The dark side of Coal India
Sharad Matade 22 October 2010

We dug deep into the coal behemoth’s seamier side. Though Coal India is flying high now on the back of its big-bang IPO, it really did not come up smelling of roses

Now that the hype about Coal India Ltd's (CIL) Rs15,000-crore mega initial public offer (IPO) is dying down, now it's time to look at the company's darker side.

For instance, there are about 615 proceedings pending against employees of CIL and its subsidiaries, including investigation by the CBI and the Central Vigilance Commission, (among other regulatory bodies) relating to corruption and other charges. Still, CIL firmly believes that these proceedings will not impact its financial results. The world's largest coal reserve holder, in its red herring prospectus, has not submitted a comprehensive list of legal proceedings.

In May 2010, MP Dikshit, ex-chairman and managing director of South Eastern Coalfields Limited (SECL), a subsidiary of CIL, was arrested by the CBI for allegedly accepting about Rs1.30 crore from two private firms. In 2003, the government suspended NK Sharma, CMD of CIL, on allegations of corruption. He was charged with misappropriation in the purchase of coal and allegedly favoured Bharat Earth Movers Ltd for awarding a contract.

The Centre is also fully aware about CIL and its subsidiaries' illegal practices but it looks like the government, and indeed, the coal behemoth itself, do not seem to be concerned, since the entity accounts for more than 80% of India's coal output.

Recently, Union coal minister Sriprakash Jaiswal had told reporters that the Centre has taken "adequate efforts" to curb corrupt activities in the coal sector, which had built up over the past 30 years. However, he did not miss the chance to blame state governments, saying that the Centre is "not getting help" from them in eradicating corruption.

As on 10 September 2010, nine public interest litigations, three criminal and ten income-tax cases have been filed against the company. Despite being a government undertaking, CIL is also facing allegations from other government departments. The Department of Central Excise and Customs has raised a claim of Rs6.40 million against the company (CIL did not provide the detailed information in its red herring prospectus).

There are 16 arbitration matters and 10 civil cases, which account for about Rs268.69 million and more than Rs100 million respectively, involving the company.

Additionally, there are about 160 cases relating to sales and marketing disputes filed by CIL's consumers. The company has also been charged for alleged encroachment of land for carrying on mining activities and 236 service matters have been filed by its employees.

CIL's subsidiaries are one step ahead as far as pending litigation goes. More than 250 criminal cases have been filed against Bharat Coking Coal Limited (BCCL), another subsidiary of CIL. One notable case has been the criminal case filed by the directorate general of mines safety, against BCCL officials, alleging that certain company officials had failed to take timely action to repair or replace badly-deteriorated pipelines which resulted in the death of three workers.

Six public interest litigations and a whopping 448 tax cases, relating to sales tax, service tax, royalties, rural employment and primary education cess, and bank guarantees which involve Rs5,696.27 million, have been filed against BCCL. A total of 868 civil, 843 service cases and 71 arbitration petitions have also been filed against BCCL.

Central Coalfields Limited, which has lost 11.26 lakh tonnes in production till June this year, is also facing allegations for illegally dumping hazardous waste, forceful occupation of land, violating environmental norms, evading electricity duty and various tax cases. The total amounts involved in tax cases and arbitration cases are Rs29,423.42 million and Rs478 million respectively. The directorate general of mines safety has also slapped accident cases against a few CCL employees.

Central Mine Planning and Design Institute Limited (CMPDIL), Eastern Coal Fields Limited (ECFL), Mahanadi Coalfields Limited (MCL), Northern Coalfields Limited (NCL), South Eastern Coalfields Limited (SECL) and Western Coalfields Limited  (WCL) - all CIL subsidiaries - are facing thousands of cases relating to criminal, tax, encroachment and environmental issues amounting to billions of rupees. A molestation case has also been filed against a senior official of NCL.

A media report says that despite the company's safety and health measures, the situation is still poor. Major accidents were in the New Kenda Colliery (54 deaths) in 1994, Gaslitand mine (65 deaths) in 1995, and Bagdiggi mine (29 deaths) in 2001 and there is also a steady toll of smaller accidents. In the case of units under CIL, the annual number of deaths run at an average of 190, added the report.

Despite the company and its subsidiaries being charged with serious allegations, almost all market pundits and research firms have gone ballistic over the IPO citing the company's strong balance sheet, rapidly growing production and reserve capacity and increasing demand for the company's products.

Shibaji Dash
1 decade ago
Col India touched a high of Rs 357- gain of Rs 112/-. Just wait for a few days to know who have bought up the shares off loaded by the HNIs , the retail buyers of the IPO. and to whose domain and control these shares have passed on directly or indirectly. It would be some of the top 5 multi national mineral companies. Incidentally, that is and would not be story in the case of the No.1 Chinese company owning the highest amount of coal reserve in the world.
1 decade ago
corruption and misuse of power is universel,see the listing
Shibaji Dash
1 decade ago
Mr Matade may consider requisitioning Information from the IT Dept. at Kolkata or CBDT about the outcome of the massive raid on the coal mafia of Dhanbad in 1988/1989(with CRPF protection) to add more factual back up to his research.
Sonali Bankar
1 decade ago
This is really eye-opening report. This could have been highly impacted, if reporter would have come up this report before IPO.
Satish Kasturkar
1 decade ago
This helps us to understand Coal India very well.
The report is commendable.
Rohinton Khambata
1 decade ago
Excellent piece of Journalism. How I wish you had published same before its IPO issue.
1 decade ago
Market eventually discounts these factors in price. Not (sur) prised correctly.
Shadi Katyal
1 decade ago
I agree with Mr.Prasan that we must get some details of Coal Mafia as it is well known that tons of coal along with trucks is stolen daily.
As for Indian coal the unfortunate part is that it has more ash and since it is PSU the cost to customer is much higher as prices are manipulated. If there is no PSU and no hanky panky is done Coal could be king .
The Indian PSU are well known of corruption but now we saw right under the throne much larger thievery in CGW.
One should ask the quesion why are we allowing PSU even to exist.
Look at Air India and hotels
1 decade ago
nice and good information but why u didnt publish in-between Ads of IPO thanks to spread awareness and make public to open their mind in dis regard
k a prasanna
1 decade ago
Coal India being a PSU there is bound to be corruption, malpractices and misuse of power etc.,in the set up. Is there any PSU out fit in the country which is totally non corrupt? Also, there is bound to be litigation, accidents, considering the scale and area of operation. These are trivial matters. More importantly, the entire coal business is controlled and managed by COAL MAFIA. Instead, readers would welcome an in-depth article, on 'mafia' control of coal business.
Shadi Katyal
1 decade ago
Why is PIO allowed when there are so many cases pending. Off course this is a PSUand there will never be any judgment against the employees.
Who will invest in such PSU???

Narendra Doshi
1 decade ago
It is unfortunate that Sharad Matade could not come out with this excellent 'graveyard backlog heap of dirt information' befor or during the IPO period.
What do you recommend to retail investors who get the allotment ??
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