Coal India plans to take all eight subsidiaries public
3 min read 01 Jul 2022, 12:12 AM ISTFirm may take all its 8 subsidiaries public as prices of the fossil fuel soarExperts said that the Centre’s plan is in line with its target of privatizing or selling stakes in non-core businesses
PremiumNEW DELHI : Coal India Ltd is looking at taking all its eight subsidiaries public as prices of the fossil fuel soared after power demand rebounded from the pandemic, a government official aware of the development said.
The coal ministry has approved a draft Cabinet note to sell 25% of state-run Coal India’s consulting unit, Central Mine Planning & Design Institute, and Bharat Coking Coal Ltd to the public. The other subsidiaries that may go public are Central Coalfields Ltd, Eastern Coalfields Ltd, Mahanadi Coalfields Ltd, Northern Coalfields Ltd, South Eastern Coalfields Ltd and Western Coalfields Ltd.
“There is a plan that Coal India units offload their shares in the market. It started with two companies. The process is underway. The board has passed (the resolutions for the stake sales)," the official said, requesting anonymity.
The government wants to take Coal India’s units public at a time a global fuel shortage has catapulted coal prices to a record. Coal use has been surging worldwide in recent months after years of decline because of rising power demand as economic activities gather pace after the easing of the pandemic and supply disruptions caused by Western sanctions on Russia, a major miner, for invading Ukraine.
Analysts said coal companies may garner investor interest in the near term because of red-hot prices. However, the fuel’s long-term future appears bleak as environmental compulsions and strict climate targets may force investors to shun them. “Coal and other fossil fuels seem to be in favour now amid the geopolitical tensions and the supply constraints. But, in the years ahead, investors are unlikely to buy these shares. Both foreign institutional investors and domestic corporates are slowly moving away from investment in fossil fuel-based companies," said an analyst with a consulting firm who did not want to be named as the firm advises companies in the coal sector.
Queries sent to the coal ministry and Coal India remained unanswered until press time.
According to an annual action plan prepared by the coal ministry, the cabinet note for the listing of Central Mine Planning & Design has been submitted for approval after consultations with other relevant ministries, and a draft note for Bharat Coking Coal’s listing has been sent for inter-ministerial discussions.
Experts said that the Centre’s plan is in line with its target of privatizing or selling stakes in non-core businesses.
For FY23, the government has set a disinvestment target of ₹65,000 crore. However, the listings of Bharat Coking Coal and Central Mine Planning & Design may spill over to the next financial year.
Initial public offerings of state-run companies have been a major source of non-tax revenues for the government. For example, the mega IPO of Life Insurance Corp. of India fetched the government ₹20,557 crore, although it was listed at a discount amid weak investor sentiments because of global uncertainty because of the war in Europe.
The government is also considering the merger of Mineral Exploration Corp. Ltd with Central Mine Planning & Design. “Keeping in view the scope for its business expansion in other minerals, the government has plans for its strengthening, for which it is being considered to merge the two companies," said a coal ministry statement in April, adding that Central Mine Planning & Design will continue to be a Coal India unit.
Coal India has ramped up production to meet the power demand following the power crisis in April. India’s coal production touched a record level of 777 million tonnes in FY22.
The government owns 66.13% of Coal India. At the time of its IPO in 2010, it was the largest such offering in the country. The miner is currently valued at ₹1.14 trillion.
Amid a worldwide push towards cleaner energy, Coal India is also diversifying into aluminium production, solar power generation and coal gasification as it seeks to decarbonize its operations.
On 20 June, Mint reported that the company is awaiting clearances for its planned integrated greenfield aluminium project in Odisha. A government panel chaired by the state’s chief minister Naveen Patnaik approved the project in December.
