Govt clears coal special purpose vehicle for overseas acquisitions

Govt clears coal special purpose vehicle for overseas acquisitions

New Delhi: The Union cabinet’s economic affairs committee allowed a group of public sector firms to set up a separate company to acquire coal assets overseas to meet rising demand for the commodity, which is used in the generation of power and the manufacture of steel.

This was part of several proposals cleared by the committee on Thursday.

Other key proposals cleared include the creation of an Armed Forces Tribunal that would serve as an appellate authority where court martial orders can be challenged; the setting up of a pilot training institute in Maharashtra and upgrading an existing one at Rae Bareli, the constituency of Sonia Gandhi, chairperson of the ruling United Progressive Alliance government, in an effort to cater to growing demand for pilots in the country; and the creation of an offshore container terminal at the Mumbai Port to meet growing inbound and outbound trade traffic.

Mint had reported on Thursday that the committee could take up the issue of the company that public sector firms, Steel Authority of India Ltd (SAIL), Coal India Ltd (CIL), Rashtriya Ispat Nigam Ltd (RINL), NTPC Ltd and National Mineral Development Corp. Ltd (NMDC) want to set up as a special purpose vehicle (SPV).

The company is to have a corpus of Rs10,000 crore and its paid-up capital will be Rs3,500 crore. SAIL and CIL will contribute Rs1,000 crore each, while the other firms will pay Rs500 crore each.

“The special purpose vehicle, to be set under the ministry of steel, will have all the freedom and flexibility of a Navratna (a public sector firm selected by the government to be developed as a multinational company), even though it is not being given that status officially," said a government official who did not wish to be identified.

“A committee of secretaries will be set up to approve overseas investment proposals of the SPV, for all acquisitions of metallurgical coking coal assets that are worth over Rs1,500 crore," the official added. Acquisitions of less than Rs1,500 crore will not need clearance by the committee, or cabinet approval.

Food Corporation dues

The committee also cleared payment of Rs17,700 crore that the government owes the state-owned Food Corporation of India (FCI) for supplying foodgrain under welfare schemes.

The dues would be paid through “supplementary budget provisions" in the revised estimates of this year and 2008-09, according to finance minister P.Chidambaram.

However, the committee did not specify the mode of payment (it could be through the issue of bonds or other routes). FCI has bills of around Rs19,000 crore pending with the government.

Significantly, the committee has decided that provisions for financing purchase of foodgrain for welfare schemes will be included in the Union budget starting 2008-09, and that all future payments to FCI will be made before the government took delivery of the grain.

Constituency benefits

Apart from the pilot training institute, the committee also decided to upgrade into a full-fledged branch, the extension of the National Institute of Fashion Technology (NIFT), which has been set up at Rae Bareli.

This centre is the first NIFT one “set up in any backward area", Chidambaram said. The funding of this centre would be along the same lines as that of the Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs), a mechanism called block grants.

Another vocational training institute at Rae Bareli, the Indira Gandhi Rashtriya Udaan Akademi (IGRUA), also got a facelift.

The cabinet committee approved an agreement between the school and Canadian pilot training firm CAE Inc. IGRUA will be modernized with a budgetary support of roughly Rs65 crore.

CAE is also involved in the flying school that is to be set up at Gondia, in Maharashtra. Gondia is the home town of Union civil aviation minister Praful Patel. This project will get budgetary support of around Rs80 crore and will see an additional Rs113.50 crore being spent on infrastructure upgradation and on purchasing new equipment. However, the additional amount will have to be raised by CAE and the Airports Authority of India, the two partners in the venture, National Flying Training Institute.

Container boom

The committee also cleared a project of the ministry of shipping to set up an offshore container terminal in Mumbai at an estimated cost of Rs367 crore on a build-operate-transfer (BOT) basis. This will be set up through a licence agreement between the Mumbai Port Trust and a consortium of Gammon India Ltd, Gammon Infrastructure Ltd and Dragados SPL of Spain. The total cost of the project is estimated at close to Rs1,230 crore.

The investment by the BOT operator will be about Rs860 crore and the port trust will invest a little over Rs365 crore.

The project will increase the port’s container handling capacity by 9.6 million tonnes per year after dredging at the port and laying tracks for a railway container depot that can ship containers to and from inland railway terminals.

In other decisions, the cabinet committee cleared a proposal to fully fund construction of hostels for girl students belonging to the scheduled castes, and another to raise the authorized share capital of the National Minorities Development and Finance Corporation (NMDFC), from Rs650 crore to Rs750 crore.

PTI contributed to this story.