Thursday, April 15, 2010

Maoist woes may hit FDI, Coal India IPO

Sumant Banerji, Hindustan Times

New Delhi, April 14, 2010
First Published: 21:55 IST(14/4/2010)
Last Updated: 01:35 IST(15/4/2010)


Both foreign direct investment (FDI) and an ambitious initial public offering (IPO) of shares by the world’s largest coal producer — the state-owned Coal India Ltd — could be jolted by the current wave of Maoist-bred unrest and violence in the mining belts of Chhattisgarh and Jharkhand.
The corridor of influence for Naxalites — as Indian Maoists are called — stretches from the Nepal border to Andhra Pradesh, covering areas in West Bengal and Orissa as well. Public sector metals and mining firms are often their target.
“Though there is no estimate available on how much loss mining companies incur due to Naxalite activites, it is not an atmosphere that breeds investment,” said RK Sharma, general secretary, Federation of Indian Mineral Industries. “If the problem is not checked appropriately, it would have a big impact on foreign investment. I would think foreign investors may also think twice before putting their money in the Coal India IPO.”
CIL, whose operations have been hit by Naxalites in the past, plans to raise in excess of Rs 12,000 crore through its IPO expected in August.
“The Naxalite menace is one of the biggest problems that we are faced with and often it impacts our stock movement when railway tracks are blown apart,” said a senior CIL official, adding it may become “very critical” as many northern power plants depend on coal from CIL.
Naxals usually target iron ore miners like the National Mineral Development Corporation.
More than 80 per cent of the country’s 23.6 billion-tonne iron ore reserves fall in Naxal-hit areas.
“The Naxals have so far mostly targeted iron ore miners because of the wealth,” said Navin Vohra, partner, who leads the mining practice in consulting firm Ernst & Young’s Indian unit.
“The disruptions do impact opening up of new mines and as such any new entrant will have to bear this is mind.”

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