Observers looking to gauge the seriousness of the UPA’s reform and disinvestment efforts should pay particularly close attention to developments at Coal India Limited (CIL). In particular, recent comments by new Minister for Coal Sriprakash Jaiswal as well as CIL’s head, Partha Bhattacharyya, indicate that long-delayed fundamental reforms may finally be in the offing.

For better or for worse, India’s economy runs on coal, which provides most of the country’s total energy and more than two-thirds of its electricity. In recent months, crippling power shortages, caused to a significant degree by a nationwide coal shortage, have served as a real brake on growth. Reform of the coal sector to increase efficiency and output can clearly no longer be postponed.

India’s coal ministry and CIL have already undergone much more reform in the past few years than has often been acknowledged. There have been significant gains in openness, transparency and productivity However, as comments made in recent days by senior officials indicate, the pace of reforms must increase. (Both Jaiswal and Bhattacharyya have publicly indicated that the government hopes to make a 5-10 per cent stake sale in CIL within the next year.)

While these are the strongest signals yet about the possibility of bringing market discipline to CIL’s operations, disinvestment should not be considered a foregone conclusion. Bills doing so have been stuck in the Lok Sabha for almost a decade now, blocked by legislators with a vested interest in the status quo. But the current severe coal shortage, and UPA-II’s fresh mandate, might change that. Few companies are more crucial than CIL; having personally acted as his own coal minister for part of UPA-I, after Shibu Soren was forced out, Manmohan Singh is well aware of the necessity of continuing structural reforms within the sector and of their broader importance.

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