The Coal Ministry feels that the coal quality issues recently raised against Coal India may dampen investors’ sentiment when the miner goes for a share sale.

The Ministry has shared its concern with the Department of Disinvestment, which had sought views on the proposed stake-sale, said a Senior Coal Ministry official.

India’s largest power producer NTPC entered into a tussle with Coal India over the quality issue by not clearing the latter’s bills. In March, the power generator flagged that it will pay only for the quality of coal that is being received at the power plant and not for what is being billed by the miner. NTPC owed Coal India Rs 2,840 crore. The coal major posted a net profit of Rs 14,788.20 crore for the fiscal ended March 2012 on a revenue of Rs 62,415 crore. Earnings per share stood at Rs 23.45.

Pratik Prakashbapu Patil, Minister of State for Coal, said the proposal for disinvestment of 10 per cent Government shareholding in Coal India is under consideration and also is being consulted with various stakeholders. It is being considered whether the Government stake should further be diluted by going for offer-for-sale (OFS) mechanism along with buy-back programme, or just OFS.

A final call on the timing of the sale will be taken by the Cabinet Committee on Economic Affairs.

“Operational issues at Coal India are hampering investors’ sentiments. Issues related to environmental clearances have not moved forward,” said Deven R. Choksey, CEO and MD of K.R. Choksey Shares and Securities Private Ltd.

Choksey said whichever public sector companies have gone for OFS have seen their market capitalisation going down.. “By buy-back of shares, Coal India would reduce its liquidity. They need to allot (cash reserves) for growth programmes,” he added.

Coal India stock closed 0.79 per cent lower at Rs 315.45 apiece on the Bombay Stock Exchange on Monday.