KOLKATA (miningweekly.com) – Adverse capital market conditions, environmental concerns among foreign investment banks and labour opposition have created uncertainty about the Indian government’s plan to sell a stake in Coal India Limited (CIL).

The government was keen to sell a 10% stake in CIL to investors within the current fiscal year, as part of the roadmap for divestments in State-owned companies to bridge the federal fiscal deficit. But the present business environment was "not conducive" for setting a definite date, an official in the Coal Ministry involved in preparing the divestment papers said.

He said the federal government had expected to raise about $10-billion though the sale of interests in various government companies, of which about $3.3-billion was expected to be the result of a divestment of 10% of CIL.

There was uncertainty about whether the government would be able to conclude the divestment of the 10% stake in CIL, which was considered crucial to the government's aim to bridge the fiscal deficit it was facing, by March 2016.

The federal government’s decision to call off the appointment of merchant bankers for handling the CIL equity sale for the third time this year was emblematic of the uncertainties dogging the divestment, the official said.

Several officials conceded that pressures were mounting on foreign investment bankers to stay away from the coal sector owing to rising environmental concerns over the use of the fuel, particularly among European and American bankers, triggering bearish sentiments on participation in the stake sale among overseas investors.

It was pointed out that environmental concerns over Indian coal mining had been aggravated as Western economies have noted the running battles between the Indian government and environmental activists and nongovernmental organisations, including Greenpeace India.

In September, the Indian government cancelled the registration of Greenpeace India and banned it from receiving foreign funds largely owing to the latter’s opposition to mining at the Mahan coalblock.

Meanwhile, all five trade unions representing CIL workers were opposed to any further divestments on the grounds that it would lead to "creeping privatisation" of the country’s largest mining company.

The trade unions in a joint statement pointed out that the government had, during a previous round of the sale of its equity holding in 2014/15, assured workers that no further equity sale in CIL would be held and that the public sector nature of the company would be protected.

At least two merchant bankers told Mining Weekly Online that valuations of CIL equity could also possibly be impacted by the miner’s inability to improve realisations through e-auctions.

Although CIL has been permitted to increase volumes on offer for sale through e-auctions, the response has been poor until now. In the last round, there were few takers for the five-million tonnes on offer, as buyers stayed away, perceiving the base price to be too stiff.

CIL had set the base price at 25% plus the notified price at which the miner sold coal to thermal power producers.