Why coal strike call-off isn't Modi's Thatcher moment yet

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26 Aug, 2025 12:21

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Moneycontrol Bureau

On Tuesday last week, trade unions affiliated with Coal India, the country’s monopoly coal miner, started a five-day strike that threatened to cripple India’s struggling power sector.

In a show of unity between unions backed by different parties -- including, interestingly, the BJP -- not seen in decades, workers of the mining behemoth were protesting against what they called were steps to disinvest in and restructure Coal India as well as moves to open up the coal mining sector.

The contentious issues related to a report tabled by a committee led by Suresh Prabhu before he was appointed Railway Minister that suggested steps to restructure Coal India, as well as a clause in the coal mining ordinance that would let the government allow commercial mining of coal.

But three days into the mega strike, by which time coal production had fallen by about 75 percent according to some reports, the government intervened and successfully convinced the unions to call it off, leading media reports to dub it Narendra Modi’s Margaret Thatcher moment – in which Britain’s Iron Lady took on striking coal unions in 1984 and defeated them.

However, there are several reasons why making such a pronouncement may be premature and Modi’s battle in reforming India’s coal and power sector is only half won yet. Before that, here’s a background.

India’s coal mining sector was nationalized in the ‘70s. Coal India started producing a bulk of the mineral required in a country where about 65 percent of its plants rely upon it to generate power.

As demand for coal starting rising, starting 1990s, the government started allowing private companies with end use (power, cement and steel firms) to mine coal – they could not sell mined coal in the open market – but the process of mine allocation was so riddled with problems that the Supreme Court last year cancelled all of those.

The present government later came out with an ordinance to facilitate auction of coal mines, which also contained a clause it may allow commercial sale of coal by these firms at some point in future.

But even as the Modi government may have prevailed upon unions for now, there remain several challenges in the way for it to truly reform the power sector.

One, the government’s roadmap to allow commercial mining is still unclear. Coal India, whose output has grown at a snail’s pace for several years, will be able to satisfy the country’s burgeoning need for coal. It was this that led to the country needing to import 20 percent of its requirements even as India sits on the world’s fifth-largest coal reserves.

But in its bid to boost production, the government’s decision to allow end-use companies to mine (or even sell) coal is a half step at best as these companies have neither experience nor expertise to do so.

As evidenced by the prior experience of allowing such firms to mine (though some of it were because of issues beyond their control such as delayed permissions), it is well known that these companies were not able to scale up production in any meaningful way.

For commercial mining to take off successfully, the government will have to invite global mining behemoths, with their advanced technical know-how and experience, (the BHP Billitons and Rio Tintos of the world) to come in and mine.

But reports suggest that as part of a compromise to have the strike called off, the government agreed to “evaluate the enabling clause in the ordinance that paved the way for commercial mining” by forming a panel to look into it as well as issues related to Coal India restructuring.

Even over the point about restructuring the inefficient mining behemoth, there are also concerns about how effective the Suresh Prabhu committee’s steps would be in boosting output.

“The group has recommended delegation of power to CIL’s subsidiaries and granting them operational flexibility to improve efficiency in production,” an editorial in Mint says.

“History, however, has made it amply clear that subsidiary companies do not compete as expected by the designers of government policy in the coal sector,” it points out. “Though CIL already has eight subsidiaries under it, this has not brought about any competition to act as a check on the domination of the parent company. Yet, asking public sector units with overt political control over them to compete like private companies by merely breaking them down into multiple units has remained the favourite recommendation of many.