The Hindu Business Line : FDI in captive coal mining may be allowed for steel, cement cos

The move will also pave the way for international steel manufacturers such as Posco and Arcelor, who have announced plans to set up steel plants in India, to have their own captive coal mines to meet their coal requirements.

New Delhi , June 6

IN order to increase coal production, the Government plans to to permit up to 100 per cent foreign direct investment (FDI) in captive coal mining in steel, cement and sponge iron sectors where captive coal mining is already permitted.

Last fiscal, the country produced around 370 million tonnes (mt) of coal, out of which 325 mt were produced by Coal India Ltd (CIL). This fiscal, according to CIL estimates, the country will face a shortage of around 12 mt.

The move will have a dual impact, Government sources said. "On one hand it would reduce pressure on Coal India while on the other hand it will bring down the production cost for these companies who would save on coal cost," officials said.

Domestic steel, cement and sponge iron manufacturers too would be permitted to bring in FDI for captive coal mining through the joint venture route where the Indian partner may hold a nominal stake.

As of now, FDI in coal mining for captive use is allowed only in the power sector.

Government sources told Business Line: "Since there is an urgent need to increase coal production, this is only an extension of what has been done to the power sector. The Finance Minister has already indicated that the Government would undertake comprehensive reforms in the coal sector."

However, for domestic steel manufacturers taking the joint venture route for captive coal mining, certain tax-related issues need to be sorted out before formalisation of the policy, sources said.

The tax-related issue is the transfer of coal mined by the joint venture company to the Indian steel manufacturer. Sources said that when the joint venture between Indian steel manufacturer and foreign investor mines coal for captive use by the Indian partner's steel plant, the transfer might require some clarifications.

"The Companies Act does not permit one company to just give away some assets, in this case coal, to another company. If it is shown as sale, the issue of sales tax or value-added tax comes in," sources said, adding the move would require some amendments to existing rules.

The Government is planning to introduce certain changes in coal-related mining legislations in the monsoon session, sources added.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Centre agrees to subsidise cotton export from Maharashtra

`Infocomm may match Reliance in turnover, profits in 4 years'

Wheat stocks plummet to 14.3 mt

Crude futures catching fancy of bullion, equity investors

Tax on 9 new services likely from June 16

FDI in captive coal mining may be allowed for steel, cement cos

Indian Hotels Q4 net up 14.6 pc

Developing world relies on Indian ARVs: LSE Update

Bank of Baroda opens 24-hour branch in Mumbai — Rahul Dravid appointed brand ambassador