#dnaEdit: Elephant in the room

With the five day strike by Coal India Limited (CIL) trade unions being called off in two days, it has been an exercise in muscle flexing and little else. All that the trade unions have succeeded in extracting was a promise from the Centre that it had no intention to de-nationalise CIL. A committee comprising coal ministry officials and trade union representatives has also been formed to examine the unions’ concerns. It has not even been clarified whether this committee’s findings will become the basis for any future action. The strike was called to protest the issuance of the ordinance amending the Coal Mines Nationalisation Act and the government’s plans to disinvest its stake in CIL. While the involvement of the BJP-affiliated Bharatiya Mazdoor Sangh in the strike made news, this is nothing new as central trade unions have held coordinated strikes in various sectors for some years now. It is also noteworthy that both the coal minister Piyush Goyal or the trade union leaders are mum about an earlier reported plan of the Modi government to break up CIL by hiving off its seven subsidiary operating companies as independent public sector units. 

It has also to be assumed that the government’s plans for a 10 per cent stake sale (it currently holds 89.65 per cent in CIL) this fiscal will also be allowed by the unions considering that there is no danger of management control slipping out. While trade unions are entitled to take measures to protect their members’ interests they must accept that CIL is critical for the country’s economic security and that government intervention in the coal sector cannot wait any longer.  CIL is the world’s largest coal company and is a virtual monopoly barring  a few power, steel, cement, aluminium and fertiliser companies fortunate to have been allotted captive coal blocks to meet their own needs without having to rely on CIL. In 2013-14, CIL could produce only 462 million tonnes of coal forcing India to import 158 million tonnes to meet the supply shortfall. Riding on the recent ordinance allowing e-auctions for 214 coal blocks, whose allocation was recently cancelled by the Supreme Court, the coal ministry has set an ambitious target of upscaling domestic coal production to one billion tonnes in five years. It is becoming clear that domestic policymakers have lost faith in CIL’s ability to hike production or meet industry demand.

With privatisation not an option, breaking up CIL into smaller PSU units appears to be the best short-term solution before the coal ministry to achieve its targets. Interestingly, a Suresh Prabhu-headed advisory group has recommended that CIL’s subsidiaries be granted more operational flexibility to improve production efficiency but rejected the need for restructuring CIL. It is unclear how this would help meet supply shortfalls as CIL and its subsidiaries are already stretching the limits of “flexibility” by outsourcing coal excavation work to private companies. Another proposed option is to grant CIL pricing freedom. CIL is forced to sell coal at low prices that do not reflect global market prices. Free market proponents complain that this impedes the motivation to increase production. The irony is that any gains at supplying coal at artificially low prices is offset by the procurement of imported coal at high prices. However, pricing freedom for CIL would come at a great cost for power producers and domestic consumers making it politically untenable. With power needs growing, the unions should focus on better working conditions for their miners rather than mobilising ill-conceived strikes against much needed reforms.