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Piquant situation over World Bank coal loan

Badal Sanyal

CALCUTTA, June 23

A PIQUANT situation has developed over the utilisation of the sanctioned World Bank loan of about $ 1.06 billions towards development of 24 existing opencast coal projects with the subsidiaries of Coal India Ltd not inclined to draw upon the unutilised p ortion of the loan unless IBRD withdraws the conditionalities.

There are indications that the five subsidiaries of CIL, which are the beneficiaries of the World Bank loan sanctioned under the coal sector rehabilitation project (CSRP), may surrender about $ 500 millions, which is still to be utilised in the second ph ase of CSRP implemention.

Of the total loan sanctioned in 1997, these companies have so far utilised about $ 560 millions towards procurement of heavy earthmoving equipment through global tenders.

Informed sources, however, explain the development differently. They point out that it is the World Bank which is inclined to suspend disbursement of the unutilised portion of the loan.

According to it, the Indian Government has done precious little to reconstruct the domestic coal sector to facilitate the involvement of the private sector in a big in the future development of the industry.

IBRD is believed to be unhappy as in its opinion the Indian government has made no serious efforts to further amend the Coal Mines Nationalisation Act, to allow captive coal mines to sell their surplus production in the open market and to realise the hug e outstanding coal sales dues from the state electricity boards.

Moreover, a substantial amount of the surplus generated by profit-making coal companies, which are also beneficiaries of IBRD loan, are being diverted indirectly to sick companies like Eastern Coalfields Ltd, Bharat Coking Coal Ltd and Central Coalfields Ltd.

The World Bank is learnt to have expressed its unhappiness to the Union coal ministry. It is now sending a high-power team to make mid-term review of the projects. Though unhappy, it is unlikely to decide unilaterally to suspend disbursement of the loan because this might affect CIL's credit rating.

Therefore, IBRD seems to give an impression that it is taking note of the coal companies' stance against the conditions it has imposed and in response, it is suspending disbursements against the unutilised portion of about $ 500 millions.

When contacted, board-level CIL sources said that there would be no adverse impact on the coal companies since the existing equipment in operation, if maintained and utilised properly, would be sufficient to achieve production plans for the next few year s. This apart, old equipment can be replaced through lease finance.