No knowledge of CIL's plans to tap capital mkt: CoalMin
The Coal Ministry has denied any knowledge of state-owned Coal India Limited planning to raise funds from the capital market.india Updated: Feb 04, 2006 14:31 IST
The Coal Ministry has denied any knowledge of state-owned Coal India Limited planning to raise funds from the capital market, saying the public sector firm was not empowered to do so under the existing Articles of Association.
Barely a week after reports quoted unnamed CIL officials as saying that the PSU was planning to launch its maiden public offer, highly-placed sources in the Ministry said they were "amazed" by the said report.
"How can it (CIL) do that for which it does not have the required mandate," the sources told PTI, adding that "in the past too, similar propositions did the rounds but nothing came out of it as there were too many issues involved."
The report quoted sources in CIL as saying that the PSU was planning to hit the capital market with its maiden public offer of five per cent paid-up capital to raise an ambitious Rs 3,000 crore.
The reports further said the entire proceeds from the proposed initial public offer (IPO) would be used to to fund the company's expansion programme -- to increase production to 571 million tonne by the end of 11th Plan period in 2012.
Reacting to the same, Coal Ministry sources said the said proposition of entering the capital market through the IPO route was simply untenable according to the constitution of the public sector behemoth.
"If at all, the CIL intended to do so it would have to abrogate the Articles of Association it has with the government. Is CIL mandated to do that?" they asked.
Sources said: "Normally such major decisions are taken by empowered Committee of Secretaries. But till now nothing of this sort has happened in the coal sector."
When asked about the report that the Coal Ministry had been apprised of the PSU's intentions, the sources said in earlier presentations the CIL had itself made it clear that resorting to such a route would be an arduous one and is fraught with repeated hurdles.
CIL has also applied to the department of public enterprises to get a mini-ratna status that would add value to the company and help it get better premium on shares.
Moreover, the hitherto sick subsidiaries of CIL-Bharat Coking Coal Limited (BCCL) and Eastern Coalfields Limited (ECL) have begun vigorous efforts to wriggle out of the fiscal morass. BCCL has entered into an agreement with domestic steel giant Steel Authority of India Limited (SAIL) worth Rs 800 crore wherein SAIL would provide the said amount of money to BCCL to extract the best quality coking coal from the renowned Moonidih mines while BCCL would utilise the money to upgrade its equipments which was long overdue, sources argued.
ECL, too has launched many cost-cutting exercises to breakeven by the end of the current fiscal and is said to be treading on the right path.
"This had to happen. Once the CIL and its subsidiaries were saddled with an additional fiscal burden of Rs 7,500 crore arising out of the National Coal Wage Agreement VII in which thousands of workers were given their promotions and subsequent salary hikes leading to the said burden."
First Published: Feb 04, 2006 14:31 IST