The Government's decision to issue a Presidential directive to Coal India to sign 20-year fuel supply agreements with power producers will only “strengthen” its legal case, The Children's Investment Fund has said.

Speaking to Business Line over telephone, Mr Oscar Veldhuijzen, partner at TCI, the London-based activist fund, which is the second largest shareholder in CIL, said that the Government was “shooting itself in the foot.”

“All the directive does is strengthen our legal case that there is Government intervention…it has made this blatantly obvious now,” he said.

Responding to the decision to give CIL the flexibility to decide on the size of the penalty if it doesn't meet FSA commitments, he said that this made the directive “far less harmful as long as the board does their job.”

“What we require from the board is that they make sure that those penalties are close to zero and that they raise FSA prices to market levels,” he added.

He reiterated the fund's determination to see the case through. “We are very furious about this,” he said. “The Government is very dismissive of us and think they are above the law...they hide themselves behind the argument of public interest but they are depriving CIL — and by extension the Indian public — of $20 billion of profits per annum, selling at below the market rates.”

He rejected criticisms, made following the launch of TCI's legal action on April 1 that it should have been aware of the risks. “We were aware of the pros and cons,” he said. The fund had been happy with the direction of CIL under former Chairman Mr Bhattacharyya, but that the company had lost direction in the past few months.

“You can't treat it like a government entity while making it a listed company,” he said. “Investors are giving up on PSUs and interest will come to a standstill if they are not careful.”

“This is not a game, we have substantial money at stake,” he said. “If they continue to act like this our actions will only increase…we have a very strong track record. We believe in this investment case.”