A day after Greenpeace said Coal India was keeping investors in the dark about a “decline” in reserve estimates, the coal major on Tuesday hit back, saying the environment protection lobby was ‘misleading’ investors by spreading “baseless” information.
The stock on Tuesday tumbled 2.6 per cent to Rs 296.95 on the BSE.
According to CIL, the “decline” in “extractable reserve” as referred to by Greenpeace is a derivative of different assessment techniques used by the company since 2011 following a Government decision.
Moreover, considering the regular accretion to reserves in existing blocks through expansion of drilling activity and the award of 119 blocks in July, the extractable reserves may have been doubled since it was last reported in April 2010.
Without direct reference of any organisation, CIL Chairman S. Narsing Rao said: “If I piece together things happening since last year, there is possibility of a sinister design.” The UK-based The Children’s Investment Fund Management Fund, now holding 0.6 per cent stake in the company, previously went to court accusing CIL of selling coal at a subsidised price sacrificing minority shareholders’ interest.
Greenpeace on Monday, alleged that Coal India wrongly claimed extractable coal reserves of 21.7 billion tonnes (bt) during its initial public offering in 2010, higher than actual extractable reserves of 18.2 bt.
Rao, however, ruled out legal action against Greenpeace claiming “it’s a waste of time”.
The issue has its roots in the Government’s intention to introduce internationally accepted norms in the Indian coal industry beginning 2011. The need was felt during the CIL’s IPO.
For years, India used the home grown Indian Standard Procedure (ISP) to assess reserves. All the blocks awarded by the Government, so far, were based on ISP estimates.
To make itself more understandable to foreign audiences, CIL got its reserves assessed under the JORC code (Joint Iron Ore Reserve Committee), used primarily in Australia, in 2010. According to the results (mentioned in the issue prospectus), extractable reserves were pegged at 18.86 bt, as against 22.3 bt as measured under the ISP.
Both the results are, however, subject to change on further drilling in the same blocks. Also rise in price of coal as well as availability of technology may convert today’s difficult asset into a mineable reserve.
Beginning April 2011 CIL switched over to internationally accepted UNFC code (United Nations Framework Classification). This has pegged extractable reserve as in April 2010 at 18.21 bt. Incidentally CIL is the only company, which could conform to the directive so far.
Since then, the company added approximately 2 bt of mineable reserve every year to its kitty through further drilling in the same assets. This has more than compensated the ‘decline’ estimates.
Again in July 2013, the Centre awarded it with 41 bt reserves (based on ISP). Since majority of the new blocks are less explored, it would take years for CIL to come out with a more realistic assessment on mineable reserves. But, expectation is, it should swell the reserves substantially from the current level.
“The moot point is we have sufficient reserves to keep producing coal for decades to come,” said a company director