Objections by Coal India’s board highlight this
At some point, sooner rather than later, the government will have to squarely address the issue of whether the social obligations of PSUs are more important than the ones to shareholders. Though it has not come up in an explicit manner in the case of oil PSUs that have, over the years, paid for the government’s policy of subsidising fuel, it has certainly been on investors’ minds; that is why the price-earning multiples that oil PSUs get are smaller than they are for their private sector counterparts. The issue of social objectives versus shareholder duties, however, keeps cropping up in the case of Coal India Limited. While the Children’s Investment Fund first raised this, Coal India’s board has flagged the matter again. In response to coal minister Piyush Goyal’s statement that Coal India would halve the amount of coal it sells through e-auctions—this fetches a higher price than that for the rest of its supplies—the board pointed out earlier this week that the policy would harm shareholders. The minister has, at various points, said that the auctions were not in the public interest, and that Coal India had got the mines for free anyway. While he is well within his rights to make the arguments, it is difficult to fault Coal India’s board either. If Coal India, or some other PSU is to help further the larger national interest—by providing cheap coal or gas in order to get cheaper electricity—it is perhaps time to think of delisting it.
While the oil ministry has said it will announce new gas prices by next month, one solution being talked of is to not allow this price hike for oil PSUs who got some of their fields without having to bid for them—the argument, in this case, is that were the fields to have been bid out, the government would have got a higher revenue-share from them. In which case, the cleaner solution would be to bid out even the older fields and to give the oil PSUs a chance to match the bids, a right of first refusal, basically. Once this is done, gas prices should be raised uniformly for all players. Indeed, if subsidies have to be given in what is called the national interest, a better way to do this is to emulate the electricity sector where subsidies to agriculture are paid for from the budget which will then fund this by way of the dividends it gets from higher coal/gas prices got from the PSUs.