Coal news and updates

A difference of opinion with Coal India over share buyback has led the government to form an inter-ministerial group to discuss the pros and cons of the proposal as well as the optimum quantum. 

 

The state¬run monopoly miner, the largest coal company in the world, is sitting on cash reserves of at least Rs 40,000 crore. CIL management has been holding on to the reserves for financing the expansion of the company which is targeting output of 1 billion tonnes a year by 2020 from about 550 million tonnes at present. The Centre, on the other hand, wants CIL to hand over its reserves to the government and tap into the debt market to finance its capex . 

 

Officials said the government wants CIL to buy back 25% of its stake and add about Rs 6,000 crore to the government's kitty. This week, CIL management will make a presentation to the inter¬ministerial group on the proposed buyback, a senior executive said, requesting not to be identified. "The final decision on the buyback will be taken by the inter¬ministerial group, which comprises officials from the coal ministry, Department of Disinvestment and other ministries," he said. 

 

The government intends to use the money raised from CIL for development work. "Coal India management, however, feels debt option will lead to increased project costs and inflated coal prices since interest cost will have to be recovered from coal prices," the executive said. Some high¬cost projects may also turn unviable and keep the company from achieving the target of 1 billion tonnes, he said. As per the proposal, buyback will be followed by an additional divestment that will bring down the Centre's stake in the company below 75% and help the behemoth adhere to the market regulator Sebi's norm of at least 25% public holding in listed state¬run companies. The deadline for ensuring this is August 2017.

Source: Economic Times