Coal Indias Future

As a result of the price increases it has been allowed to make, CIL brought down its losses to a mere Rs 30 crore on a turnover of Rs 1,600 crore. Even Eastern Coalfields, its perpetually bleeding subsidiary, has broken even. These figures must be taken with a pinch of salt, for they are based on historical cost depreciation; in actuality, CIL, in company with many other public enterprises, has allowed its assets to be eaten up by inflation and failed to provide against its effects. But by the standards of public sector accounting, CIL is now no longer drenched in red ink. Now it would like to eliminate losses, and to this end has proposed to make its subsidiaries independent profit centres. They would be allowed to go into the market and borrow on their own, but their losses would no longer be financed by CIL. This essentially would mean the end of the Coal Price Regulation Account, which is CILs internal retention pricing mechanism to cross-subsidise loss-making subsidiaries at the cost of profit-making

 

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An end to the cross-subsidisation is overdue, for as in every other industry, it is an incentive to inefficiency. But there is a more fundamental question to be asked: is CIL itself necessary? The abolition of CIL would release buildings and land worth crores in Delhi, Dhanbad and elsewhere; it would eliminate precisely that manpower that costs most and produces least. The same question could be asked of SAIL. But SAIL does have some rationale for existence: it has set up common marketing facilities for its steel plants, it has centralised R&D and technological upgradation, and it takes common financing decisions for its plants. CIL renders its subsidiaries no such services. Coal marketing is non-existent, coal technology is moribund, and CIL proposes to decentralise financing decisions.

If CILs existence is questioned, the same question can be asked about its subsidiaries as well. They are geographical bundles of coal mines tied up in a hurry when the mines were nationalised. In fact, each coal mine is a more or less independent entity as it was before nationalisation; all that nationalisation has achieved is to divorced the wage of the workers from the performance of the mine they worked in. There is as little reason for cross-subsidisation within the subsidiaries as between them; there is as good reason for abolishing them as CIL itself. Let coal exchanges be set up in the major coal producing centres, let each coal mine auction its output in the exchanges, and let them go to the stock market if they need to expand.