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Gangs of Coal India

The government has taken a step forward on coal, but this sideways, tip-toeing denationalisation is unlikely to be a complete solution

Last week, when Finance Minister Arun Jaitley made the announcement about the coal auction ordinance, he seemed to be taking great pains to assure the mediapersons present about the future of Coal India. This raises some interesting points about the nature of thinking on economic reforms in India. Not only did the Finance Minister issue an assurance that Coal India would continue as it is, the words he chose were extremely emphatic, “the larger interest of Coal India would be fully protected.”

I'm not sure what he meant here by 'larger' interests. Before this comment, he had spoken about the dire coal supply situation in the power, cement and steel sectors, and commented on the irony of India importing expensive coal despite having large coal reserves. Are Coal India's interests larger than these issues? That would appear to be the case.

To understand what is going on, one should read between the lines of what he said, and also examine the actual text of the ordinance. Even though Mr. Jaitley was at pains to claim that what was being done was not denationalisation, the reality, as written into the ordinance, is different. The ordinance clearly states that '..a company or a joint venture company formed by two or more companies, may carry on coal mining operations in India, in any form either for own consumption, sale or for any other purpose...'

In combination with what he said, this appears to mean that coal will be denationalised, but in the manner that telecom and airlines have been denationalised. In other words, the inefficient and incompetent public sector behemoth will continue to operate alongside new private sector players till it becomes a complete zombie. In fact, calling Coal India inefficient and incompetent is doing it a favour.

In terms of either coal production, or delivering reliability and quality to its customers, Coal India is clearly the main problem that the sector faces in India. As it happens, I have personal, on-the-ground experience of Coal India's workings through people I've known personally for years.' Through each level, the company's operations are characterised by waste, pilferage, inefficiency and corruption. Not just that, these very traits have allowed a criminal culture to breed and flourish in the coal belt in which it's often hard to figure out the boundaries between crime, business and politics. This nexus was always there, but actually got much stronger and deadlier after coal nationalisation. Even Bollywood knows this, as you can see in the movie Gangs of Wasseypur.

However, attitudes towards denationalisation and privatisation in government as well as in parts of the media, seem more in tune with the 1979 movie about coal, Kaala Patthar. This movie was based on the Chasnala mining disaster of 1975. Funnily enough, even though that disaster actually took place in a public-sector mine, the movie changed the identity of the mine owner to a 'Seth Dhanraj' (Prem Chopra, obviously) who refused to spend money on safety equipment! It's easy to laugh at the socialist mindset now, but when I hear talk of Coal India's larger interests (presumably larger than India's interests) being fully protected, it's clear that not enough has changed.

When one talks to people who worked in Coal India, Air India, or other PSUs, they inevitably point the finger away from employees and towards politicians and bureaucrats. However, what is at fault is the very concept of government businesses. Control without responsibility will inevitably lead to one sort of a disastrous outcome or the other. One amazing example from the same part of the country is the town of Sindri in Jharkhand, home to a now closed fertilizer plant, which was actually the very first public sector company, Sindri Fertilizers and Chemicals, established in 1951. This plant's employee quarters township are a flourishing home to thousands of people, despite there being no actual employees for more than decade. Everything still exists, except for the fertilizer.

Any meaningful PSU reform has to be done with the understanding that the default option should be closure or outright privatisation. The sooner we stop fudging on this issue, the better it is for the country.