The government was banking on a 10% stake sale in Coal India Ltd to meet its disinvestment target for the current fiscal. Given its recent decision to halve the issue size, the government is likely to miss the sell-off target.
Like in 2010, disinvestment in CIL is marred by a series of controversies this year. After many rounds of discussions and heated arguments between the coal ministry and the trade unions representing 3.57 lakh workers, the government has decided to move ahead with a 5% stake sale in the Kolkata-based Navratna company.
The disinvestment department on August 8 issued the request for proposal to sell the 5% stake in CIL through the auction route. Though the Cabinet is yet to give its approval for proposed stake sale, the disinvestment department is proceeding with the appointment of merchant bankers for the issue that is expected to garner over R8,400 crore for the government.
In a bid to win the support of protesting workers, the government plans to allot shares to CIL employees at a discount of 5% to the lowest cut-off price, up to a maximum of 10% of the offer-for-sale (OFS) size.
But facing strong opposition from employees unions who threaten to strike work, the government is reluctant even to give a time-line for the stake sale. The government currently holds 90% stake in CIL.
Opposed to any stakes sale in the company without taking the trade unions on board, Ramendra Kumar, secretary of the Indian Mine Workers Federation (IMWF), told FE, ?We are opposed to even 5% disinvestment in CIL. CITU has given the notice for a three-day strike. We are also discussing that. We are also inviting INTUC to join us.? IMWF is affiliated to the leftist All-India Trade Union Congress.
The five central trade unions operating in Coal India and its subsidiaries are Indian National Trade Union Congress (INTUC), All India Trade Union Congress (AITUC), Bharatiya Mazdoor Sangh (BMS), Hind Mazdoor Sabha (HMS) and Centre of Indian Trade Unions (CITU).
A strike at CIL at this juncture will not just lower the domestic output but also push up imports. A one-day strike could lower the coal output by almost 2 million tonne given that CIL produces four-fifths of the country’s coal output estimated at 557 million tonne during 2012-13.
Already, the country?s coal imports have more than trebled from 41.5 mt in 2006-07 to 135 mt in 2012-13 due to rising demand and CIL?s inability to scale up operations. The coal import bill has also been rising steadily and were at $16 billion last fiscal, adding to the stress on the current account deficit that widened to 4.8% of GDP in 2012-13 from 4.2% in 2011-12. An indefinite strike is sure to choke power supply in major parts of the country. With elections hardly a year away, a section in the government is also averse to the disinvestment plan fearing a backlash from the working class in their constituencies.
The stand-off with trade unions has prompted the finance ministry to defer, from April, its plan to seek cabinet clearance for the CIL disinvestment. If the coal ministry is able to persuade the unions, the finance ministry will move the proposal to the cabinet. Discussions are also going on for a buyback of 2% stake by CIL.
At the last meeting with the coal minister on May 28, the trade unions expressed their ?strong reservations? on any stake sale, especially because the government had given an assurance before the CIL IPO in 2010 that there would be no more divestment.
In fact, the 10-point demand submitted by the coordination committee of all-trade unions headed by INTUC?s R Sajeeva Reddy included the halting of PSU disinvestment, apart from changes in contract labour laws and a hike in minimum wages.
In April, an inter-ministerial group (IMG) headed by disinvestment secretary Ravi Mathur had approved the stake sale in CIL through the OFS route.
Labour agitations have stalled disinvestment in companies such as Nalco and Neyveli Lignite. In some cases, the concerned ministries have backed off from disinvestment, like the heavy industries ministry from Bhel, citing the ?poor outlook? for the sector. Since disinvestment was started in 1991-92, the government could meet budget targets in just four out of 22 years. During 2012-13, the government raised the highest ever R23,956 crore from stake sale but it still fell short of the budget target of R30,000 crore.
For 2013-14, the finance ministry targets R40,000 crore from stake sale in companies such as CIL, IOC, NHPC, Engineers India, Rashtriya Ispat Nigam Ltd, Rashtriya Chemicals and Fertilisers and MMTC. If the CIL stake sale is stalled, it will be difficult for the government not only to meet the disinvestment target but also to cut the fiscal deficit to 4.8% of GDP.
