The Hindu : Business : CIL may have to rework strategy

Online edition of India's National Newspaper
Saturday, Mar 04, 2006

Business

Business

CIL may have to rework strategy

Indrani Dutta

Definition of captive consumption to be modified

KOLKATA: The budget has set the stage for increased competition for the public sector Coal India Ltd (CIL), which now accounts for 85 per cent of the country's coal production.

Even as most top officials of CIL went into a huddle after the announcements by the Finance Minister, P. Chidambaram, user companies in the core sector were readying to raise a toast to the Union Finance Minister saying that a lot of pending issues have been addressed in the budget and ultimately sectors such as power would get coal on a timely basis.

What is exciting private and public sector players in the power sector, the single largest consumer of thermal coal, is that the budget has given definite hints that necessary legislative changes will be brought about to modify the definition of captive consumption to allow coal mining by producers with firm supply contracts with steel, coal and power companies.

Currently core sector coal users enter captive mining but they are required to have an equity stake in the coal-mining companies they get coal from.

Sources in CESC felt that this had paved the way for entry of any company into captive coal mining with firm fuel supply agreements with the three core sectors.

A CIL official admitted that this would in effect set up a parallel system, since now only CIL was allowed to sell coal in this manner.

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