Govt starts Coal India restructuring process

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SME Times News Bureau | 09 Jan, 2013
The coal ministry Tuesday said expressions of interest (EIO) for appointing consultants has been invited for the restructuring of Coal India Limited (CIL).

The aim of inviting advisors "is to examine various issues for restructuring of CIL", the ministry said.

The coal ministry Monday had said it proposed to take up a study "to assess the need for restructuring of CIL in light of the avoidance of drawbacks inherent in a monopolistic situation" and "to prepare a road map for smooth transition towards proposed restructuring".

One idea for restructuring is to break CIL subsidiaries as independent entities to boost production by infusing competition.

Restructuring of CIL was originally proposed by the T.L. Shankar committee on coal sector reforms that submitted its recommendations in 2007. The panel had suggested staying away from any major legal or administrative restructuring of the world's largest coal producer. It had, however, recommended making changes at the board-level by making the chairman and managing director of CIL the chairman of the boards of all subsidiaries.

The government had accepted the Shankar committee recommendation for CIL's restructuring in the 12th Plan period (2012-17).

The 12th Plan document recommends spinning off the CIL subsidiaries as separate public sector companies which should be "encouraged to develop their own strategies of coal development, including joint venture activities and acquisition of assets abroad".

CIL has seven subsidiaries such as Bharat Coking Coal Ltd (BCCL), Central Coalfields Ltd (CCL), and Eastern Coalfields Ltd (ECL) and Central Mine Planning and Design Institute Ltd.

Coal India was formed in 1975 as part of the effort to nationalise the coal sector. Based on location of coal reserves across India, four coal production subsidiaries were set up. Later three more production subsidiaries were added.

CIL accounts for over 82 percent of India's 532 million tonne coal production. The company's output has remained stagnant over the past two years owing to capacity constraints and delays in clearances for new mines, necessitating costly imports of coal.

The Planning Commission has estimated that the coal import could go up to 185 million tonnes at the end of the 12th Plan based on total coal demand of 980 million tonnes and domestic supply of 795 million tonnes.

CIL's monopoly has often come in for criticism by power companies, which blame it for abuse of monopoly in production to dictate prices.