Coal India unions are blackmailing the nation. Modi govt must call their bluff

coal

Starting yesterday (i.e. January 6, 2015) five trade unions representing the workers of Coal India have gone on a five day strike. The strike is backed the Bhartiya Mazdoor Sangh, which is the labour union affiliated to the Bhartiya Janata Party and the Sangh parivaar.
The unions are essentially demanding that the government should not disinvest its shares in Coal India and at the same time they don’t want any private participation in the coal sector in the country. In December 2014, the government had re-promulgated the Coal Mines (Special Provisions) Ordinance. This ordinance allows the auctioning of coal blocks. The ordinance also has an enabling provision for commercial mining of coal by private companies.
This is something that has not gone down well with the unions. “A consensus has emerged among the unions after the government showed arrogance over re-issuing the ordinance without consultations with the trade unions,” Jibon Roy of Centre of Indian Trade Union (CITU), told the Financial Express. The Indian National Trade Union Congress, All India Trade Union Congress (AITUC) and Hind Mazdoor Sabha (HMS) are the other three trade unions backing the strike.
Reports in the media suggest that the strike has been effective and the production of coal has come down dramatically. A news-report filed by the Press Trust of India suggests that “out of the total production of 1.5 million tonnes a day, nearly 75 per cent has been hit.” Another report by Bloomberg puts the figure at a much lower 50%.
Coal India produces 80% of the nation’s coal. A major portion of this coal is supplied to thermal power plants. As the Bloomberg news-report points out: “Of the 100 power plants that run on local coal, 42 had supplies of less than seven days as of 1 January, according to the power ministry’s Central Electricity Authority. Twenty of these plants had less than four days of stock.”
What this means is that if the strike continues for five days the inventory levels of the power plants will fall further and that may lead to a power crisis. The unions understand this and are using this as a negotiating tool with the government. A Press Trust of India report points out that Yasar Shah, the minister state for Power in Uttar Pradesh, said the state may face electricity crisis if the strike by coal workers extended longer.
The question to ask here is are the points on which the unions have gone on a strike valid enough? Or are they simply resorting to blackmail?
The government needs to auction coal blocks/mines because the Supreme Court in September 2014 had cancelled the allocation of 204 out of the 218 blocks that various governments since 1993 had allocated to private companies for captive consumption.
The idea, as the Economic Survey of 1994-1995 pointed out, was to “encourage private sector investment in the coal sector, the Coal Mines (Nationalisation) Act, 1973, was amended with effect from June 9, 1993, for operation of captive coal mines by companies engaged in the production of iron and steel, power generation and washing of coal in the private sector.” This allowed private companies engaged in the production of iron and steel, power and cement to own coal blocks for their captive use.
The Supreme Court cancelled these allocations and in its decisions said that the “the entire exercise of allocation…appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected.”
Given this, the government now needs to auction these coal blocks. So, its just following a decision made by the Supreme Court. The trade unions by opposing this are essentially going against a decision made by the Supreme Court.
The trade unions are also protesting against the decision of the government to allow private companies to commercially mine coal. Why has the government made this decision? For the simple reason that Coal India is not producing enough coal to meet the demand.
As per estimates made by the Geological Survey of India, India has third largest coal reserves in the world of 301.56 billion tonnes. Nevertheless, we still need to import coal. Why is that the case?
Coal India produced 323.58 million tonnes of coal in 2004-2005. In 2013-2014, it produced 462.42 million tonnes of coal. The rate of production has increased at an average annual rate of 4.05%. During the same period, the total amount of coal imports has increased from 28.95 million tonnes to 171 million tonnes, at an average annual rate of 21.8%.
So what India needs is more coal. Coal India hasn’t been able to increase its rate of production at a rate which matches the rate of increase in demand for coal. Given this, it is common sense that more companies need to be allowed to produce coal, whether they are run by the government or they are privately run, doesn’t really matter.
Further, should the government be thinking about the more than 120 crore Indians as a whole or about around 3 lakh employees of Coal India who do not want private participation in the coal sector? The decision is a no-brainer. India needs more coal whether the unions representing the workers of Coal India like it or not.
It also needs to be pointed out that when it comes to paying its workers, Coal India is doing a good job. During the year 2010-2011, the total employee benefit expenses (salary, wages, allowances, bonus, leave travel encashment, contribution to PF, gratuity etc.) of Coal India amounted to Rs 19,851.78 crore. The company had an average manpower of 3,90,243 individuals during the course of the year. This means that the average amount of money that Coal India paid a single employee in 2010-2011 was at Rs 5,08,703.
In 2013-2014, the total employee benefit expenses amounted to Rs 27,769.43 crore. The average manpower during the course of the year had fallen to 3,52,282. This means that the average amount of money that Coal India paid a single employee in 2013-2014 mounted to Rs 7,88,273. This means that an average Coal India employee has seen a jump in payment of 55% over a period of four years, which is not bad by any stretch of imagination. Workmen make up nearly 85% of the employees of Coal India.
What these points clearly tell us is that the trade unions of Coal India are essentially blackmailing the nation and nothing more. The government needs to call their bluff even if it leads to some pain in the short term.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)


The column originally appeared on www.firstpost.com
on Jan 7, 2015

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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