Coal news and updates

CIL restructuring or privatisation - What will help country?

September 25: The coal ministry is believed to be working vigorously for privatisation and or restructuring of Coal India Ltd (CIL) in order to improve efficiency and increase coal production, but many in the industry believe that separating coal producing subsidiaries of the company from the parent will not serve any purpose even as privatisation is just not possible as per existing rules.

Privatisation of CIL cannot be done since it would require an amendment to the Coal Mine Act has. Otherwise, the privatisation Bill would be illegal. It is to be noted that a Bill to amend the Coal Mine Act is pending in Parliament for the last nearly 14 years, industry experts said.

However, if the government wants, it can go ahead with the amendment to the Act. Unlike previous governments, the current government is in the majority in the Lok Sabha and it would be easier for it to pass the Bill at present, the experts said.

However, whether it will go ahead with it or not only time will tell.

So far as restructuring is concerned, it can definitely be done, but the point is, was it the inefficiency of CIL, as a holding company, that prevented its subsidiary companies from increasing coal production? Or, were there other reasons too for stagnation in coal production by CIL? experts asked.

“If the inefficiency of CIL was the reason for subsidiary companies not meeting their production targets, then the arms should be separated from CIL immediately. But those who track the industry will agree that stagnation in coal production at the subsidiary level was mainly because of delays in getting statutory clearances as well as in land acquisition and not because of any inefficiency on the part of the parent company,” the experts feel.

But if for any reason, the government decides to separate the subsidiaries, the question is, can the companies compete against each other in a scenario where demand is much more than supply?

Experts feel they cannot compete as they cannot fix their prices on their own and there will be no flexibility for somebody to reduce prices or others to increase prices.

“The third issue is, will the subsidiary companies be able to get land faster if they are independent? Are they going to get clearances faster? Will Railways help some companies more than others?” the experts asked.

“If all these things are possible, then bifurcation of Coal India could have well been accepted. As, these factors would have helped in increasing production. To my mind, none of these things are possible,” a Delhi-based expert said, adding, the restructuring may not lead to change in the monopolistic character of the companies.

“If there is no competition between the subsidiaries, then the monopoly will continue. Each company will be government-owned and each will have its own monopoly. So there seems to be no benefit in bifurcation,” he added.