This is the fourth in the series of articles titled “The Way Forward” following “Treating states as partners”
I had always held the view that the Government has no business to do business and should get out of non-strategic Public Sector Undertakings (PSUs).
This has also been the generally held view of most of the Governments post-1990. But not many had walked the talk. However, is it necessary to emasculate them (suck out surplus cash from them through dividends and buybacks), deprive them of necessary human resources, humiliate and condemn them before bidding adieu? Unfortunately, we are doing precisely this.
All hell seems to have broken loose consequent to a CAG report that brought one government to its knees and another one to power. There was indeed a crisis in the coal sector in 2014.
The coal shortage crisis was exacerbated by a couple of judgements of the Supreme Court that endorsed the flights of imagination of a rampaging CAG. The Supreme Court went beyond what the CAG had said and cancelled all the coal blocks allocated since the 1990s. Now it was left to Coal India Limited (CIL) to plug the gap that was producing 80 percent of coal in the country.
There was no regular Chairman and Managing Director (CMD) of Coal India Limited (CIL) when I took over as Secretary, Coal, Government of India. One of my initial tasks was to look for a CMD.
The Minister was keen on someone from the private sector and a few of them were indeed shortlisted. However, I could manage to convince the Minister to go for Sutirtha Bhattacharya, a former IAS officer who had done well as CMD of Singreni Coal Fields Limited. And, it turned out to be a masterstroke.
Sutirtha Bhattacharya performed a miracle. Coal production by CIL reached unprecedented levels. It rose by 34 million tonnes in 2014-15. This was more than the cumulative increase during the preceding 4 years. During 2015-16 it increased by additional 44 million tonnes.
We were now toying with the idea of exporting coal to Bangladesh. It was quite remarkable how the same team at Coal India was galvanized to deliver such stupendous results. From acute shortage in 2014 when more than 25 power plants were critical on account of a shortage of coal to no power plant being critical in 2016.
The share price of CIL rose to Rs 439 in July 2015. {Ironically, this share price collapsed to Rs 211 in January 2020 (now it stands at around Rs 150). When the share price is compared to the Sensex, the situation will appear even grimmer. The two indices have moved in different directions.}
The collapse in share prices raises a few issues that may be relevant for a large number of PSUs. The share price had risen in 2015 beyond Rs 400 on account of the performance of CIL, being led by an extremely able CMD who got necessary support from the government.
CIL was, by and large, left alone to determine its own business decisions. All attempts were made to ensure that CIL was not treated as an extended arm of the government.
There was some pressure from some quarters of the government to raise money through bonds in cash-rich companies like CIL and NTPC. It was successfully resisted in the context of CIL that saved the company from this financial misdemeanour (NTPC wasn’t so “lucky”).
The government helped CIL in their interface with the state governments for acquiring land and for the environment and forest clearances. Interaction with the railways helped in procuring a record number of railway rakes. There was a clear definition of their respective roles.
What then led to the collapse of share prices afterwards? Why was the momentum lost? Many factors could have caused this collapse but some of them could and should have been taken care of.
Once coal production reached comfortable levels, the Government yet again started meddling in the affairs of Coal India. Coal India managers were asked to go around scouting for schools to build toilets as a part of Swachhata Abhiyaan for the government.
Whereas the programme was laudable, it is a moot point whether the coal managers should be doing that job (I explain this in the chapter “Shit Happens” in my recently released book, “Ethical Dilemmas of a Civil Servant”).
The government could have easily sought monetary contribution from CIL as a part of CSR activity but to ask coal mine managers to get toilets constructed was taking it a bit too far. Coal production suffered.
After Sutirtha Bhattacharya completed his three-year tenure, there was no regular CMD of CIL for more than a year. This impacted the momentum. How can the PSU itself be blamed for an action that was totally in the domain of the government?
As Secretary, Coal I ensured that the Board of Coal India was not short of Directors. Unfortunately, a large number of CPSUs suffer on account of the delays in the appointment of Directors that is the sole prerogative of the Government.
No one seems to be bothered about the adverse impact such delays have on the outcomes but the CPSUs are blamed for poor performance. Some of the Directors on the respective Boards of CPSU do not have the requisite credentials to sit on these boards but they are there because of their political clout.
The callous manner in which cash is “sucked” out of CPSUs through unwarranted dividends and share buybacks cannot be termed as fiscally prudent by any stretch of the imagination. This has been done to balance the budgetary deficit of the government.
Consequently, the expansion plans of the CPSUs have suffered. CIL also suffered a similar fate. The expansion plans of the company are worked on the basis of these reserves. A cash-rich company may now have to borrow at a rate higher than what government would to balance its budget. This would be true of many other “Maharatna” PSUs that are now gradually being emasculated.
At the outset, it has to be decided whether the Government wants to run a CPSU or not. These are not easy decisions but need to be taken. If the decision is to privatize, it should be done forthwith.
Periodic announcements relating to privatization without actually carrying it out is quite debilitating for the officers of these CPSUs. However, if the government does decide to continue with the ownership, the question to be asked should not be whether CPSUs are headed by IAS officers (an erroneous impression has been created that such entities are managed by IAS officers) the question is whether these CPSUs are allowed to run professionally.
How else do you explain so many vacancies at the top in CPSUs? The senior management of CPSUs are exasperated but they can do precious little about it. These vacancies need to be filled up forthwith.
Government has to play the role of a “facilitator” and not just a “monitor” in the context of such CPSUs that it wants to retain. Even though technically MoUs are signed between the Government and the CPSUs, “interference” continues at various levels.
A large number of critical business decisions are taken on the basis of formal/informal directives of the Government. Misuse of facilities provided by the CPSUs has to be stopped forthwith.
The prescription for reviving and sustaining some CPSUs exists. The intention and application seem to be missing except in a few cases like CIL during 2014-16. It can be done. It should be done in the interest of the country.
