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Tuesday, 09 July 2013 00:00
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PSU unions get govt to back down, yet again

 

While corporate India is playing hardball with trade unions who are threatening strikes, including by increasingly automating their assembly lines, the government doesn’t seem to miss one opportunity to give in to the unions. In the case of the monopolist Coal India whose poor performance has meant India spends around 1% of GDP in importing coal, union power has meant that almost 5 months after the Budget announcement, the government is no closer to bringing in PPP players into the coal sector. It has also meant that, though the government is very far from privatising Coal India, its unions have ensured the government cannot sell even 10% of its shares—the government shareholding in Coal India is 90% and, as per the plan to get R56,000 crore from disinvestment this year, the finance ministry had planned to sell another 10%. This would have given the government R18,000 crore or around a third of the year’s target. Even after this, the government would still own 80% of Coal India, but the unions were having none of this, so the disinvestment has been put on hold.

It gets worse. As part of Sebi’s decision on minimum public shareholding, a mere 10% of PSU shareholding has to be held by people other than the promoters—it is 25% for private firms. The idea is to get some diversity in the shareholding, to get the public to take part in the company’s fortunes. As part of this process, the government planned to sell off 5% of its shareholding in Neyveli Lignite Corporation, to bring it down from 93.5% to the Sebi-mandated norm. Neyveli’s 18,000-plus permanent employees—considerably smaller than Coal India’s 3.45 lakh—however, weren’t ready for even this, so they went on strike. Tamil Nadu chief minister J Jayalalithaa decided to make some political capital since the PSU is headquartered in her state and offered to get her state’s PSUs to buy up the 5% stake—the law, after all, just stated the Central government had to divest, it didn’t say a state government unit couldn’t buy the shares. Anxious to prevent any form of possible strife, the Centre argued its case with Sebi which, sadly, agreed to the farce; the Tamil Nadu government will now discuss the modalities with Sebi. When the Centre is totting up its successes, 5% disinvestment in Neyveli will be one of them.

 
 

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