In February this year, Coal India announced that it planned to pick up a 15% stake in the Australian assets of US-based coal firm Peabody. When a company of the size of Coal India makes this sort of announcement, people in the trade sit up and take notice. Other companies followed suit, and some picked up pace on their bids, like Rio Tinto for Riversdale. All of them completed their deals. But last week, Coal India said the joint venture will take more time to sew up. This comes after the coal company was informed it can bid for only listed companies overseas, automatically eliminating the scope for picking up unlisted bargains. The current delay is as usual, the doing of a government that is taking its time over clearances on issues like the listing of the proposed company. Remember, all this comes despite the government dangling the Maharatna tag on the company, meant to override just such delays. Peabody Energy is the world?s largest private sector coal company, not some nondescript entity with an opaque financial structure. Valuations of a joint venture with it shouldn?t be a problem. There are two implications from the delay. It pushes back the chance to acquire new coal mines that India badly needs. The second is the possibility that some other company may put in a rival bid.
Meanwhile, as widely reported by media, India is in the middle of a coal crisis. With around two-thirds of the coal produced in the country being used in power generation, according to Planning Commission data, any shortage in coal availability is sure to hit the power sector in a big way. The power ministry predicts that a coal shortage would mean the production of 26,000 MW (12.3% of India?s 1,71,000 MW of installed capacity) less electricity in 2011-12. The delays are, therefore, precisely quantifiable and ought to be charged to the coal ministry. The coal ministry is like many of India?s line ministries, with little knowledge of issues like mergers and valuations. They were set up to allocate scarce resource among competing ends. There can be no other reason why the same ministry acquiesced to a plan to set up Coal Videsh with five ministries to report to for any decision. That company has no assets till date.
