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Disinvestment Minister Arun Shourie, in the eye of the storm
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By
Md. Zeyaul Haque, Special to IslamOnline
NEW
DELHI, Sept 3 (IslamOnline) - For some time, India’ s relentless
disinvestment drive (sale of government companies) has been stalled. The
reason is severe ideological differences between various components of
the National Democratic Alliance (NDA) ruling at the Center.
To
cover sharp differences in the BJP over privatization, party spokesman
Arun Jaitely claimed in New Delhi Monday, September 2, that there was no
difference within the party which “ supports disinvestment fully.”
Finance Minister Jaswant Singh repeated the same line, Tuesday,
September 3.
However,
this is one crack that cannot be papered over. Even the parent
organization of BJP, the Rashtiya Swayamsevak Sangh (RSS), from which
the prime minister, deputy prime minister and other important ministers
take their orders, has vociferously opposed disinvestment periodically.
Led
by Bharatiya Janata Party (BJP), the 24-party coalition represents a
wide spectrum of political ideologies. The powerful cabinet committee on
disinvestment, which has the prime minister, the deputy prime minister
and other senior ministers on board, has not met since July 11. Under
rules, it had been meeting twice a month.
The
Congress Party, under whose rule market-oriented changes were introduced
in early 1990s, has also criticized the present phase of disinvestment.
The Congress has pointed out that it is not against privatization and
the sale of government-run, state-owned companies in principle. However,
money from the sale of such companies should have gone to
infrastructure-building rather than being used to tide over immediate
fiscal problems.
Even
an extremely senior member of the cabinet, Defense Minister George
Fernandes, has publicly opposed the sales. Fernandes, a politician of
socialist background, is ideologically opposed to selling state assets
to private businesses. However, his socialist credentials have been
questioned because he chose to keep quiet till substantial assets were
sold. Between October 2001 and June 2002 the Union government sold 28
state undertakings, or public sector undertakings (PSUs).
The
October 2001-June 2002 sales fetched in a whopping Rs 50 billion.
However, of late, government has been facing strong resistance to
further sales even from senior ministers like Ram Naik (petroleum),
George Fernandes (defence) and Pramod Mahajan (information technology).
Petroleum
Minister Naik has been resisting sale of oil giants Bharat Petroleum
Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
Naik’ s case is that both these companies are huge profit-earners, and
thus should not be offered on a platter to private businesses.
Quite
a few people agree with Naik. The HPCL earned an impressive Rs 11
billion in profit last year, while BPL had a profit of Rs 8 billion.
Besides, oil is a “ strategic sector,” which should be under state
control. As per this line of thinking, such PSUs should not be allowed
to be taken over by private businesses.
However,
private investment in oil PSUs is regarded as acceptable as long as the
controlling share remains with the state. Defense minister Fernandes
supports state control of defense PSUs as well, as it is a sector which
cannot be opened to private investment at all.
The
other side says that it is not government’ s business to do business,
profitable or not. Disinvestment minister Arun Shourie, a former World
Bank employee, opposes the idea of government control over business.
Shourie is in the eye of a storm over the issue.
There
are several finer points in the disinvestment debate. Socialists and
former socialists favor “ public sales,” as opposed to “ strategic
sales.” In public sales, the shares are sold to common small investors
in the share markets, while in strategic sales a state-owned company is
sold to a private company. The argument against such sales is that they
replace one monopoly (state-owned) with another monopoly (privately
owned).
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An investor filling form at India largest, govt-owned, mutual fund UTI
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These
people prefer the British model of disinvestment under Margaret
Thatcher. Under Thatcher, the British government sold off state-owned
companies to common investors at relatively lower prices, thus enriching
common Britishers.
The
Indian Disinvestment Minister, who has sold off quite a few PSUs in
strategic sales, has claimed that such sales give much higher revenue to
the state exchequer.
India
began its existence as a free, democratic state with independence from
British rule in 1947. The first generation of leaders preferred a model
of extensive state controls on the crucial areas of economy that was
like Soviet-style planned economy in many respects. “ The state must
have control of the commanding heights of economy,” was a popular
political slogan of early years.
The
first prime minister, Jawaharlal Nehru, was a Fabian socialist who
preferred a “ mixed economy” - an economy that had some features of
the market economies, but much of it was state-controlled. Over the
years state control bred inefficiency, corruption, and stagnation.
As
a results of years of state control (which began to be lifted in the
early 1990s), most public sector companies became loss-making
enterprises. Public disappointment with these money guzzling companies
grew so much that over the years the idea of disinvestment gained
acceptance. The present opposition to disinvestment is likely to melt
away in weeks ahead
.
