The disinvestment card!
My father is a retired public sector undertaking employee. Having grown up in a township within a city scenario where this navratna organisation had created all sorts of facilities for its employees: sector-wise schools, colleges, dispensaries, shopping complexes, recreational facilities, etc. In short – everything the employee and their families would ever need; reason why I have deep respect for public sector organisations. But over the time they haven’t been able to sustain themselves. When I finished my graduation in 1993, the organisation hadn’t recruited a single engineer since 4 years, the staff quarters were slowly being sold or given on rent to outsiders, many education society schools were closed and a lot of controls were put on providing medical facilities to the employees, especially to the retired lot. To the employee and their families these changes were hurtful, but it also underlined the compulsions of such a public sector organisation. In our case this was a profit making enterprise, but most of the otters aren’t.
Which brings me to the core issue, the outcry started on reported scrapping of the Disinvestment ministry propagated by the Left, as it prepares to back a Congress lead government at the center. The leftist thinking obviously has roots in safeguarding worker rights. They maintain that disinvestment needs a human face: don’t sell the “family jewels”, don’t disinvest the navratnas and the profit making non-navratnas they say. This has caused much furore. The Samajwadi party terming Shourie as “an economic terrorist” said, “Sell only those that are not making profits”.
Even if we neglect these opportunistic clamour, and look at the primary reasons for disinvestment, they were manifold:
- Removing government monopoly and allowing private sector players to participate, so that better competition leads to better services/competitive prices.
- Get rid of loss making organisations and organisations with surplus manpower, high overheads.
- Redeploying the resources in areas that are much higher on the social priority, such as, basic health, family welfare, primary education and social and essential infrastructure.
While I fail to understand how the disinvestment decision on the two petroleum giants, Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) would have justified on the point (2), since they have consistently contributed to the central exchequer, the last point is the one that interests me.
My clear view is: Government should certainly not be burdened with running companies, but if it has to, as in matters of National security and safeguard (Atomic energy, Railways for instance) and for social concerns, it should perhaps limit itself to the sectors mentioned at (3).
The disinvestment issue indeed is touchy and in all ways non-populist. Now there are umpteen ways to populism but they can cause serious repercussions too. Remember that one of the reasons for Digvijay Singh losing in last assembly elections was his refusal to pay perks to government employees (who comprise of a paltry 1% of Madhya Pradesh voters), and cut down on posts in the bid of reducing the cost to the exchequer on salaries, obviously in order to satisfy the rest of 99% in form of subsidies (for example: in form of “free” electricity).
Today many such governments will be shocked to discover, when they actually hold the steering, that in fact there is no money in their wallet to entertain such populist measures. When people tend to feel that employment is being cut (it doesn’t matter if in organisation like the National Textiles people are drawing salaries sitting at home, rationale being “where else can they go”) they will protest. Third parties can always smell foul and say the the companies were under-sold or there was something fishy in the deals. We must remember that perhaps this was the reason that Arun Shourie was given the charge for the ministry, for his non-partisan, steady image. Thanks to the forward looking attitude of many such public sector employees like my father, at least people like me are not sitting at home waiting for the trade unions to fetch us a secure sarkari job.
IMHO, These are certainly not the days when you can leech to the government run enterprises for nourishment, simply because you voted for that government.
Everybody knows that the Congress has been the pioneer in playing populism cards (ranging from caste to Ayodhya) but if they try playing with seemingly sane economy measures, just to appease the allies, in the long run they might just as well pay the price. I think the way of economy that India has started traveling on, no party can ever hinder its pace. This yelling is just a matter of public imagery, behind the scenes they will have to do what all others have been doing, whosoever comes to power. My advise, therefore, to these politicians is: pick some other card to play.
Exactly my sentiments Nitin! Reason why I advice the government to continue with the current Disinvestment/ Privatisation. Only things I expect are: accountability and transparency. What I fear from these politicians and beaurocrats is that to for individual gains and speedy process they might under-sell the properties or sell them for pennies. Remember that the Ambanis were the first few industrialist to meet Sonia, they are the most interested parties in the Oil deal. Such meetings only bring bad-name to whatever good work Shourie might have done.
Private sector is interested in sick PSUs only when they have added paraphernalia in the form of land at throwaway prices. Otherwise who will be interested in buying a sick unit?
Very well written Debashish.
Debashish,
The issue with privatisation really is whether the government is the best entity to do business; or as some would say is an IAS officer a better CEO than an entrepreneur or an MBA?
Public Sector Units may have been appropriate in the Nehruvian world, but they have resulted in India being extremely uncompetitive internationally; many are profitable today only because they are shielded from competition. Many are loss making even after being shielded from competition. Indian consumers were fed with a narrow range of shoddy goods at uncompetitive prices. Worse, these products could never hope to compete internationally. There may have been a few exceptions but this generally was the case.
Many of these were heavily subsidised by the government. This meant taxpayers were being made to pay for the inefficiencies of the PSU.
Experience around the world has shown this is not a model that works today. Government is best when it governs, not when it does business.
As I pointed out in my blog, PSU sell-offs should be across the board; whether loss-making or not. Why should investors pick up only loss making businesses. Once sold, the government must remove protectionist walls to ensure free play of competitive market forces.
The human element is one of putting in place healthcare & education systems that takes care of these basic needs. This is the ‘human face’ of reform that is needed.