Time is fast running out for Coal India, which enjoys a near monopoly in coal supplies in the country, to avert a legal tussle with its biggest foreign investor The Children’s Investment Fund.
The fund has set a 30 June deadline for the company to respond with a plan to revise to market level the prices of coal to be sold to companies under fuel supply agreements, according to media reports.
“Unless we hear no later than 30 June that the board of CIL is willing to set a clear, unambiguous and verifiable path to price all FSA coal to market levels, we would be left with no options but to bring claims against both CIL and its directors for repeated breaches of company law, violation of fiduciary duties and obligations to shareholders,” TCI, which holds a minority two percent stake in Coal India, said in a letter to Coal India chairman.
Reuters
The fund has been at loggerheads with Coal India after the public sector company was forced by the government to sign fuel supply agreements with power companies. As per the pacts, Coal India will have to pay penalty to the companies if it fails to meet the commitment.
TCI views this as unwarranted government interference in the affairs of the company and has invoked the Indo-Cyprus Bilateral Investment Treaty for protection of its investments.
Firstpost had on May 29 reported that confusing signals emerged from a meeting between coal ministry officials and the representative of the fund.
While sources from the government told Firstpost that TCI was unable to tell them which clauses in the bilateral treaty had been violated, other sources said the ministry agreed to free coal pricing, allowing CIL to determine the price.
According to a Breakingviews column on Reuters, TCI’s Chris Hohn said Coal India could make an additional $20 billion a year if it sold in line with open market prices.
Well, that’s quite an amount, isn’t it?
