As a result, Modi will likely pass his Coal India test
Coal India, in more ways than one, represents the Modi government’s agni pariksha, if you will. The UPA wanted to disinvest a stake in Coal India, but with the PSU’s trade unions opposing it, the government quickly backed down—with an 89.65% government stake in Coal India, the PSU is very far away from being privatised, but the unions simply don’t want to take even the slightest chance. Despite the fact that Modi had R22,000 crore riding on the 10% Coal India stake sale—that is 35% of the budget’s disinvestment target—the unions expected him to go the UPA way; indeed, they wanted more and threatened to go on strike. For one, the unions wanted all the coal mines that the Supreme Court was going to cancel to come back to Coal India; bringing in commercial miners into the sector was something too revolutionary to even be thought of. Indeed, when the idea was mooted, top officials in the ministry argued Coal India’s unions would never countenance the thought, and if they went on strike, they would bring the power sector to its knees.
Despite this, however, the Modi government went ahead with an ordinance that, sooner rather than later, will usher in commercial coal mining, and the cancelled coal mines were not given to Coal India. In retrospect, it is clear there was some pretty serious backchannel work going on since the Bharatiya Mazdoor Sangh (BMS), one of India’s biggest trade unions and an affiliate of the Sangh Parivar, has decided to back Modi on the stake sale—BMS says it has the support of more than half of Coal India’s 3.7 lakh workers. What that means is that the Coal India stake sale will go through and, most likely, commercial miners will also be brought in gradually.
While no details are available about how BMS was brought on board, it would appear the Sangh Parivar is backing Modi’s larger reforms package as it realises creation of jobs and getting the economy back on track are vital. While most trade unions are calling for a big strike on December 5 to protest Modi’s reforms, it is important to make BMS realise its larger salvation lies in more job-creation and not in simply serving the labour aristocracy as it is right now. With organised labour only a fraction of the workforce, the only way for unions to increase their membership, and influence, is from new entrants to the jobs market; and the only way to get more jobs in the organised sector is to go along with solutions that make the jobs market more flexible. If this doesn’t happen, employers will either go for more capital-intensive solutions—Maruti’s production has risen 3.4 times in the past decade but workers have increased only 2.5 times—or set up small unorganised units. Indian states that have flexible labour laws, a McKinsey study found, had 35% of the workforce employed in the organised sector where wage levels are much higher; the figure was 23% in states that didn’t have flexible laws. While it is not clear if BMS will go along with Modi’s larger labour reforms—including the ones of the type made by the Rajasthan government—the BMS president got it absolutely right when he said “a strike is not the right process to get your demands met”.