Coal India to acquire 50% in Indian Oil's explosives division

To ensure steady supply of quality explosives used to extract coal from open-cast mines, Coal India (CIL) will be taking 50 per cent control of the entire explosives business of Indian Oil Corporation (IOC).

These two government-owned companies have signed a memorandum of understanding (MoU), whereby 12 explosive making units of IOC will have joint ownership with CIL. “A joint venture company will be floated and is likely to start production from March 2017,” said an official in Coal India.

The detailed terms, including stake and assets transfer, are yet to be finalised but a source, close to this development, said IOC will sell 50 per cent of its stake in the explosives business. “This will allow Coal India uninterrupted supply of explosives, first step to extract coal,” the person said.

Although CIL doesn't incur a significant expenditure in procuring explosives, its procurement and steady supply is crucial.

In 2012, following a Coal India complaint on cartelisation, the Competition Commission of India had imposed a penalty of Rs 60 crore on 10 explosives manufacturers for violating the Competition Act of 2002. It was then that the black mineral extractor decided to secure its own uninterrupted supply of these chemical components and talks with IOC began for a joint venture project.

Of IOC’s explosives units, six are located at Coal India’s subsidiary units, except Western Coalfields. Eight of these units exclusively cater to the demand of CIL. However, the total procurement is only a fourth of the miner's requirements. “We procure the rest of our demand from 20-22 other suppliers,” the Coal India official said.