TCI's battle with Coal India Limited (CIL) is giving India a bad press abroad. TCI is known to be an activist shareholder. Just before the financial crisis, it was amongst those who pressure ABN Amro to split up and sell the pieces to various parties, including RBS. The deal eventually sunk RBS- so much for TCI's activism.
TCI's demands on CIL are downright unreasonable- they certainly cannot dictate pricing policy or, for that matter, personnel policy or any other policy. Shareholders must focus overwhelmingly on outcomes- are they getting their target returns or not? Judged by this test, TCI has no business to get worked up over CIL. CIL's return on equity in the past couple of years were 37% and 33%. It seems to me that it is customers who are getting ripped (or maybe suppliers, including the supplier of land, the government), not shareholders.
The bottomline is this: the PSU business model is very different from the private sector model. If you don't like this model, stay out of PSUs. It can't be that you invest in a PSU and expect it to behave like a private company. I am sorry to note that the independent directors on the board of Coal India do not seem to have applied their mind to the problem; they seem to think that independence is best displayed by not toeing the government line.
More in my ET column, CIL: TCI's Misplaced Zeal