Economy

Plan to unbundle CIL against govt’s goal to create mega PSUs: Experts

Pratim Ranjan Bose Kolkata | Updated on January 12, 2018 Published on June 10, 2017

coal

NITI Aayog Vice-Chairman Arvind Panagariya’s proposal to unbundle Coal India has evoked strong response from the former chairmen of the company, who think the recommendation is in contradiction to the government’s stated goal of creating consolidated mega PSUs.

Pangariya last week told media that CIL be “unbundled” to allow competition. To put it straight, he is asking for spinning off of seven mining subsidiaries into separate corporate entities and doing away with the listed holding company CIL.

The proposal is in line with the restructuring mooted by the Manmohan Singh government in 2013.

While CIL chairman Sutirtha Bhattacharya could not be reached, the proposal evoked strong response from former top officials, experts and some analysts.

“Have seen this suggestion of breaking Coal India prop up at regular intervals of 4 to 5 years over the last 25 years,” former chairman Partha S Bhattacharyya, who led the company during the mega IPO in 2010, said in a public post on Facebook.

Reconsider proposal

“CIL today is the only Indian company that rightfully claims to be the largest in the world as a coal mining company. The largest companies in other sectors such as oil & gas, power, steel etc., are not big enough to lay claim on being the global top shot. The government should seriously reconsider the proposal,” he said.

Bhattacharyya felt the successive governments treated CIL - that bounced back from the verge of sickness in the 1990s – merely as “a provider of financial resources to meet fiscal deficits”.

Enforcing dividend payout ratio substantially in excess of 100%, levying Rs. 400 a tonne carbon tax, and “diverting (CIL) resources to unrelated purposes like revival of fertiliser units are measures that possibly does not take into cognizance the best interest of the company”, Bhattacharyya pointed out.

Many posts vacant

Incidentally, while the Modi government raised carbon tax on coal four-fold, it spared a potentially more polluting petroleum coke from the ambit of such taxes, creating market imbalance and replacement of coal by pet-coke in captive electricity generation.

Such decisions come over and above the government’s failure in ensuring strong governance in coal companies. For more than two years between 2014 and end 2016, most of the 50 plus slots for independent directors in CIL group were vacant.

This had seriously hampered decision making as the whole-time directors played it safe to avoid future controversies or corruption charges.

Management deficiency

Worse, many subsidiaries like Eastern Coalfields and Bharat Coking coal are headless for too long. ECL was recently in news for a serious accident. Bhattacharyya linked the headless status to management deficiencies.

He gave CIL full credit in managing the subsidiaries so far and pointed out that the dissolution of CIL would create a serious management gap.

“It would be incorrect to expect the Ministry of Coal deliver the role that Coal India Ltd plays today in ensuring proper governance in the subsidiaries. The government has not been able to deliver on its most important task of providing continuity of top leadership at the subsidiaries,” he said.

NC Jha, who led the company for nearly a year after Bhattacharyya’s exit soon after the IPO, pointed out that to ensure competition, the policy makers must allow the company to be run freely.

Having worked for the consolidation of Coal India, it pains to hear the unbundling theory, he said.

Speaking on condition of anonymity, at least two analysts from top global agencies didn’t find any merit in the proposal either.

Published on June 10, 2017
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