Monday, August 31, 2009

Formation of an Empowered Committee of Secretaries with mandate to consider and recommend proposals to Coal India Limited to invest abroad

SH/CS/RK
The Cabinet Committee on Economic Affairs today approved the proposal that the Empowered Committee of Secretaries, constituted earlier for considering proposals to be taken up by the International Coal Ventures Limited (ICVL), a Special Purpose Vehicle (SPV), set up jointly by SAIL/RINL, NTPC, NMDC/CIL for acquiring coal properties abroad, will also consider proposals for CIL for investments in coal assets abroad, which are beyond the powers of the CIL Board. Such proposals for investment abroad will be submitted by CIL to the above Empowered Committee. The recommendations of the Empowered Committee will be placed before the CCEA for approval. A representative of the Planning commission has also been included in the aforesaid Committee. CCEA also approved the guidelines, to be followed by CIL for investments abroad.

The objectives which the Coal India Ltd. proposes to achieve are:

(i) To bring coking coal and high grade ash thermal coal to India to meet the national demand. This may be done by acquiring coal properties abroad or investing in joint ventures with coal mining companies.

(ii) To adopt best global mining and management practices and to transform CIL into an efficient global coal company with trans-national operations.

(iii) The demand for coal in India has been outpacing its supply from indigenous sources and the domestic coal production has not been able to keep pace with the demand. Demand for coal is forecast to increase sharply to about 731 Million Tonnes (MT) by 2011-12 from the current 474 MT. Further, it is expected to be increased by 1,125 MT by 2016-17 and 2,555 MT by 2031-32. Since India does not have enough reserves of metallurgical and high grade coal, to meet the projected gap between demand and supply, efforts are being made to secure resources abroad from where long term supply of coal at reasonable prices could be assured.

In such transactions, negotiation and finalization of deals normally take place in a very short time frame. Therefore, expeditious approval would be required in respect of investment abroad, as the speed of decision making is the key issue. Hence, in order to facilitate expeditious decision making, it is considered necessary to utilize the services of the earlier constituted Empowered Committee of Secretaries for ICVL, also for the CIL’s investment proposals abroad, which are beyond the existing financial delegation to a Navratna company, i.e. Rs.1000 crore. This is also a big step forward to grant greater autonomy to the major Navratna PSU like CIL.

The strategy of CIL in the short term with immediate returns would be by way of establishing joint venture or equity participation with companies mining meteorological coal and/or low ash thermal coal mines. In a medium term prospective, CIL would be scouting for equity participation with companies in green field projects and finally in long term, the CIL’s intentions would be to acquire/lease coal blocks and mine them on a standalone basis.

It would help CIL to get speedy clearance of its investment proposals abroad which ultimately will help in bridging the ever increasing gap of demand and supply in the coal sector. It may also act as a motivating factor, as greater autonomy has been granted to CIL. In long run, all the consumers of this vital resource would be benefited, specifically the infrastructure sectors such as steel, cement and power etc.

Memorandum of Understanding (MoU) for cooperation for development of coal mining in Mozambique has been signed between Government of India and Government of Mozambique. Two coal Blocks have been awarded to Coal India Ltd. through bidding process for carrying out exploration and future mine development. To promote Indian interest in Mozambique, Government of India is considering approval of sovereign fund for development of Apex Planning Organisation (APO) and Apex Training Organisation (ATO) to look after scientific mine planning in coal projects in Mozambique as well as train people of Mozambique in different aspects of coal mining.

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