The Hindu : Business : CIL mulls hiving off unit

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Wednesday, Jul 04, 2007
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CIL mulls hiving off unit

Indrani Dutta

Greater Calcutta Gas may join the proposed venture
Majority stake is likely to be given to HPCL

KOLKATA: Coal India Ltd (CIL) is planning to hive off the loss-making Dankuni Coal Complex (DCC) into a joint venture with Hindustan Petroleum Corporation Ltd (HPCL). Talks have already been held and it is possible that a West Bengal government outfit, Greater Calcutta Gas Supply Corporation (GCGSC) will also join in the proposed joint venture. DCC has an exclusive gas offtake arrangement with GCGSC.

DCC, located near here, was set up in the Eighties as a coal-carbonisation unit of CIL in line with the recommendations of the 1974 Fuel Policy of the Central Government which favoured the setting up of such pants in India, as a replacement of petroleum-based fuel oil in the wake of the crude price shock of the Seventies. The main product of DCC, coal gas, was meant to be an alternative fuel for domestic and industrial use, projected as an industrial substitute for furnace oil.

Sources said that a round of talks was recently held in New Delhi between CIL, HPCL and the West Bengal government. This was confirmed by State industry department officials who said that wide-ranging discussions were held and HPCL would conduct further studies. Majority stake is likely to be given to HPCL. The 485 employees of GCGSC, whose accumulated losses exceed Rs. 20 crore, are to be retained along with the 600 employees of DCC. Sources told The Hindu that although DCC had ex cellent profit-potential with a low break-even point, poor gas offtake had restricted production levels on the one hand and the low price of gas being paid by GCGSC on the other, pushing the unit to the brink. DCC incurs a loss of nearly Rs. 2 crore a month, having accumulated a Rs. 500-crore loss since inception.

It was learnt that while GCGSC buys the DCC piped gas at Rs. 22 per therm, it sells at Rs. 40 leaving DCC with only 50 per cent of the retail price. Moreover, its offtake was low, leading to only a 35 per cent capacity utilisation by DCC. This also restricted DCC’s by-product output which enjoyed a very good market. The unit was transferred to CIL’s profit-making subsidiary South Eastern Coalfields more than a decade ago.

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