 "Coal India in dilemma over its fertiliser venture")
“There is still dilemma over the proposal for entering into coal gasification for fertiliser production. This requires high grade coal which we do not have in plenty now,” said a senior CIL executive, who did not wish to be identified.
The proposal was to enter into two joint ventures with the Fertilizer Corporation of India (FCIL), Gas Authority of India Limited (GAIL), and Rashtriya Chemicals & Fertilizers (RCF) to revive FCIL’s Talcher unit (which is a sick unit and was shut down in 2000).
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The two joint ventures will together set up a coal gasification project for production of 1.2 million tonnes per annum (mtpa) urea and ammonium nitrate at Talcher. To be able to enter into the joint venture, CIL plans to amend its current MoA to include the manufacture of fertilisers and ammonium nitrate.
Although the official cited operational issues, the matter was becoming controversial with proxy advisory firms opposing the plan accusing the government of misusing the behemoth’s cash pile.
Institutional Investors Advisory Services (IiAS), a Mumbai-based proxy firm, had said in its report dated July 1: “In the case of Coal India, manufacture of fertilisers and ammonium nitrate is an unrelated diversification. …IiAS fears that allowing this alteration to the MoA will open the floodgates for the GoI (government of India) to further leverage Coal India’s cash flows.”
The firm said, “…the investment requirement in the current joint ventures (estimated at Rs 9,000 crore) is relatively small compared to the size of Coal India’s balance sheet. Yet, the foray into chemical/fertiliser manufacturing will unnecessarily distract Coal India from its core business, where the company has been unable to meet targets.” It asked investors to vote against the resolution.
Public-sector undertakings (PSUs) in India have long been seen as tools through which the government implemented its agenda. “But listed PSUs must be looked at differently. In disinvesting from some of the PSUs, the GoI has created new owners – and the GoI 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 had argued.
- Coal India had earlier sought shareholders’ approval through postal ballot to amend its MoA to enable its entry into the sector
- The proposal was to enter into two joint ventures with the FCIL, GAIL, and RCF to revive FCIL’s Talcher unit (which is a sick unit and was shut down in 2000)