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Coal ministry, CIL may oppose PFC-like funding agency

Coal minister Piyush Goyal has proposed to set up an agency on the lines of PFC to bring private investment into the sector

The government may face opposition from within its ranks to a proposal to set up a funding agency to try and spur private investment in the coal sector.

Some sections within the coal ministry and state-controlled miner Coal India Ltd (CIL) are unhappy with a proposal mooted by coal minister Piyush Goyal to set up an agency on the lines of Power Finance Corp. Ltd (PFC) to bring private investment into the sector, especially in getting companies to participate in the auctioning of coalfields for captive use via the competitive bidding route, according to a person with direct knowledge of the matter.

PFC was set up in 1986 to help companies bid for power projects by helping them secure speedier environment, forest, legal and other clearances, besides easier funding.

“It first needs to be considered how successful has PFC been (in getting clearances)?” the person cited above said, requesting anonymity.

“Moreover, why not first give speedier clearances to Coal India itself, rather than to private companies?” To be sure, besides private companies, PFC also lends to central and state government-promoted units.

CIL, the world’s largest coal miner, accounts for 80% of the domestic production of the mineral. It has been struggling to meet its output targets, for which the company has been at the receiving end. In 2013-14, CIL missed its output target of 482 million tonnes (mt), producing just 462 mt during the period. In June, the company achieved an output of 34.54 mt, missing its target of 36.54 mt. Its output in the April-June period of the current fiscal year was at 108.33 mt, while the target for the quarter was 113.01 mt.

“(CIL) envisages taking up 118 projects for an ultimate capacity of 353.87 mtpa (million tonnes per annum) during the 12th Five-Year Plan. The envisaged contribution in 2016-17, the terminal year of the 12th Five-Year Plan, is 137.77 mt,” Goyal told Rajya Sabha in a written reply on Monday.

As of September last year, CIL was awaiting environmental and forest clearances for 241 projects, a PTI report had said, citing company documents. These included 193 forest clearances and 48 environmental ones, the PTI report had said. The government proposed setting up a new funding agency as its move to auction three captive coalfields on a pilot basis has generated poor interest, with bids received for just one coalfield. Shortage of locally available coal, coupled with declining international prices has led to India importing more of the commodity. On Monday, a Bloomberg report, citing mjunction Services Ltd, a commodity trader that tracks coal shipments, said that India’s coal imports could touch an all-time high of 152 mt this year. Analysts too are not convinced about setting up a financing body for the coal sector. “Financing required for mining is far less than that required for the power sector, so such a body may not be required,” said Dipesh Dipu, an energy analyst and a partner at Jenissi Management Consultants. “Even Coal India, which is sitting on a Rs.60,000 crore cash surplus, often takes the equity route when it could easily finance new projects,” he added. “The main problem when it comes to power plants is land acquisition. All the other clearances are easy. The new land acquisition Act puts the onus of getting clearances on the private companies, so PFC’s efficacy cannot be judged,” said Chintan J. Mehta, an analyst with Mumbai-based Sunidhi Securities and Finance Ltd. “For Coal India, the issue is clearances on mining leases, which is tough.”

Source: www.livemint.com