Mumbai: The government of India’s plan for Coal India Ltd to diversify into fertiliser production has met with resistance from the Institutional Investor Advisory Services India Limited (IiAS) a proxy advisory firm.
Coal India at the behest of the GoI plans to enter into two joint ventures with the Fertiliser Corporation of India Ltd (FCIL), Gas Authority of India Limited (GAIL) and Rashtriya Chemicals and Fertilisers Limited (RCF) to revive FCIL’s Talcher unit (a sick unit that was shut down in 2000). The two JVs will, together, set up a coal gassification project for production of 1.2 MTPA urea and ammonium nitrate at Talcher. However Coal India has to amend its current Memorandum of Association (MoA) to include the manufacture of fertilisers and ammonium nitrate.
Speaking to this newspaper Amit Tandon said since fertilisers is an unrelated diversification it would distract Coal India from its core business where it is unable to meet its target. He said “While IiAS does not object to companies diversifying their business models, IiAS fears that allowing this alteration to the MoA will open the floodgates for the GoI to further leverage Coal India’s cash flows.”
The investment required for the current joint ventures is relatively small and estimated at Rs 9,000 crore is compared to the size of Coal India’s balance sheet of around Rs 49,000 crore (consolidated). “Yet, the JV foray will unnecessarily distract Coal India from its core business, where the company has been unable to meet targets."
Coal India has been unable to meet domestic demand to the tune of 155 million tonnes and its imports have gone up 21 per cent to 152mt.
IiAS has recommended that minority shareholders should vote against the resolution, Mr Tandon said.
The GoI has created new owners through divestment, and it needs to respect their rights. GoI directives to listed PSUs must create equitable returns for all shareholders. Listed PSUs must not be toyed with,” IiAS said.
Re-auction
The coal ministry is considering auctioning 25 captive coal blocks which where taken back from the firms due to their failure in developing them.
“There are 25 deallocated coal blocks where court cases have not been filed as per the information available. These coal blocks could be considered for allocation under the new dispensation,” according to official document.
