Who wins if Coal India Ltd loses? Privatising this PSU will be another misadventure

The Government of India resembled this week a symphony seriously out of tune. Power utilities ran dangerously short of coal with stocks sufficient to last two days against the mandatory minimum requirement of 20 days. Mining of coal by public sector giant Coal India Limited, stagnating for the past four years, was blamed for the short supply. Power utilities, it was revealed, owed CIL a whopping Rs. 20,000 Crore while power distributing companies owed an even more staggering amount of Rs. 1,10,000 Crore to the power generating units. Coordination with the Railways and the coal-bearing states of Chhattisgarh, Jharkhand, Odisha and West Bengal had seemingly collapsed.

Above all, coal mining by private companies had failed to take off. Ironically, two union ministers, Piyush Goyal and R.K. Singh, were the first to flag their concern and endorse the alarm sounded by the Delhi Government on imminent black outs. But it was not long before they changed their tune and other union ministers joined them in denying any crisis anywhere. Finance Minister Nirmala Sitharaman rubbished all talk of crisis at the Kennedy School in Harvard. Coal minister Pralhad Joshi, power minister R.K. Singh and the commerce minister Piyush Goyal also assured the country that all talk of shortages of coal or power was nothing short of blasphemy. As the Government scrambled to contain the damage and silence the inconvenient questions being raised, it increasingly looked even more dysfunctional and disjointed.

There is actually no reason for India to face coal or power shortage. Between the years 2004 and 2012 India added more installed capacity to generate power than what was installed between 1947 and 2004. But power utilities have never operated at full capacity because demand did not pick up. Artificial shortages of coal, which India has in abundance and has learnt to live with its higher ash content, benefit private players and importers. The Government glossed over the fact that it had arm-twisted CIL into paying a higher dividend to the Government and diverting its cash reserves to areas other than mining. CIL had been left with no money to invest on new mines or to expand existing mines.

The Government’s inexplicable decision to keep senior positions in the CIL and its subsidiaries vacant has led to speculation that the government wants to privatise and sell off CIL and its considerable assets. No prizes for guessing who will be the eventual buyer in such an eventuality. CIL had cash reserves of Rs. 40,000 Crore in 2015 which dwindled to just Rs. 8000 Crore in 2019-20. It was trading at the rate of Rs. 400 per share in 2016 but is now trading at less than half that rate. It was left without a full-time chairman for more than a year. It was forced by the Government to invest in three fertilizer plants and its mining managers, claimed a former Coal Secretary, were asked to supervise construction of toilets. If the Government’s game plan is to bleed CIL and discredit it before selling it off with its considerable assets cheap to the private sector, it should first study why coal mining was nationalized in the first place. Investment in R&D, safety, modernisation and planning are not what the Indian private sector is known for. The crucial coal sector is capital intensive and involves coordination best done by the Government. With CIL still supplying 80 percent of India’s coal, dismantling it may well be a misadventure that the country can ill-afford.