1.0 Preamble
It can and would be argued that the United Progressive Government is a
secular alternative to the National Democratic Alliance. The emphasis
being on the struggle against communal forces, it is not possible to disturb
the equilibrium by raising questions relating to economic policies. Compromise
is the essence of political stability and therefore the best that one
can hope is some concessions in the neo-liberalism enforced by the gang
of four – the Multinationals – Indian big business –
the Indian State and the consortium of World Bank-IMF and WTO. In one
sentence, using Marxist terminology – why worry about the base when
the struggle is located in the super structure? The critical and relevant
question that begs an answer is can communalism be fought without worrying
about the base?
2.0 Ideological continuity but with a fig leaf
The UPA government is committed to the public sector strategy articulated
by the Congress during 1991-96 and by the United Front during 1996-98
when Shri Murasoli Maran was the Industry Minister.
The Industrial Policy Statement of 24th July 1991 stated that the
government would divest part of its holdings in selected public sector
enterprises (PSEs), but did not place any cap on the extent of disinvestment.
In the Budget speech of 1991-92, a cap of 20% for disinvestment was reinstated
and the eligible investors' universe was again modified to consist of
mutual funds and investment institutions in the public sector and the
workers in these firms. The objectives too were modified: "In order
to raise resources, encourage wider public participation and promote greater
accountability, up to 20 per cent of Government equity in selected public
sector undertakings would be offered to mutual funds and investment institutions
in the public sector, as also to workers in these firms".
The highlights of the Common Minimum Programme of the United Front Government
in 1996 were as follows:
• To carefully examine the public sector non-core strategic areas;
• To set up a Disinvestment Commission for advising on disinvestment-related
matters;
• To take and implement decisions to disinvest in a transparent
manner;
• Job security, opportunities for retraining and redeployment to
be assured.
No disinvestment objective was, however, mentioned in the policy statement.
"The question of withdrawing the public sector from non-core strategic
areas will be carefully examined subject, however, to assuring the workers
and employees of job security or, in the alternative, opportunities for
retraining and redeployment. The United Front Government will establish
a Disinvestment Commission to advise the government on these steps. Any
decision to disinvest will be taken and implemented in a transparent manner."
Just in case there is any doubt that there is some ideological shift in
the neoliberal commitment to privatization, the common minimum programme
is quite categorical is assuring continuity.
The UPA government believes that privatisation should increase competition,
not decrease it. It also believes that there must be a direct link between
privatisation and social needs like, for example, the use of privatisation
revenues for designated social sector schemes. Public sector companies
and nationalised banks will be encouraged to enter the capital market
to raise resources and offer new investment avenues to retail investors.
Chronically loss-making companies will either be sold off or closed after
all workers have got their legitimate dues and compensation. The UPA will
induct private industry to turn around companies that have potential for
revival.
Even worse the CMP promises complete adhocism.
All privatisation will be considered on a case-by-case
basis.
In order to ensure that the left parties are not completely compromised,
there is plenty of rhetoric.
The UPA government is committed to a strong and effective public sector
whose social objectives are met by its commercial functioning. But for
this there is need for selectivity and a strategic focus. The UPA is pledged
to devolve full managerial and commercial autonomy to successful, profit-making
companies operating in a competitive environment.
Also the distinction between sale of 49 % equity and 51 % equity is maintained
in all the super profit companies and it is assured that a fig leaf will
be provided to hide the modesty of the left parties.
The UPA will retain ONGC, IOC, HPCL, BPCL, GAIL, NTPC, SAIL and BHEL in
the public sector while divestment takes place.
It is difficult to find any major change in the pronouncements of the
UPA’s Common Minimum Programme and the Suo – Moto Statement
of Shri Arun Shourie, Minister of Disinvestment, made in both Houses of
Parliament on 9th December, 2002.
Review of policy and new directions:
The main objective of disinvestment is to put national resources and assets
to optimal use and in particular to unleash the productive potential inherent
in our public sector enterprises. The policy of disinvestment specifically
aims at:
• Modernization and upgradation of Public Sector Enterprises;
• Creation of new assets;
• Generating of employment; and
• Retiring of public debt.
Government would continue to ensure that disinvestment does not result
in alienation of national assets, which, through the process of disinvestment,
remain where they are. It will also ensure that disinvestment does not
result in private monopolies.
In order to provide complete visibility to the Government’s continued
commitment of utilisation of disinvestment proceeds for social and infrastructure
sectors, the Government would set up a Disinvestment Proceeds Fund. This
Fund will be used for financing fresh employment opportunities and investment,
and for retirement of public debt.
It would probably be argued that while the rhetoric is almost identical,
the left parties would work as watch dogs and ensure better implementation
because there is no doubt that besides ideology there was outright corruption
that was the prime mover of NDA’s policies and implementation.
3.0 A false fault line
A false fault line ahs been found called profit and loss, and this has
been made into a watershed for decision-making. Only if a public sector
or public service is profitable then privatization is blasphemy. By that
argument, all State Electricity Boards should be immediately privatized
since they are hopelessly loss making.
It is important therefore to demystify loss making that has been made
synonymous with inefficiency that allegedly is caused by public ownership
and cured by privatization.
1.1 Conceptual sickness
These are enterprises that were established irrespective of their commercial
viability. The reason for setting them up even when there were chances
of losses was because they belonged to one of the following groups a)
Public Service b) Strategic Units c) Softer political instrument for market
regulation. d) Quest for self-reliance.
a) Public Service: Example: Delhi Transport Corporation (DTC). For three
years, this was the recipient of the highest productivity award, while
showing losses. This was mainly due to administered prices. Similar is
the case of the State Electricity Boards where governments have prescribed
loss-making tariffs.
b) Strategic Units: Example: Hindustan Copper Ltd. It extracts copper
from very low-grade ore and yet it has to compete at international prices.
Another could be Mishra Dhatu Nigam (at present a profit making enterprise)
that produces, without economies of scale, strategic alloys for defence.
c) Softer political option for market regulation: Example: Food Corporation
of India (and other commodity related corporations like for Jute, Cotton
etc.). It buys at administered price (to provide relief to farmers) sell
at prices that provide relief to the consumers. Super Bazar is another
example, where the same products that any grocer would sell were sold
to regulate retail trade. These are examples of using PSEs as a softer
political option instead of outright nationalizing the trade.
d) Quest for self-reliance: In the fertilizer Industry, plants were set
up to use our abundant Indian resource - low-grade coal. Also some of
the plants were built at a time when there was acute shortage of foreign
exchange. This resulted in sub-optimal equipment being purchased since
the choice was restricted only to rupee payment areas.
1.2 Inherited sickness
Industrial sickness and the danger of mass unemployment was the motive
and purpose of taking over enterprises from the private sector that had
been completed looted and turned sick. A special feature of many of these
units is that they have very valuable real estate.
1.3 Sickness due to failure of infrastructure
Example: Fertiliser Corporation of India, Ramagundam unit. A split second
failure of power supply either in quality (like frequency) or quantity
would lead to a loss of production of several days. Initially captive
stations were not envisaged and installed in Fertiliser units.
1.4 Sickness due to policy decisions
Example: Engineering Projects India Ltd. that was directed to execute
a project in Iraq even when loss was projected. The promise to compensate
EPIL was not kept. Similarly, the PSEs were used to mobilize foreign exchange
(since they, rather than the Government, were considered by foreign lenders
to be credit worthy). Government used the foreign exchange and the enterprises
were left to bear the loss caused by exchange rate variation. In some
cases, PSEs were even prevented from repaying the loans when conditions
were favourable for the enterprise. In recent times, even after the Government
has announced the withdrawal of the Administered Price Mechanism for Petroleum
projects, the Petroleum PSEs, due to the compulsions of Elections held
in 2004, were not allowed to exercise their commercial discretion.
1.5 Indecision by Government
Indecision by the Government (in some cases deliberately motivated and
financed by business rivals) is another major cause of sickness. Example:
Hindustan Fertilizer Corporation Haldia unit. There was a major failure
during commissioning; no decision was taken on rehabilitating and re-commissioning
the units even after obtaining the advice of German (Ube) and a Japanese
(Toyo) consultants.
1.6 Due to Managerial failure (including indecision by Government)
and labour unrest
Some of the managerial failures are: a) Inability of managements to keep
up with technological changes, b) high inventory build ups, c) inability
to react to market changes, d) seeking softer options in industrial disputes
without considering the long-term consequences and e) corruption. Several
PSEs are victims of these failures that are universal and not unique to
the public sector. However, those who are ideologically committed to the
privatization of the Public Sector, flag these arguments as the sole reason
for losses in the Public Sector and prescribe privatization as the panacea.
1.7 Militant Trade Unionism
Even before the loss making "taken over sick units" (like the
NTC and West Bengal-based Engineering units) could be restructured and
made commercially viable, wages in these firms were pushed to unrealistic
levels making the revival almost impossible.
It can be noticed that most of the industrial sickness can be attributable
to causes that are independent of public ownership. On the contrary, private
ownership, mismanaged and swindling were responsible for a sizable section
of the public sector sick units. The assertion that reversing ownership
once again hold the key to redemption of these units fails to make sense
except if one realizes that most of the so-called sick units of the "taken
over sector" have vast and valuable real estate in Metropolitan cities.
4.0 Conclusion
In India, public sector enterprises and public services are not mere
enterprises but a political option in the discharge of the State to provide
its citizens access to goods and services in a country where there is
inequity in purchasing capacity and underdevelopment across economic sectors
and backward geographic regions and communities.
It is also important to recognize that every model has an internal continuity
and cohesion. It is not possible on the one hand to modify every single
economic legislation be it the Electricity Act, The Telegraph Act, The
Banking Act, The Insurance Act etc., to suit the neo-liberal economic
model that favours investors over consumers and markets over state intervention.
Any attempt to seek minor concession may be politically pragmatic, but
do not in any way make any impact to the needs on the ground.
The Trade Unions and all patriotic sections of the Indian people must
understand that the defence of the public sector and public services remains
the main agenda of their struggle totally undiluted by the common minimum
programme of the United Progressive Alliance.