Does ownership matter? Empirical evidence from the performance of Indian state and private coal mining companies

Abstract

This paper empirically investigates the effects of ownership in the Indian coal mining industry. It aims to examine whether there are efficiency and performance differentials between the state owned coal companies (SCCs) and privately owned coal companies (PCCs). We use a comprehensive dataset of 33 coal mining companies, comprising both publicly and privately owned firms existing in India over the period 2000–2016 to investigate whether ownership matters in economic terms, i.e. whether the state owned or privately owned coal mining companies show superior efficiency and performance. Using a multivariate panel data regression analysis it is shown that SCCs significantly underperform the private sector in terms of output efficiency and profitability. The reasons for this underperformance could be attributable to lack of technological upgradation, manpower skill deficiency, lack of incentivization and inadequate infrastructural facilities. Overall, this paper suggests to find out a middle path between economic outcome and socio-political considerations as political preference for state coal can become unviable from cost efficiency point of view.