Coal India limited is divesting 10% of its stake in the company. 63.13 Crore shares will be the IPO offer. Of this 1 % of the issue size has been reserved for the employees. The chairman of the CIL, P S Bhattacharya says that coal is the national asset and retail investors would be in focus and he especially wishes at least 50% of the employees to be shareholders of the company. For facilitating the subscription by the employees to the reserved quota the company has already released Rs. 5500 crores of arrears with an informal advice to use part of these arrears to subscribe to the equity sale.

The company has also asked the concerned entities to issue PAN cards and open demat accounts for facilitating the subscription. The company has initiated talks with banks like SBI, UBI, PNB and BOB for cheap staff loans to facilitate subscription by the employees of CIL to the divestment.

Thus the PSU is going all out to see that the divestment is successful on the employee reserve quota front too. Apparently it appears that the employee’s interest too is taken care of well by all these measures.

But why should the employees be given a special treatment. In building up of CIL the entire nation has contributed through direct and indirect taxes. Though the employees are a part of the set-up they have been regularly rewarded for their work through salaries, bonuses perks and pensions as per the terms agreed.

Giving a special favour to the capital divestment is a bit misplaced. If the retail investor should get the benefit of the dilution of the stake he too must be favoured with a cheap loan as is being attempted for the employees. But such investment through cheap loans may succeed on the retail quota front but banks will suffer in the margin front.

SBI latest quarter result speaks all. Profit is down because of increasing provision for bad loans and the liquidity overhang. The bank is planning to cut bulk deposits as a cost cutting measure. Since banks are pressured already on excess liquidity any pressure to grant cheap loans for investment to PSU’s divestment will squeeze in their margin further and will reflect in the stock market. Share prices of SBI fell by 4% after news of reduced Q4 net profit. Other banks too would face the fall in their share prices if such special favours are granted time and again while divestment of PSU stake. The loss in the value of the public sector banks’ share could be huge in due course.

The unions concerned may be happy to have scored over by the favourable terms for employees but ideally speaking there should be only a general reservation quota for the retail investors. And these investors who are capable of investing through their investible surplus should be considered on the pro rata basis. The special employee quota should be dismantled once and for all. It is also seen that many employees who do subscribe get out of the investment soon as they are not genuine investors but act as a front for somebody ready with the cash and a meagre reward.

Thus the policy for special employee reservation should be done away with and they should be treated on par with the retail investors to save the embarrassment of discrimination of the general retail investors Vis a vis the employees. We must realise the difference between the private sector employee and the public sector employee. In the former the initial to build the enterprise in terms of both the capital and the labour comes from the private initiative while in the latter the public in general has contributed to the enterprise not the employee alone. Hence the PSU employee ideally should not deserve a favoured treatment. It’s a tough call for the policy makers. But lasting policy solutions demand discrimination neutral decisions. Let’s call it a day for employee reservation in PSUs and cheap loans for subscription.