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Narendra Modi getting his Thatcher moment confronting coal unions

Modi plans to bring in more efficient private firms, which the coal unions say will mean job losses and they’ll fight

Is India’s Prime Minister Narendra Modi reading up on Margaret Thatcher? The late former prime minister of the UK had one of her defining and controversial confrontations in a protracted fight with striking coal miners in the 1980s.

Different time, another country, but Modi has angry unions meeting on Wednesday and threatening strikes at the world’s biggest coal miner, Coal India Ltd.

Coal-fired power plants generate 60% of India’s electricity, except for when shortages lead to repeated blackouts. Outages shaved $68 billion or almost 4% off annual gross domestic product (GDP) in the year ended March 2013, says the Federation of Indian Chambers of Commerce and Industry.

Last week, Modi made a move toward ending shortages, winning partial passage of a bill that will allow him to end a 40-year government coal monopoly. The plan is to bring in more efficient private companies, which the coal unions say will mean job losses and they’ll fight him.

“Let them open up the sector, there will be strikes all across and large-scale violence,” said SQ Zama, secretary general at the Indian National Mineworkers Federation, a unit of the opposition’s Congress party-backed Indian National Trade Union Congress (INTUC).

The Indian National Trade Union Congress said all major unions would meet 17 December to decide their response to Modi’s plan. Coal India fell as much as 1.4% to Rs361.6 in early trading in Mumbai on Wednesday. The stock has gained 25% this year, the same as the benchmark S&P BSE Sensex.

Thatcher’s clash with the UK coal unions in 1984-85 was over plans to close mines, which led to strikes, protests and violence. Modi, so far, is being less confrontational. Modi faces similar challenges as Thatcher, “but he’s strategically handling them, without seeming to take them head on,” said Debasish Mishra, senior director of Deloitte Touche Tohmatsu India Pvt.’s energy and resources practice. India has the world’s fifth-biggest coal reserves yet is now importing record amounts because Kolkata-based Coal India, which controls 80% of the nation’s supply, isn’t meeting production and delivery targets. Some private companies do mine coal in India, but it’s only allowed for so-called captive use at their own plants.

By law it can’t be resold. Previous governments have tried to change this law, all failing in the face of union opposition. State-run Coal India, which employs 346,000 people across the country and sells about $11 billion of the fuel a year, has failed to meet output targets since at least 2010 when the government sold off 10% in a public share sale. The state retains about 90%. Policy blunder Coal India has said it’s hampered by poor transport infrastructure and opposition to land purchases above coal deposits, even as it’s under pressure to double output by 2019. Coal will remain the mainstay of India’s electricity production in years to come, coal and power minister Piyush Goyal said at a conference on 25 November. Economist Surendra Laxminarayan Rao says the government needs to get out of the coal business.

“One of the biggest policy blunders of India has been the government taking control of the coal industry,” said Rao at The Energy and Resources Institute in New Delhi. “The coal shortage is not just because of Coal India’s incompetence and its primitive technology. The unions are majorly responsible,” he said.

“There’s no choice for Modi except to overcome them.” The unions, fearing private companies will cut wages and benefits as well as jobs, said they have been seeking talks with minister Goyal for the past two months. Meeting dispute They were persuaded to call off a strike for 24 November on a promise they would get a sitdown with the minister or coal secretary Anil Swarup, the top bureaucrat in the ministry. The meeting hasn’t happened and the unions don’t like it.

“We want to discuss the issues and find a middle path,” said the Trade Union Congress’s Zama. “But he won’t meet us. What kind of arrogance is this?” Swarup disputed that version of events, saying in a text message on 15 December that the minister has given time for a meeting but the union representatives couldn’t make it. The bill to allow private companies to mine and sell coal won approval on Friday in the lower house of the Parliament, where Modi’s ruling Bharatiya Janata Party, or BJP, has a majority. It will become law if it passes the upper house, where the BJP and its allies are in a minority. Digging in Unions have said they are willing to discuss compromises on other disputes with the government, such as the sale of another stake in Coal India, while insisting privatization of the industry is off limits. The union is ready to be flexible about selling more shares in Coal India, Zama said by phone from the western Indian town of Nagpur.

“But there’s no question of allowing commercial mining for non-state companies.” Last year, the coal unions threatened a three-day strike to oppose the share sale plan, forcing the government to back down. The government will resume “active movement” on Coal India’s share sale early next year, minister Goyal told the CNBC TV18 news channel in an interview broadcast last week. “There is absolutely no effort to put it on the backburner.” The plan is to raise Rs15740 crore ($2.5 billion) from the sale. In May this year, Modi gained the biggest electoral mandate in three decades and a majority for his north India-based BJP in parliament. Company men? “The coal unions have traditionally drawn their strength mostly from political parties in India’s east.

With BJP’s absolute majority in the parliament, their influencing powers have considerably reduced,” said Mishra at Deloitte Touche. For its part, Coal India raised annual bonuses for employees this year by almost 30% to Rs1,300 crore. It’s also said it will improve post-retirement health benefits for workers, personnel director R. Mohan Das said in a phone interview. Thatcher’s battle with coal unions left deep scars in British society and to some stained her legacy.

Modi’s challenge with India’s coal unions is just starting and he does seem to have an advantage Thatcher lacked, who, after all, planned to close mines not boost supply. “Compensation has risen substantially in the past years and that’s made workers more loyal to the management,” said Sankar Ray, an independent Kolkata-based analyst of India’s unions and left-wing politics. “The unions are finding it difficult to mobilize support.”

Source: Bloomberg


Narendra Modi , Thatcher