INTERVIEW How will the restructuring impact Coal India’s bottom line? Difficult to answer unless the details of proposed restructuring are known. As on date every subsidiary is a separate legal entity and CIL as a whole has not been able to get any tax break on the losses of its loss making units. How will the exercise impact coal production in the country? Don’t you think the performance of companies like SECL and MCL will improve due to greater freedom in taking investment decisions and project implementation? Not really. Under the present structure they have enough authority to go for new projects. As for investments, the five Miniratna subsidiaries – SECL, MCL, NCL, WCL and CCL – can take investment decisions of up to Rs 500 crore in each case. Only two subsidiaries – ECL and BCCL – have a lower cap. For investments beyond these sizes, of up to Rs 5,000 crore in each case, CIL Board can decide. In coal mining these limits comprehensively cover all projects leaving hardly any project for decision of the government. If the subsidiaries need greater freedom on investments, the bigger ones may be considered for elevation to Navratna status. The government can give a thought to that. Another major advantage for the subsidiaries is the central procurement system for larger
24 Coal Insights, January 2013
Such proposals have been surfacing from time to time in the past. In all such cases it created uncertainty and concern for the company’s rank and files and put the management in a dilemma. CIL, to my mind, does not deserve it any more. equipment with Maintenance & Repair Contract (MARC) for long term. The centralisation enables making sensible changes in the tendering process to infuse competition. In one particular case, CIL could infuse competition by making suitable modifications in tender conditions leading to the procurement of 42 cubic metre shovels in 2010 at a price lower than the price at which the same equipment was bought in 2007 by SECL. Introducing integrity pact and holding extensive pre-NIT discussions were some of the forward looking practices introduced to bring in more competition in the procurement process. It is difficult to build these competencies in a decentralised manner in each subsidiary. Finally, what in your view is the possibility of this restructuring taking place? It is difficult to guess the outcome. But from past experience, I can only say that such proposals have been surfacing from time to time in the past. In all such cases it created uncertainty and concern
for the company’s rank and files and put the management in a dilemma. CIL, to my mind does not deserve it any more. Also this time around, I am a little confused as Coal India is now a listed entity. Also, the company is back on the growth trajectory, registering around 8 percent growth in production yearon-year. What will be the impact of this proposed restructuring on the million odd shareholders that include global institutional investors? On a different note I am not sure whether such an exercise is based on the recommendations of any duly constituted committee. I recall the T L Shankar Committee recommending the Coal India chairman to act as Chairman of all the subsidiaries. That however was impractical; but don’t recall anything on splitting the subsidiaries. Having said this let me reiterate that the current structure is just about fine for the company. And Coal India can deliver its best under the very same structure provided it is not compelled to face avoidable external challenges every now and then.