KOLKATA (miningweekly.com) - Close on the heels of trade unions, foreign institutional investors (FIIs) have come out in opposition of the Indian government’s divestment of an equity holding in producer Coal India Limited (CIL), albeit for differing reasons.

FIIs, for the first time, have officially conveyed their opposition to the CIL divestment, claiming adverse capital market conditions and negative impact on valuations of CIL equity.

The FIIs have gone to the extent of threatening to offload their existing equity holdings in CIL if the government went ahead with disinvesting 10% of its equity holding in the mining company, an official in Coal Ministry said.

He said that it had been conveyed by the FIIs that they would rather sell off CIL than suffer fall in valuations of their holdings, which was inevitable if the government went ahead with its divestment plan.

However, although the Indian government has not officially stated as such, the Coal Ministry was averse to pushing through the divestments before the end of March next year, owing to a number of reasons, including adverse capital market conditions, coal falling out of favour with foreign investors, particularly European fund houses, and opposition from trade unions operating in CIL.

The official said that the communication from the three FIIs would be yet another setback to government’s plans to raise funds through sale of equity in government-owned companies and bridge the fiscal gap in the Union budget.

It had been pointed out that since January, the CIL stock had fallen an estimated 14% in view of bearish trends at the stock market and coal stocks in general not considered attractive by foreign investors.

The Indian government was aiming to raise an estimated $3-billion through sale of 10% equity in CIL.

On the labour front, five major trade unions active among CIL workers, including NNMWF affiliated to Indian National Trade Union Congress (INTUC), the labour arm of the Congress party Bharatiya Mazdoor Sangh (BMS), left wing organizations like Central for Indian Trade Unions (CITU) and All India Trade Union Congress (AITUC), have all opposed the divestment, threatening to launch direct action if the government went ahead with offloading equity to private investors.

The trade unions have claimed that sequential disinvestment of shares of CIL by the government tantamounted to “creeping privatisation of the mining company and threatening interests of workers”.