The Children’s Fund has written to the company and all its directors asking them to act in the best interest of its minority shareholders. The government and the coal ministry had asked the company to sign FSA’s (Fuel Supply Agreements) with the power producers assuring them of 80% of the fuel supply. This assurance would ensure that Coal India would have to make good the loss if it fails to supply the 80% assured supply, even if it means that the same would have to be imported at double the cost.
This FSA would ensure that a profitable company would become a loss making company in the course of the next decade at best. It may be mentioned that coal prices are between 60-60% cheaper than international prices on a kilo calorific value basis. Why the government is pushing the company to do so is at best a mystery or one more of its hundreds of scams for which the UPA-II has now become well known for. It is pure reflection that no shareholder body in India has chosen to challenge any government company till date shows how consumer activism in India is. Readers would recall that in the case of Satyam also there was no action taken by any Indian mutual fund and it was much later that there was concerted effort against the company. In the meanwhile class action suits were filed by foreign investors against the company and also its auditors. Both had to pay up while Indian Investors had no such recourse. Even after Satyam is history there have been no amendments to the law to protect and safeguard the rights of minority Indian shareholders. How long will this differentiation continue?
Coming back to Coal India, the coal ministry is threatening the company and its board of bringing Presidential intervention in the matter of FSA. This would be most unfortunate for the company, for the cause of corporate governance and would ensure that not only portfolio investment but also FDI gets affected. Everybody would be aware that the amendment to the income tax act with retrospective effect of 60 years has been proposed in the Finance Bill and is the laughing stock all over the country and the world. It seems the government is now left with just one job of defending its action and the bill that the intention of this retrospective amendment is not to become vindictive but only to tax genuine cases like “VODAFONE”. Such desperate action needs to be avoided in the greater interest of the country and not create work for lawyers and chartered accountants.
Post Coal India one would see action being culled against the government in the oil sector PSU’s like ONGC, OIL, GAIL and the OMC’s like IOC, HPCL and BPCL. The government must reduce taxes, excise duties and VAT on these products as they have become criminally high. The action taken by the Goa government in reducing VAT from 12% to a mere 0.1% and thereby reducing the price of petrol by Rs 11 per litre. The neighbouring state Maharashtra has increased the taxes on petrol, diesel and LPG and also levied a new charge of VAT on natural gas. This effectively increases prices of petro products leading to a chain reaction and leading to higher inflation. It’s high time that rationalisation of the tax structure on petro products is done so that the industry, country and consumer survive.
Take the recent case of increasing the royalty on crude oil which was raised from Rs 2500 per ton by a staggering 80% to Rs 4500 per ton. This is a pass through levy and would increase the under recoveries and the losses of the oil refining companies. The government is quite happy having earned this money and would pay a small portion of it as subsidy but all other taxes whether it is excise duty, sales tax or VAT would go up because of this royalty and no one would talk about it.
I believe that the time has come for minority shareholders to demand their rights and all shareholders of Coal India must support the action being taken by The Children’s Fund.
Minority Shareholders must Unite, and fight to save and protect our interests as shareholders.
