Coal India – Divestment for FY 2023-24
- June 1, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Coal India – Divestment for FY 2023-24
Section: National economy
- Government’s bid to divest up to 3% equity stake in the company through offer for sale of shares (OFS).
- Centre is likely to raise about Rs 4,200 crore from the sale of the full 3% stake at the base price of Rs 225 per share.
- Government currently holds a 13% stake in the coal mining PSU.
- A green shoe option to further sell an additional 1.5% over the base offer, which will be exercised in case of oversubscription.
- Government of India, who set a disinvestment of Rs 51,000 crore for the fiscal year 2024 which is lower than the previous financial year.
- Coal India produced 622 MMT (million metric tonne) coal in 2022. Out of it, coking coal production is 54 MMT.
|Types of Coals|
Non Coking Coal does not have any caking properties and it is mainly used as thermal coal for power generation. It has a higher ash content and is also used in industries like cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing.
Coking coal (Metallurgical coal) is the type of coal which on heating in the absence of air undergoes a transformation into a plastic state, swells, and then solidifies to form coke. Only some bituminous coals possess such properties, and to varying degrees. Coke is an essential fuel and reactant in the blast furnace process for primary steelmaking. The demand for metallurgical coal is highly coupled to the demand for steel.
Ranks of coals, from those with the least carbon to those with the most carbon, are lignite < subbituminous < bituminous < anthracite.
|Green Shoe Option|
The green shoe option is a special clause used in an underwriting agreement for IPO/OFS where the underwriter is under no restrictions to sell more than the planned number of shares. Underwriters thus have the right to sell more shares to investors than what is planned.
- Disinvestment means sale or liquidation of assets by the government, usually Central and state public sector enterprises, projects, or other fixed assets.
- The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs, such as to bridge the revenue shortfall from other regular sources. In some cases, disinvestment may be done to privatise assets.
- However, not all disinvestment is privatisation.
- Some of the benefits of disinvestment are that it can be helpful in the long-term growth of the country; it allows the government and even the company to reduce debt. Disinvestment allows a larger share of PSU ownership in the open market, which in turn allows for the development of a strong capital market in India.
- There is a separate department under the Ministry of Finance which handles all disinvestment-related works for the government.
- On 10 December 1999, the Department of Disinvestment was set up as a separate department and later renamed as Department of Investment and Public Asset Management.
- Disinvestment targets are set under each Union Budget, and every year the targets change. The government takes the final decision on whether to raise the divestment target or not.
- As per the latest policy, disinvestment now covers two types: (1) disinvestment through minority stake sale and (2) strategic disinvestment.
- Public Sector Undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSEs;
- In the case of disinvestment through minority stake (share) sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings;
- Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs up to 50 per cent or more, along with transfer of management control.