Within months of its hugely oversubscribed initial public offering (IPO), the newly-listed Coal India Ltd (CIL) has apprised the government of reducing investors interest in the company's stock.
Calling this a "disturbing trend," CIL chairman and managing director Partha S Bhattacharya informed the coal ministry in a January 25 letter that "CIL's stock has been recently receiving a sell recommendation by major investment bankers and broking firms."
Seeking an immediate increase in the prices of domestic coal, CIL chairman said worldwide there has been a substantial increase in coal prices recently. "Not effecting any rise in coal prices is creating doubts in the minds of investors on the extent of regulatory restriction on coal prices prevailing at present," he said.
As against the domestic price of R1,000 to 1,200 per tonne, the current price of coal in the global market is almost four times at R4000 per tonne and above.
Bhattacharya also cited the government policy of restricting coal mining in the "no-go" areas as the one affecting its production. "As a consequence of the on going restrictions of mining in 'no-go' areas, CIL is finding almost impossible to enhance its coal production at even half the rates it registered in 2008-09 and 2009-10."
Even as input prices increased substantially due to high inflation (the increase in dearness allowance to its employees which has gone up from 27.2 %to 49.9% on basic pay since October 2009), CIL said there has been no increase in the coal prices since October 2009.
"This situation has severely eroded CIL's ability to contain increase in cost of production within the inflation rate," it said.
Seeking an increase in coal prices, CIL has proposed a differential pricing mechanism to the coal ministry wherein it said that there could be a notified price for the power utilities, defence, fertiliser units (where end product prices are determined by regulators) and a different notified price higher by a margin of 40% for other sectors whose end-product prices are market driven.