The tussle between the board of India’s largest miner Coal India Ltd (CIL) and the government over supply agreements is set to extend further. A senior coal ministry official on Friday took a tough stand, stating the government could ask CIL to fall in line by issuing a directive with respect to the conduct of the company’s business under its articles of association. The company, though, said it would seek an extension of the March 31 deadline.
The deadline being missed due to dissenting independent directors within the board comes in the backdrop of the company’s second largest shareholder The Children’s Investment Fund (TCI) initiating legal action against the directors for failing to perform their fiduciary duties under government pressure.
A senior ministry official said in case the board did not relent, the President of India may issue directives with respect to the conduct of the company’s affairs.
Under Article 33 of the company’s articles of association, the President, by virtue of holding a majority of equity share capital, has the power to appoint non-retiring directors on its board, not exceeding one-third of the total board members. The government currently holds 90 per cent stake in the Bombay Stock Exchange-listed company.
The company said it would seek an extension of the PMO’s March 31 deadline to sign agreements for full supply to additional power projects commissioned before December 2011. The delay would dampen prospects of increased fuel availability for 30,000-Mw power capacity.
Coal India’s board, which has already met thrice over the past week to consider the new model Fuel Supply Agreement (FSA), has already put its foot down on the matter. In its third meeting yesterday, the board turned down the proposal to supply coal at 80 per cent commitment level.
Coal minister Sri Prakash Jaiswal on Friday said a briefing might take place on Monday after minutes of the board meetings were available. Power minister Sushilkumar Shinde said he would take up the matter with the PM.
The private power industry said it was not unduly worried over the delay. “If CIL’s board is raising some issues, it is for the management to satisfy them. We prefer this due diligence as it shows the company is serious about signing FSAs and implementing them,” Ashok Khurana, director general of the Association of Power Producers, a representative body of over two dozen private power companies, told Business Standard.
Coal India shares closed at Rs 343.1 apiece on Friday, up three per cent from the previous close.
