In many ways, it is an ideal time in CIL’s corporate history to sell a public stake: structural reforms that saw it shed well above one lakh employees over the past several years led CIL, a loss-maker for decades, to substantial recent profits (expected to be Rs 500 crore this year). In part due to its recent successes it was declared a Navratna company in October of last year, allowing it greater operational flexibility and thus making it considerably more appealing to capital markets. In addition, substantial management reforms and the utilisation of outsourcing in many mining operations made it considerably more efficient and effective.

Ultimately, a public share sale would impose much-needed discipline, which could lead to further performance improvements even if the state continues to own the vast majority of the company. A model for such a development can be seen in entities such as Gujarat Mineral Development Corporation (GMDC), a majority state-owned mining company that has seen continuous performance improvements and steady profits with high gross margins since going public. While GMDC is still restricted to a degree by government rules, it runs much more like a private enterprise and has achieved excellent performance metrics.

Interestingly, Bhattacharyya has also suggested offering equity stakes in the partially-privatised CIL in exchange for land for families displaced by mining operations. Given that land continues to be the central constraint on coal development in India, this could provide an interesting synergy of interests. Similarly, profit-sharing or labour-owned equity stakes in a new CIL (a suggestion recently floated by Jaiswal) could considerably help in an industry where labour-management strife has been intense. Profits were just Rs 96 crore in the wake of a new wage agreement in 2008-2009 that substantially hiked wages from Rs 5,000 crore in the previous year; still, maintaining profitability with a dramatically increased wage structure is an indication that the company is now on much firmer footing than it has been at any time in the recent past.

... contd.