free cash reserves of over Rs62,000 crore, as at June 2013. In 2012-13, Coal India paid the highest dividend of 140 (i.e. Rs14 per share with a face value of Rs10), which absorbed Rs8843 crore, out of which as much as Rs7964 crore went to the Union Government as its dividend on its holdings!

Since the government has already withdrawn the idea of 5% disinvestment plan, due to the threatened strike, the Board of Directors have a wonderful opportunity to provide a substantial increase in dividend, which can swell the government kitty. A special dividend of Rs50 or more per share is not out of reach!

The second step that the Board may boldly take is to offer a buy-back programme, by pricing the share at about Rs340-350, as this will enable the government to get rid of more than 5% of its of holdings!

The third step would be even more innovative in offering the shares of the Company to all the employees on the permanent rolls with a provision for non-saleability for a minimum period of five to seven years. This will encourage workers participation in the affairs of the company and benefit them in the long run. Additionally, the Board may also accept the workers proposal as performance-linked pay programme. This will create a sense of belonging for the workers.

Finally, in view of the very large number of collieries involved in the CIL conglomerate a high level independent committee may be established to restructure the entire organization. Many of its mining programmes are bogged down to environmental clearances and some of these have been pending for years. Dedicated railway corridors, availability of rakes, modernization programmes relating to importation of high and sophisticated equipment and technology are other factors that may require a more effective restructuring to enable CIL to carry on its enormous task more successfully. It is time that a bold decision is made to invite successful overseas miners to invest and bring in their knowledge and experience so that CIL can produce more coal and be able to eliminate the importation completely.

CIL has a huge responsibility ahead which they are well qualified to perform.

Source: www.moneylife.in