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The Children's International (TCI) Fund, a UK-based institutional investor, has filed a writ petition in the Delhi High Court seeking to quash the letter dated 25 January 2012 written by the then Coal Secretary, Alok Perti to Coal India Limited (CIL) instructing it to revise the price hike CIL made in December 2011.
The Delhi High Court issued notice to both CIL and Union of India.
In December 2011, CIL had increased the prices of thermal coal. "This was a positive and forward step in bringing the coal prices at par with the international prices. The Ministry of Coal (the Ministry), however, illegally interfered with this decision and directed CIL to roll down the prices. Accordingly, CIL reversed the price hike on 31 January 2012," the statement issued by TCI said.
The UK-based institutional investor owns about 1 per cent in the company. At current prices, this is worth over Rs 2,200 crore.
In its petition, TCI argued that coal prices were completely de-regulated and the Ministry did not have legal authority to interfere. The petition also argued that the January revision in the price was also illegal.
The TCI petition also sought a direction from the High Court to the Ministry on interference in the pricing mechanism in any manner.
TCI claimed in its statement that it had always urged CIL to bring the coal prices in sync with the international price. "CIL loses $19 billion per annum of pre-tax profits because of artificially low coal prices. Cheap coal is not benefitting the People of India as most benefits are ending up with private companies or mismanaged State Electricity Boards," the TCI statement said.
TCI argued in the statement that benefits of higher profits for Coal India should be used to increase dividends which help to increase the availability of (cheap) power to India.
TCI has also challenged the legality of the directive dated 04 April 2012 issued under Article 37 of the articles of association of CIL by the Joint Secretary in the name of the President (the Directive). Whilst, under the Articles of Association, this power has been conferred on the President to be exercised either in the interest of national security or substantial public interest¸ TCI believes that there has been no application of mind by the Ministry to assess if any public interest, let alone a substantial public interest, would be served by issuing such a Directive.
TCI wants the whole system of Fuel Supply Agreements or FSAs to be scrapped. Following the law laid down by the Supreme Court of India in many cases, including the recent 2G judgment (Centre for Public Interest Litigation v. Union of India), a natural resource like coal should be auctioned rather than given through FSAs.
TCI also said in the release that the FSA system of distributing coal has an inbuilt risk of engendering corruption and there are strong parallels between the corruption related to the allocation of the 2G spectrum at a large discount to fair market prices at the time and ‘Coalgate’ – selling coal blocks at a large discount to market – as well as selling FSA coal below market prices.
"In addition to its writ action in the High Court it is also TCI’s intention to sue Board of CIL for breach of fiduciary duties and abuse of minority shareholders," the TCI statement said.
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