Coal India sheds 3% on profitability concerns

Shares of Coal India tanked by nearly 3% in morning trade on the bourses today after the company said its profitability would be eroded by about Rs 2,000 crore per annum post-enactment of a proposed new mining Bill that was cleared by Cabinet on Friday.

According to the new Mines and Minerals (Development and Regulation) Bill, 2011, coal miners have to share 26% of their profits with project-affected people. Coal India Chairman N C Jha has said, "It (new Mines Bill) would hit the profitability of the company by about Rs 2,000 crore."

Shares of Coal India opened on a weak note and then dipped by over 2.76% from its previous closing price to a low of Rs 323.55 on the BSE. Similar movement was seen on the National Stock Exchange, where the stock dropped by 2.95% to hit a low of Rs 323.35.

However, Coal India later regained some of the lost ground and was trading at Rs 329.50 on the BSE, down 0.98%, and at Rs 329.85 on the NSE, down 1.01%, at 1050 hours.

Marketmen attributed the fall in the counter to the projected impact of the new Mines Bill on the profitability of the company. The bearish trend in the broader market also dragged down the stock.

The BSE benchmark Sensex was trading at 16,172.20 points, down by 281.56 points, and the wide-based Nifty was quoted at 4,859.15 points, lower by 84.10 points, at 1104 hours.

Jha added that if the government wanted to maintain the profit of the state-run PSU, it would have to resort to a hike in coal prices.

Earlier this month, Jha had said the additional cost impact due to the new Bill will eventually be passed on to the consumers. The Federation of Indian Mineral Industries (FIMI), too, had said yesterday that prices of all minerals will go up if the new Mines Bill is implemented.

Domestic coal prices range from Rs 770 to Rs 1,700 a tonne at present.