Coal India’s announcement of a grand dividend cannot mask its several crises and the need for reform.
On Tuesday, the board of Coal India Limited decided to pay a dividend of Rs 18,000 crore to its shareholders. Since the Central government is a 90 per cent shareholder in the company, it earned Rs 16,875 crore. The sum will almost complete its budget target of raising Rs 73,875 crore as dividend and profit from public sector enterprises. In the normal course, there could have been no quibble about a majority shareholder earning a large dividend, but FY14 is not a normal year.
In the circumstances, the build-up of Rs 60,000 crore of reserves in the company, from which it paid the dividend, is a sign of massive inefficiency. The exertions by the inter-ministerial groups on behalf of CIL have neither opened any new mines for the company, nor raised production. The government could have rectified the situation somewhat by disinvestment in the maharatna company to bring in additional accountability through the markets and allowing the public to share in riches like the generous dividends. That, too, has fallen through as the CIL trade unions have successfully blocked the share sale.
The transfer of money to the government is an indication of the scale of the investment gap that has developed in this sector. Except for helping to balance the books of a government whose deficit is to a large extent the result of unproductive expenditures and subsidies, the transaction does little else.
