Who Will Tell the PM? – 3
- Anil Swarup
- Published on 21 Aug 2023, 12:39 pm IST
- 6 minutes read
Highlights
- What ails the Public Sector Undertakings (PSUs) including Navratna and Maharatna companies?
- What can be done to sustain the profitable PSUs and how sick PSUs can be brought out of the red?
- Often PSUs lie orphaned as was the case with Coal India Limited
- Anil Swarup column
“Government has no business to do business and should get out of non-strategic PSUs”. I was clear in my mind when I tweeted this sometime back. I had held this view for quite some time. Most of the governments also believed and stated this but not many had walked the talk. I did add to my tweet, “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.
To say that there was a crisis in the coal sector in 2014 would be a gross understatement. All hell seems to have broken loose consequent to a CAG report that brought one government to its knees and another one to power. 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 to plug the gap (In any case, CIL was producing 80% of coal within the country).
When I took over as Coal Secretary, Government of India, there was no regular Chairman and Managing Director (CMD) of Coal India Limited (CIL). The first task was to look for a CMD. The initial effort of the Minister was to find someone from the private sector and few of them were indeed shortlisted. (The dislike for civil servants, especially for the IAS, is nothing new). 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, what a masterstroke it turned out to!Related Stories
ACHIEVING THE UNTHINKABLE
Sutirtha Bhattacharya accomplished what was quite unthinkable. 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, so much so that we were 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 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. When the share price is compared to the Sensex, the situation will appear even more grim. 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 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.
RAISING MONEY THROUGH BONDS
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 misdemeanor. (NTPC wasn’t so “lucky”.) The government helped CIL in their interface with the state governments for acquiring land and for 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? 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 of 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 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.
ABSENCE OF REGULAR CMDs AND DIRECTORS
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.
EMASCULATION THROUGH DIVIDENDS AND BUYBACKS
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 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.
It will perhaps be good for these CPSUs to get out of the clutches of the government and whimsical decision-making engineered by those that run the government. It is not a question whether CPSUs are headed by IAS officers (most of them aren’t) or not. The question is whether these CPSUs are allowed to run professionally. The question is whether the government is even interested in running these CPSUs professionally or running them at all. How else do you explain so many vacancies at the top in CPSUs? It would help if someone in the PMO musters the courage to inform the Prime Minister about the havoc the delays in the appointment of CMDs and Directors is causing to these CPSUs. But, who will tell the Prime Minister?
END OF THE ARTICLE
