The Children's Investment Fund (TCI), a UK-based hedge fund that has acquired a reputation for taking up cudgels on behalf of minority shareholders, said on Saturday that it would initiate a legal action against state-run Coal India Ltd within a week for failing to protect the interest of minority shareholders by keeping coal prices artificially low and signing mandatory fuel-supply agreements with power producers.
"We will file a lawsuit against the CIL board within a week or so," said Oscar Veldhuijzen, a partner at TCI, which is CIL's biggest foreign investor. TCI has also said that signing FSAs with power firms could amount to a direct transfer of $19 billion to them.
On Sunday, the coal ministry sought to rebut TCI's charges, with coal minister Sriprakash Jailwal saying the public sector undertaking was free to decide prices to protect its commercial interests, and the government played no role in this.
Virtually in the same breath, Jaiswal seemed to contradict himself, saying coal prices are kept on the lower side to ensure that consumers do not pay an exorbitant price for electricity, and that it ''is entirely in the public interest''.
The development comes soon after a presidential directive forced CIL to start inking pacts with power producers to ensure it supplies at least 80 per cent of their coal needs. The presidential diktat came after CIL refused to comply with a similar request from the Prime Minister's Office.
The world's largest coal producer will now take a final decision on the matter at a board meeting on Tuesday.