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CIL mega IPO steals the show in 2010
"Perhaps time's definition of coal is diamond," said the famed Lebanese-American author Kahlil Gibran and true to that remark
Coal India Limited (CIL) proved a virtual gold mine for the government in the year gone by.
The spectacular share sale of the world's largest coal miner ahead of Diwali added glitter and spark to the government's fund-raising plans through divestment in key PSUs.
While the country's largest ever IPO mopping up Rs 15,200 crore hogged the limelight, a terse battle between Coal and Environment Ministries after the latter declared 206 coal blocks in 9 coalfields as "no-go areas" for mining, and the governments talk of action against coal mafias numbering roughly 10,000 also gave much fodder to green activists and the media.
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CIL proved to be government's big ticket for 2010
Mergers and acquisitions of coal assets too made headlines throughout the year as firms remained in a frenzy to acquire assets in view of ever-widening demand supply gap of the dry fuel.
As far as Coal India IPO was concerned a total of 484 Foreign Institutional Investors were allotted its shares through the IPO which was oversubscribed 15.14 times.
FIIs submitted bids worth Rs 1.20 lakh crore for the mega IPO which led to over subscription of shares in that category by 24.70 times.
Overall, the IPO, in which the government sold its 10 per cent stake in it, generated bids worth Rs 2.35 lakh crore.
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CIL proved to be government's big ticket for 2010
Coal Minister Sriprakash Jaiswal termed Coal India as "Gold India."
But even enhanced production of coal, with CIL that meets over 85 per cent of domestic requirement likely to mine about 460 MT against last year's 431.5 MT, will not be able to meet demand for the black diamond, which prompted users to look for assets across the globe.
In one of the largest coal mine deals by an Indian group,the country's largest coal importer Adani Enterprises had in August bought the Australia-based Linc Energy's Galilee coal tenement in the Queensland for about Rs 12,600 crore (Rs 126 billion).
It had also been awarded preferred proponent status for developing the Dudgeon point terminal in Macay, Queensland, which gives the Adani Group the right to develop a coal terminal with an annual capacity of 30-60 million tonnes (MT).
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CIL proved to be government's big ticket for 2010
Adani Enterprises also entered into a $1.65 billion deal with the Indonesian government and its mining company PT Bukit Asam for setting up rail and port infrastructure in the island nation and get rights to source coal to India.
Besides, Anil Ambani Group firm Reliance Power has bought three coal mines in Indonesia.
Another group, Essar had earlier this year bought Trinity Coal Corp in the US and is aggressive for a similar acquisition in Australia.
Jindal Steel & Power earlier this year vied with China's Meijin Energy Group to buy Rocklands Richfield, while Lanco Ifratech in December signed a pact with an Australian company to acquire Griffin coal.
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CIL proved to be government's big ticket for 2010
Other power companies - Adani, Reliance Power, Tatas and Essar - are likely to remain aggressive on buying coal reserves overseas even as Chinese entities will continue to pose a "threat" to such deals, energy information provider Platts forecast.
CIL did not lag behind in scouting for assets abroad either. It is in advanced talks to buy 10 per cent stake in the US-based Peabody Energy Corp's asset in Australia.
The company is also negotiating with US firm Massey Energy and Indonesian Novem/Sinarma for a possible partnership for their respective mines in the US and Indonesia.
The Navratna company has earmarked Rs 6,000 crore (Rs 60 billion) for this purpose in the current fiscal. "We are making efforts to increase our global footprint and are in advanced stage of talks with three firms for assets abroad," CIL Chairman Partha S Bhattacharyya said.
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CIL proved to be government's big ticket for 2010
Joining the race is the International Coal Ventures Ltd (ICVL), an SPV comprising CIL, NTPC, NMDC, SAIL and RINL. ICVL is scouting properties abroad and may bid for Australia's Riversdale in which Tata Steel has 24 per cent stake.
Global miner Rio Tinto has already evinced interest in it while Tata Steel may counter Rio Tinto's bid. Public and privately-run steel and power firms, aluminium producers like Nalco, which faced coal shortage last year are also actively scouting for coal properties abroad.
"We have shortlisted two firms for supply of 10 million tonnes of coal, half of which would go to our Rs 18,000 crore (Rs 180 billion) Indonesian venture while remaining will be used elsewhere," Nalco Director Finance B L Bagra said.
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CIL proved to be government's big ticket for 2010
In the wake of the demand-supply gap, India's coal imports are expected to touch 164 million tonnes by 2015 as against the current 73 million tonnes (Platts estimate).
Coal Minister Jaiswal said the deficit was being met through coal imports, which are rising fast and already accounts for over 10 per cent of the consumption.
Of the total installed power capacity of 159,398 MW in India, almost 50 per cent is based on coal.
Industries such as steel, cement, fertilisers and chemicals are major sectors of coal consumption.
Globally, the Indian coal industry is the fourth largest in terms of reserves at 267 billion tonnes, and third largest in terms of overall production of around 550 MT per annum.
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CIL proved to be government's big ticket for 2010
The CIL meanwhile is in the process of restructuring its internal and external operations and also hopes to secure 138 coal blocks soon to meet its XIth Five-Year Plan (2007-11) target of 520MT.
The coal ministry has, however, expressed apprehensions that delays in forest clearance to its over 150 projects by states and Centre may result in a loss of about 190 MT of coal in the period, valued at about Rs 19,000 crore (Rs 190 billion).
It is gearing up to set up 20 new coal washeries with a combined capacity of 111.10 million tonnes to unlock the value of its sizeable reserves as washing reduces ash content of Indian coal by 7-8 per cent and improves its calorific value.
The average ash content in Indian coal is 35-38 per cent.
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CIL proved to be government's big ticket for 2010
At present, CIL sells its coal at about $22 a tonne, almost 50 per cent cheaper than prevailing international prices and washing will double the price.
As regards the "fight" between the coal and environment ministries, the coal ministry after a long battle has sought the Cabinet approval for its proposal that mining be allowed in 90 per cent of coal blocks labelled as 'no-mining' areas by the environment ministry.
As many as two hundred and six coal blocks spread across 4039 sq km in nine coalfields involving a production potential of 660 MT have been designated as 'no go' areas by the environment ministry, whereas the coal ministry wants 90 per cent of these be freed from restriction.
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CIL proved to be government's big ticket for 2010
The environment ministry has divided the mineral bearing regions into 'go' and 'no-go' areas and mining is allowed only in 'go' areas.
The battle between the duo led to a PMO-appointed panel in September deciding to refer the row to the Cabinet.
Debarring such big areas with production capacity of 660 million tonnes coal from mining will adversely impact power generation capacity and the country could see a coal shortage of 500 million tonnes in the next few years on account of such a classification, the coal ministry argued.
Several coal blocks in the "no go" areas had been allotted to firms like Hindustan Zinc, Ultra Tech, Essar etc.
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CIL proved to be government's big ticket for 2010
Such categorisation has also put several existing and upcoming coal mining operations, including captive mines of two ultra mega power projects on bidding in Chhattisgarh and Orissa, under 'no go' besides affecting CIL's operations.
Meanwhile, the process of allocating coal blocks to state-run and private firms is now on hold as the government is yet to formalise the plan to auction blocks.
As on date, 213 coal blocks with geological reserves of about 49.43 billion tonnes have been allocated to the government and private companies.
The year also saw the government issuing notices to firms failing to develop coal blocks alloted to them for captive use and show cause notices were also slapped on as many as 81 firms for violation of terms and conditions of the coal block developments.