If the government gives in to the strike threats of the unions of the public sector Neyveli Lignite Corporation (NLC) and decides instead to offer the 5% stake it wants to divest to the Tamil Nadu government—chief minister J Jayalalithaa has offered to buy the Centre’s stake—this will be most unfortunate. First, since the sale is being made as part of Sebi’s directives to get firms to have a minimum public float, substituting the central government by a state government is really just making a mockery of the rules. Two, and more important, the Centre cannot be seen as giving in to trade unions who have absolutely no reason to make the kind of demands they are. While it is still understandable, even if completely undesirable from the national point of view, that NLC unions go on strike to prevent the government from opening up the sector to private players, the current divestment of 5% shares doesn’t change NLC’s monopoly in any way.
The government has already given in to Coal India Limited’s (CIL) unions on precisely this. While the government was all set to divest 10% of its CIL stake—this alone would have helped it meet around a third of its FY14 target—the unions threatened to go on strike last month and the government gave in. As a face-saver, it was announced that discussions were being held to get the unions on board. Presumably this is also the reason why, after the Budget announced that the government was going to soon be making announcements on how to bring in private miners in the coal sector, there has been no progress on this so far. The money to be got from the NLC divestment is not too large at R460 crore, but the point to be made is an important one.