Indian government is considering disinvestment in the public sector Coal India. It is further understood to be contemplating hike in the stake sale target from 10% proposed earlier to 15% as it wants to put a sizeable number of shares in the market. The move may also be due to finance ministry considering anther proposal of mandating a 25% public float for listed companies. While the entire 25% stake may not be sold at one tranche, a significant first issue would raise chances of better returns for a follow on sale.
While the modalities of the stake sale are still being finalized, the rise in stake sale target would help government increase revenue from the sale from Rs 6,000 crore earlier to Rs 9,000 crore. In addition, it also goes well in a symbolic way with government’s intentions of increasing private participation in the coal sector. Also, the Planning Commission in its recent review of Indian economy had urged the government to go ahead strongly with the policy of disinvestment in order to generate resources for infrastructure development.
However, before the issue can be taken forward, the government will have to amend the Coal Mines (Nationalisation) Act of 1973. The union coal ministry is likely to introduce a bill in the Parliament soon to accomplish the task. The first right of purchase of shares would be given to the company’s employees. Another option of buying CIL’s shares may be given to people whose land had been acquired by the coal major for various mining projects.
India has the fourth largest proven reserves of coal in the world. However, coal output has lagged behind plans often due to inefficiency associated with the government controls. To address the issue, the ministry is also considering allowing the private companies to mine coal for commercial purposes. Presently, private concerns are only allowed to mine coal for captive purposes.