Coal India divestment faces fresh hurdle as December strike looms

Nov 05 2013, 10:16 IST
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SummaryThe risk to the government's targeted disinvestment programme in 2013-14 is increasing.

The risk to the government’s targeted disinvestment programme in 2013-14 is increasing as dominant trade unions have threatened to go on a strike in December if a stake sale in Coal India (CIL) is carried out. With the fiscal deficit crossing Rs 4.12 lakh crore, or 76% of the Budget target by September, the government will be under pressure to meet its deficit target of 4.8% of GDP in absence of big-ticket disinvestments, such as those in CIL and Indian Oil Corp (IOC).

Although the coal ministry claims it has been able to persuade trade unions to allow a 5% stake sale and another 5% buyback by the PSU without any disruption in production, the Indian Mine Workers Federation, affiliated to the left-leaning All India Trade Union Congress, along with Citu and BJP-backed Bharatiya Mazdoor Sangh, haven’t softened their stance as yet. Only the Congress-affiliated INTUC is yet to decide on joining the strike call.

“The three main issues that we are protesting is disinvestment, restructuring, and a possible break-up of CIL, and violation of labour laws for contract workers. We have called a meeting of all CIL unions on November 16 in Ranchi to decide on the strike,” Ramendra Kumar, secretary of Indian Mine Workers Federation, told FE. Indications are that if all the unions join hands, there could be a three-day strike by December-end.

CIL and IOC stake sales are crucial for the government to meet the 2013-14 disinvestment target, which for this fiscal is R55,814 crore, inclusive of the planned residuary stake sales in Hindustan Zinc and Balco. CIL and IOC stake sales are expected to garner R30,000 crore.

The government has so far raised R1,325 crore from disinvestment in MMTC, Hindustan Copper, National Fertiliser, ITDC, State Trading Corp and Neyveli Lignite. The department of disinvestment has also lined up Power Grid, NHPC and Engineers India for disinvestment in 2013-14.

CIL has started road shows abroad from last month to showcase the company’s coal reserves and push through the 5% stake sale to raise R8,000-10,000 crore by November or December. The government, which currently holds 90% in CIL, has selected seven merchant bankers, including Goldman Sachs, Credit Suisse and SBI Caps, to manage the sale through the offer for sale (OFS) route.

Though disinvestment is the main issue, labour unions are agitated after the company engaged Deloitte to advise it on restructuring of operations. The government is also contemplating public-private partnership (PPP) to help CIL raise output by digging deeper at its existing mines. The unions interpret these moves as a prelude to privatisation of the company.

Apart from disinvestment and restructuring, the trade unions are annoyed with the breach of labour and mining laws. “Contract labourers are made to work for more than 8 hours a day in violations of the Mines Act. Safety norms also have not been adhered to,” Kumar said, adding some of the trade union leaders, including him, who have protested were arrested recently.

A strike at CIL will hit output by almost 2 million tonne, given that the company produced four-fifth of the country’s coal output, estimated at 557 million tonne during 2012-13. While a good monsoon this year has boosted hydro power and lowered demand for thermal power and hence coal to some extent, a lower output at CIL will raise coal imports further.

India’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 risen steadily to $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.

In July, the coal ministry convened a meeting with trade unions to end the stalemate over the 10% stake sale in CIL to raise about R20,000 crore by March 2014, as it was crucial to meet the disinvestment target and rein in the fiscal deficit within the Budget estimate of 4.8% of GDP. Although the coal ministry lowered the disinvestment target to 5% from 10%, trade unions representing 3.57 lakh workers are still opposed to it.

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