The government is likely to defer the disinvestment of Coal India Ltd (CIL) to the next fiscal even as it is engaging with merchant banks to remain prepared for a future sale that’s estimated to be around Rs 21,000 crore.
Falling prices of global commodities and the quick drop in Coal India’s share prices are among factors that have contributed to the government developing cold feet after bravely announcing a sale plan. The department of disinvestment got clearance from the cabinet in August this year to go ahead with a 10 percent stake sale in the world’s biggest coal miner.
Coal India’s share prices have declined from about Rs 443 in August to Rs 335.40 on the Bombay Stock Exchange (BSE) on Tuesday (24 November).
Global coal prices have dropped to a 12 year low as demand dropped following a slowing appetite from China and turmoil in European economy. Also, other metals too are witnessing a muted demand and their prices have declined to multi-year lows, with copper, zinc and aluminium hovering near six year lows.
The annual budget for 2015-16 had set a target of Rs 69,500 crore from disinvestment, which includes Rs 28,500 crore from strategic stake sales and Rs 41,000 crore from minority stake sale such as in Coal India.
So far the government has raised Rs 12,600 crore from disinvestment in four PSUs: Indian Oil Corp, Dredging Corporation of India, Power Finance Corp, and Rural Electrification Corp.
Caught between volatile markets, a time limit, as well as Rs 56,900-crore shortfall in meeting the fiscal’s disinvestment target, the CIL stake sale expected to rake in at least Rs 21,000 crore would have solved a lot of problems for Finance Minister Arun Jaitley.
But top sources in the know say that institutional investors have raised concerns like valuation and global steel prices leading the Government to put off the stake sale for this fiscal. Sources say that a disinvestment of CIL during this market condition will be suicidal. In fact, the Coal Ministry has also raised concerns about the timing of this 10 percent stake sale.
Previous attempts to sell CIL shares have often been shelved because of stiff opposition to it by worker unions and poor markets among other reasons. However, the Government had managed to successfully sell 10 per cent in the blue chip on January 31, 2015, garnering Rs 22,557 crore.
BW Reporters
With about 10 years as a journalist, Suchetana has covered a wide range of issues from the Singur agitations in Bengal in 2007 to the 2G scam and more recently the Modi government’s financial policies. Her forte is investigative reporting and reporting on tax policies of the government. Before she joined BW Businessworld as National News Editor in August, she worked with ET Now for 7 years as News Editor.
