The Union coal ministry has asked the Board for Industrial & Financial Reconstruction (BIFR) to withdraw the investment ceiling imposed on Coal India subsidiary Bharat Coking Coal (BCCL), though the BIFR company has registered profit this year.

BIFR had barred the company to invest beyond 5% of its free reserves and the ministry has argued that such an investment cap has become detrimental to the company?s growth, since it requires sizeable capital expenditure every year to pursue its planned activity.

The company?s cash reserves are negated since it is a Rs 6,000-crore negative net worth company. The board could take a decision on investment up to Rs 20 crore only, whereas its capital expenditure plans are close to Rs 300 crore every year, BCCL chairman TK Lahiri told FE.

?This year (2010-2011) our capital investment requirement is Rs 300 crore against last year?s Rs 298 crore and that has to be approved by the CIL board,? Lahiri said.

A BCCL official said there were no problems in getting approvals from the CIL board but BCCL ceiling was so low that for nearly all investment proposals, it has to go to CIL for clearance. Implementing project works could have been much faster if there were no such procedural hassles, the official said.

Lahiri said BCCL didn?t have any liquidity problems in implementing projects because it has been getting loans from CIL, but its negative net worth has been hampering its autonomy.

?To come out of BIFR, this negative net worth needs to turn positive. Only after getting out of BIFR can we apply for a mini ratna status, which will help us to take investment decisions up to Rs 500 crore on our own,? Lahiri said.

In fact, according to Lahiri, a position has now come from where BCCL, currently operating 82 mines (47 underground, 18 opencast and 17 mixed mines), can drive itself out of BIFR. The company in 2009-2010 has posted a provisionary profit before tax of Rs 402 crore against a loss of Rs 1,300 crore in 2008-09. He said turnover grew by 31% at Rs 5,080 crore in 2009-10. Since BCCL is a BIFR company, it is entitled to tax exemptions.

?So our profits will help us reduce our negative net worth by around Rs 400 crore and also we are likely to get a waiver of CIL debt of Rs 2,800 crore in the current fiscal. Now, if for another two-three years we are able to register profits like last year (2009-2010), in the next four to five years BCCL will be a BIFR-free company,? Lahiri said.

He said BCCL has set a target of producing 29.1 million tonne of coal in 2010-2011, 2 mt more than last fiscal. But it has five more projects identified for producing an additional 14.52 mt by the end of the 11th Plan period in 2012. For this, there might be a requirement of investment decisions on emergency basis for which the coal ministry has asked BIFR to withdraw the investment ceiling, an official said.

Lahiri said the ministry?s communication to the BIFR followed BCCL?s request to the ministry of withdrawing the cap.