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TCI drags CIL to court over pricing

The Children?s Investment Fund Management on Friday took state-controlled Coal India to court for underpricing coal leading to crores of losses in revenue.

The Children?s Investment Fund Management (TCI) on Friday took state-controlled Coal India (CIL) to court for underpricing coal leading to crores of losses in revenue. The lawsuit, filed in the Calcutta High Court, made the government of India also a party for its ?improper exertion of pressure on the company as a majority shareholder?. The government holds a 90% stake in the miner while TCI holds a minority stake of 1.5%.

In a statement, TCI said the lawsuit was filed against the directors of CIL for breach of their fiduciary duties and for failing to perform their functions with adequate care and skill.

TCI has estimated that by the end of FY13, CIL would have lost over R8,700 crore ($1.75 billion) in pre-tax profits simply for reversing the price increase of December 31, 2011. It demanded that CIL increase the fuel supply agreement (FSA) price of coal and bring it to international market levels. But since CIL did not do so, it would have cost the company a staggering R2,15,250 crore ($43 billion) in pre-tax profits since it got listed in 2010, the hedge fund has calculated.

Around 90% of such profits could have flowed to the Indian economy in the form of dividends and the sum is enough to fund free electricity for all Indian households, TCI said in the statement.

CIL in FY12 earned a profit of R14,788 crore against R10,867crore in FY11. Its had net sales of R62,415 crore in FY12 against R50,299 crore in FY11.

TCI has been persuading the ministry of coal for the past three months to increase the price of coal and to supply 100% washed coal to reduce pollution.

Though there were several rounds of meetings with the shareholder and the coal ministry, the parties couldn’t reach a consensus.

Imran Karim, the TCI counsel, said the case has been filed at the court of Justice IP Mukherjee but there would be no hearing until November since the court will go on vacation from Monday. The court will issue directives either on Tuesday or Wednesday against which CIL will have to file a reply. The final hearing is expected to be in December, Karim said.

Though TCI earlier decided to file the case in end July, it took another two months to take CIL to court.

In August, TCI had filed a writ petition against CIL in the Delhi High Court. A CIL official said in its writ petition TCI has claimed compensation to recover the losses due to underpricing of coal.

The CIL stock closed at Rs 349.40 on Friday, up 0.24% from Thursday’s close.

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First published on: 13-10-2012 at 01:45 IST
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