Centre rejects Coal India Ltd's proposal of an increased pay package for its CMD, ..but why?

IN A strong rebuttal to PSU Coal India Limited (CIL), the Centre has rejected a proposal for a higher salary package for its CEO position.The post that has been lying vacant now and for which there was an advertisement recently seeking suitable candidates even from the private sector.

The proposal came from the coal ministry and it aimed at bridging the huge gap in average salaries of executives employed in government-owned companies and the private sector.

The coal ministry has issued an advertisement...

seeking candidates for the post of CIL CEO, which is currently held on a temporary basis by the ministry additional secretary A K Dubey until December 25.

The ministry felt that unless there was some parity between the compensation offered to the CEO of CIL and average salaries in the private sector, external candidates with the skills and experience necessary to run the group would not be enticed to apply for the job.

The compensation package determined by the government for the top CIL position averaged at around Rs 125 000 (about $2 000) a month, whereas it could be as much as 10 to 15 times more in the case of a CEO of a similar-sized private sector company, the official said.

The government has relaxed the norms for selecting a candidate for CIL and experience in mining or the coal sector was no longer mandatory. Wider managerial experience was required to run the company, which employed 350000 workers.

The coal ministry’s efforts to widen the CEO search stemmed from new challenges the mining company faced, including rising domestic coal supply shortages and stagnating production at around 452-million tons a year.

The new CEO would also have the task of managing new coal blocks, which the Supreme Court declared as having been allocated illegally.

The court last month declared that 214 coal blocks allocated to various companies were illegal and that these blocks would have to either be auctioned or handed over to CIL giving existing owners six months to wind up their operations.

Even as the government is keen to throw open the top CIL job for private sector executives, trade unions have opposed inviting “outsiders” to run the company.

The trade unions said that it was “irrational” to think that a private executive with experience of running a company with $800-million a year in turnover could head CIL, which had made $14-billion a year in revenue.

Earlier, following advise from coal ministry, Public Sector Enterprise Board (PESB), the head hunter for PSU executives, invited professionals from the private sector along with those from government owned companies to apply for the for the post of chairman and managing director (CMD) of Coal India.

The post of CMD of Coal India has been vacant since May-end when S Narsing Rao resigned. A K Dubey, additional secretary in ministry of coal, is officiating the post till a full-time chief executive is appointed.

The appointment of a full-time CMD became important following the recent Supreme Court order that cancelled almost the entire captive coal block allocation.

Most of these blocks may now come to CIL to maintain their operations.

Besides, CIL also has to take quick decisions to operationalise its own mines to meet growing demand. Absence of a full-time CMD is hurting its decision making process.

PESB recently invited application from suitable candidates for CMD position in CIL.

Unlike in past, the PESB advertisement this year has extended eligibility of application for private sector executives as well.

PESB has invited applications from private sector executives from both listed and unlisted companies with a turnover of Rs 5,000 crore.

The last date for receiving application is October 29 and candidates have also been asked to give in detail their work experience and responsibilities handled.

"Private Sector Executives must be working as whole time Director/President/CEO in a listed company whose average annual turnover during the last three financial years (2011-12, 2012-13 and 2013-14) was at least Rs 5000 crores," the advertisement said.

In case of executives from unlisted companies, PESB added a clause that the average annual turnover of the Group to which it blocks should be at least Rs 10,000 crore and the holding company or at least one of the subsidiaries of the Group should be listed on a Stock Exchange.

Power minister Piyush Goyal is keen to professionalise the functioning of the biggest coal miner in the world.

The scheme for the Maharatna PSU may also be followed in other PSUs such as DVC, PFC, NHPC who are also headless for quite some time.

The minister said that private sector executives may not be offered the salaries they may be drawing outside, but if they have with to turnaround the fortunes of an entity, they would be given free hand to do so.