Coal news and updates

Investors seek clarity on Coal India achieving 1 bln tn production by 2019

While the Coal Ministry is keen on going ahead with Coal India Ltd's (CIL) disinvestment most probably by next month, global investors are learnt to have raised queries as to how the Maharatna company plans to achieve a production target of 1 billion tonnes by 2019.

According to sources, during the recent road shows undertaken by the Coal Ministry in the US and South East Asia for CIL's disinvestment, one main concern among the merchant bankers and investors with whom they interacted were about how CIL will achieve the ambitious production target. The question arose especially in the light of the fact that CIL's production target is 507 million tonnes for the current fiscal and more over since the past few fiscals it has been struggling to even meet its annual targets.

The road shows which were held between November 17 and November 21, 2014 in Boston, San Francisco and Hong Kong, are learnt to have evoked mixed reactions among the bankers and foreign institutional investors (FIIs), especially owing to the aforementioned reason, sources privy to the development pointed out.

The Coal Ministry is currently giving finishing touches to its 'Action Plan' which it aims to unveil on December 15. This entails buying more than 200 rakes in an understanding with the Railway Ministry to expedite carriage of coal from pitheads to thermal plants. Currently CIL engages around 250 rakes for the purpose.

Also by December 2017 the Coal Ministry plans to ensure completion of three major railway lines in Chhattisgarh, Jharkhand and Odisha, which will help bring 100 million tonnes of incremental traffic. In addition to this, Coal and Power Minister Piyush Goyal has hinted at ramping up of CIL's production to achieve the 1 billion tonnes of production target by 2019 through introduction of modern technologies.

Sources however said that while the plan is pro-active, it will require a long gestation period to implement it and looking at the fact that forest as well as environmental clearances, which have delayed several of CIL's projects over the past few years, take a long time to come, the 1 billion tonnes target is currently looking quite ambitious.

While there is concern among investors and bankers at the global level, Goyal recently expressed confidence that once CIL's Action Plan gets unveiled, the market will also gain confidence about the Government's sincerity towards achieving the 1 billion tonnes production target.

He even indicated that CIL's disinvestment could happen in January 2015, as December is mainly a holiday period the world over with FIIs taking a break.

Government has set a disinvestment target of Rs 58,425 crore for the current fiscal and the Union Cabinet had in September, approved selling of its stakes in CIL, ONGC and NHPC.

Centre plans to sell 10 per cent of its stake in CIL, a move which is likely to fetch it around Rs 20,000 crore.

Source: The Pioneer