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Coal India Limited
MoEF Lifts CEPI Moratorium
on Singrauli and Ib Valley:
Sentimental +ve for CIL
Quick Comment: The Ministry of Environment and
Forest (MoEF) has made an announcement lifting the
CEPI (Comprehensive Environmental Pollution Index)
moratorium from the Singrauli and Ib Valley areas. After
the lifting of the moratorium on these two coalfields, nine
out of the initial 16 coalfields will have been cleared.
No near-term impact on production volumes: We do
not expect this to impact production estimates for F12 as
CIL still has to get other regulatory clearances (such as
forest clearance) for these coalfields, which can take
anywhere from 1-3 years. However, we expect this
announcement to aid sentiment towards the stock.
Background: In January 2010, the MoEF categorized
43 industrial clusters in the country as critically polluted
areas (i.e. having a CEPI score above 70) and imposed
a temporary moratorium on project development in
these 43 clusters. As per Coal India, its production fell
short by 16 mt for F10-11 and its target for F12 was
impacted by 39 mt due to the CEPI moratorium.
In FY10, the Singrauly and Ib valley coalfields produced
67.7mt and 44.3Mt, respectively, of raw coal which
accounted for 15.7% and 10.3% of CIL’s total production.
We believe that little production disruption occurred in
these two coalfields because of the CEPI moratorium. It
is worth noting that the moratorium on the other seven
blocks will continue until September 30, 2011 as of now,
or until another order reversing it comes.
We recently downgraded our rating on CIL to EW (see
“Medium-Term Thesis Played Out, Downgrade to EW”,
dated June 15, 2011). We feel CIL may lack near-term
catalysts for outperformance.
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