Coal Videsh plan faces roadblock

The Prime Minister's Energy Coordination Committee has asked the coal ministry to re-work its proposal for an overseas arm of the Coal India Ltd (CIL) in the wake of the objections raised by other ministries, including the ministry of finance.

The CIL had proposed the formation of Coal Videsh on the lines of ONGC Videsh for acquiring overseas coal properties. While senior coal ministry officials said the note for setting up Coal Videsh had gone for a legal vetting by the law ministry and the concerns of other ministries had been adequately addressed, officials in the finance ministry said the case was not strong enough.

"While the argument for oil companies picking up equity is valid in the wake of our dependence on imports, the same argument does not hold true in case of coal as we have a large number of coal reserves within the country," a finance ministry official said. The finance ministry's contention is that the overseas arm could be used to source long-term contracts to import high-quality coal.

Coal ministry officials said the proposal to have public sector companies like National Thermal Power Corporation (NTPC) as equity holders in the proposed Coal Videsh has been dropped. The CIL planned to float the company with an equity of Rs 1 crore.

There was a view that with a small equity, the company would in any case have to depend on the CIL balancesheet to raise funds for acquisition. "A separate company means flexibility in decision-making, but if it has to come to the government for clearances, then the purpose gets defeated," said an official.