Coal India Limited (CIL), producer of the largest amount of coal in the world, is under the supervision of the State Government of West Bengal with the Union Government holding 90% shares of CIL. Headquartered in Kolkata, West Bengal, CIL accounts for 81% of the coal requirements of the country. The production of CIL for the fiscal year 2012 – 2013 was a whopping 452 million tons and earned the Government an exchequer of INR 882.81 billion. The Ministry of Coal governs the operation of CIL. CIL was accredited with the prestigious ‘Maharatna’ status on April, 2011 by the Union Government. In terms of market value, CIL is worth INR 1,952 trillion (USD 35.9 billion) as of 31st, March, 2013, the 5th most valuable company of India.
The proposed 5% stake sale of CIL by the Government:
The CIL is evidently the fattest cow in the Government farm, and as far as divestment and stake sale issues are concerned, it is evident that CIL tops the list. As of 28th October, 2013, the Government announcement of a 5% stake sale by the November or December of 2013 further confirms the fact. As per the statement given by the Coal Minister Sriprakash Jaiswal to the media, “You may be aware that the Coal India Chairman has gone (overseas) for this purpose only”. Underlining the adverse situation created by the Cyclone Phailin, he further added that, “We are hopeful that (Coal India) will achieve its production target (of 482 million tons) in the current fiscal”. The kick – off of the Government roadshows began in mid – October, organized by the Department of Disinvestment (DoD). The said roadshows are planned to cover five countries including UK and Germany. The roadshows, essentially showcasing the pecuniary strong points of CIL, is in fact, a headhunting mission for potential investors in the 5% stake sale of the CIL. The initial plans of the DoD of a 10% stake sale debacled in the face of a strong opposition of the Labor Union of CIL.
Challenges faced by the Government’s proposed PSU stake sale program:
Divestment programs of the Government are likely to get deterred in this quarter of the fiscal year. The major reason for this is the strong demurral of the Coal ministry and the Petroleum ministry. While the CIL Management is opposed to the Government decisions of a stake sale at this point, owing to adverse market conditions and a dissatisfied Labor Union, the scenario seems to be the same for Indian Oil Corporation (IOC), another divestment target of the Government. The Petroleum Ministry is also concerned about the subdued market conditions, and is yet to give a go ahead for the Government divestment plans for the IOC scheduled for December 2013. The Coal Ministry, in fact, has submitted a note to the Cabinet opposing the proposed stake sale of the CIL. Both the Coal Ministry and the CIL Management are apprehensive of the Labor Union’s threat of calling a strike in December, throwing a spanner in the works of CIL. Besides, with the upcoming elections in Chattisgarh in November, the stake sale plans of the Government in November are likely to be shelved.
The Government divestment plans for the IOC, supposed to generate a fund of Rs 4000 crores, have also fallen through owing to the absence of a green light from the Petroleum Ministry. Even with Finance Minister P Chidamvaram’s active cooperation, stake sale programs of the Government are likely to be postponed till the January – March quarter of 2014. The disinvestment list of the Government also has NHPC (buyback) and stake sale in Engineers India and the Power Grid Corporation.
Negotiations of the Government with the five leading Trade Unions of the CIL:
The Government is supposed to initiate peace talks with the opposing Labor Unions of the CIL. In spite of the Government offer of a 5% stake in CIL to its employees, five major Labor Unions of CIL threatened to go on a nationwide strike in December, which is evidently going to affect power production as a direct consequence of an enormous fall in the coal production. The issue of the opposing Labor Unions is very clear – that this proposed 5% stake sale of the Government is nothing but the premeditated efforts on the part of the Government to privatize CIL. Coal Minister Sriprakash Jaiswal, along with some top officials of the Coal Ministry, tried to assuage the dissatisfied Labor Unions by promising to consider a ‘middle path’ to resolve this deadlock situation. Ensuing a two hour discussion with the Coal Minister, a pivotal member of the Labor Union described the inferences drawn from the said meeting to be ‘inconclusive’ though he refrained from commenting on the strike issues. However, the Union member expressed hope of better results from another meeting as promised by the Coal Ministry.
The efforts of the Finance Minister to appease the opposing Unions by promising that, every penny realized from the divestment programs will be reinvested in another PSU or will go to a public sector bank, was rudely brushed off by a Union Leader. This was evident from his statement, “How does it matter? The fact remains that the Center is trying to privatize the company, which is our primary concern”.
As of now, the proposed 5% stake sale program of CIL by the Government seems to be a non-feasible option. With the Coal Ministry reluctant about the whole issue and the five major Labor Unions vehemently opposing the move of the Government, the entire stake sale proposition faces an enormous uncertainty. It seems that, the Government plans of generating a fund of Rs 13,000 crores, through the 5% stake sale of the CIL, needs to be postponed till 2014. The only option left to the Government is, to wait it out till the markets turn and the issues with the Coal Ministry and the opposing Labor Unions are smoothed out.