Are you nuts, Mr Jaiswal? Why should CIL fund food security?

What would you think of a corporate bigwig who made the following statement to shareholders at his annual general meeting?

“I do not deny inefficiency. I do not deny overstaffing. I do not deny corruption. I do not deny theft. But we are taking action against this.”

You would probably think he was sleeping on the watch - even if the speaker was non-executive chairman or independent director without executive responsibilities. If so many “undeniable” bad things are happening in the company, it means everyone knew things have been going downhill for a while. Why didn’t he tell the CEO to fix this problem earlier?

What would you also think of the man if he further told shareholders: “We have lots of money in the bank. We will give it to our principal shareholder in case he needs it for his other businesses or needs.”

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You would probably be incensed. How can the chairman put the majority stakeholders’ interests above that of others? The chairman represents all shareholders - and not merely the promoters.

But this is more or less what Coal Minister Sriprakash Jaiswal told The Economic Times in an interview on Coal India.

Jaiswal told the newspaper: “Cash-rich companies like Coal India Ltd can lend to the government whenever the government is in need of funds. For example, enactment of the Food Security Bill would require huge funds. Coal India belongs to the people of this country and an amount of Rs 25,000 crore can easily be given to the government for implementing social schemes.”

Coal India is supposed to fund the Food Security Bill?

[caption id=“attachment_111754” align=“alignleft” width=“380” caption=“Jaiswal said Coal India belongs to the people of India and an amount of Rs 25,000 crore can easily be given to the government for implementing social schemes. Image from ibnlive”]  [/caption]

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Sorry, Mr Jaiswal. You are minister for coal, not minister for Coal India. Even if Coal India belongs 100 percent to the government - which it does not - it cannot be doing this. It is against corporate governance norms to divert cash from one enterprise to another just on a whim and a fancy.

Sure, you can legislate away Coal India’s excess profits. You can tax them more, you can ask them to pay higher dividends, but you cannot ask them to just hand over the money to someone else just because the milk of human kindness is sloshing inside you.

For starters, you had no business talking out of turn on what Coal India should or should not do. For you are not the CEO of Coal India. Mr Nirmal Chandra Jha is. If at all any decision has to be taken on lending or investing in government schemes, he has to take them. If it’s an order, he may comply, but he also needs to tell his shareholders - taxpayers and investors - why it is a good idea. If it’s a bad idea, he should resign.

Secondly, a minister’s job is to make policies, evolve rules, study demand and supply patterns and see how the industry as a whole - and not just one company - can grow efficiently. How is it your job, Mr Jaiswal, to decide what Coal India should be paying its workers or its unions as bonus? You have completely undermined corporate governance once more.

Sure, we do understand that “when the employee morale is good, productivity and production improve”, but surely Mr Jha knows that, too? Once again, why are you trying to do his job?

One understands that, thanks to the recent drop in power output due to the coal crisis, you have asked Coal India to divert its e-auction coal to power plants. You know that e-auction coal earns Coal India more money. So any loss is, in effect, a policy-induced loss to Coal India. Please ask the government to compensate for it.

Mr Jaiswal, we are sure you know that the oil companies have been ruined precisely because of the kind of attitude the government brings to public sector companies. Do you want Coal India to be landed in the same mess as Indian Oil, BPCL and HPCL?

As a competent minister, it is your duty to ensure that any losses incurred due to policy is compensated by the exchequer. One is not arguing against any decision to subsidise consumers - whether it is the poor or NTPC - but these losses cannot be diverted from the exchequer to commercial undertakings like Coal India.

Mr Jaiswal, Coal India is currently a monopoly, and you probably think the line separating policy from commercial operations need not exist for government-owned monopolies. But this is what Praful Patel thought at Air India and look where it is. This is what successive telecom ministers thought about BSNL and MTNL, and look where they are now. Once monopoly ends, public sector units are sitting ducks for private sectors rivals. Coal India will not remain a monopoly for long.

Coal India is today the world’s largest coal producer. Lack of an arm’s length distance between commercial operations and policy-making could reduce it to a basket case in just a few years’ time. Is that what you want, Mr jaiswal?