MUMBAI: The Children’s Investment Fund (TCI), the largest minority shareholder in Coal India Ltd (CIL), has rubbished the government’s argument that it was acting in public interest while directing the state-controlled miner to sign fuel supply agreements (FSAs) at throwaway prices.
The London-based hedge fund also called for the abolition of the FSA system, alleging it was benefitting ‘a lucky few’ and encouraging corruption.
“The government issued the presidential directive after the directors of the company opposed the signing of FSAs, which will benefit a few private companies, and not the people ofIndia. It is a big scam. We are going to expose this in courts,” Oscar Veldhuijzen, partner, TCI, told Business Standard. TCI has a little more than one per cent stake in the world’s largest coal miner, while the government owns 90 per cent.
He said the government was not addressing the real issue by the public interest argument. “We are in the process of filing our legal case. We’ll clearly explain how the whole FSA thing is not in public interest,” Veldhuijzen said, indicating a significant portion of the fund’s legal argument would be based on how the government’s moves were not in public interest, as it claimed.
In a presentation, titled ‘Cheap coal does not benefit Indian people’, TCI said the FSA coal system should be abolished or prices under it should be moved to market levels as soon as possible. “FSA coal price discounts primarily benefit profits of private companies. FSA coal is a direct transfer of a $19-billion subsidy to increase profits for the private sector, instead of providing cheap electricity to Indian households,” it said.
According to the presentation, if FSA coal were priced at market prices, all Indian households currently receiving electricity could receive it for free. “Alternatively, 30 per cent of Indian people without electricity could receive it for free,” the presentation said.
FSA is not justifiable for non-power companies, as these sell their products at non-regulated prices. “Because huge free profits are available for the lucky firms obtaining FSAs, we believe it is highly likely that FSAs are awarded to companies willing to pay bribes,” TCI said.
A large number of companies from unregulated industries such as cement and steel have to buy coal at market prices. “This means firms which receive FSA coal keep the whole benefit for themselves, rather than passing it on to the end customers,” TCI said.