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A Brief Outline of a Critique of the Common
Minimum Programme in respect of Public Sector and Public
Services |
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Jul
5th 2004, K. Ashok Rao * |
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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:
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To
carefully examine the public sector non-core strategic
areas;
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To
set up a Disinvestment Commission for advising on
disinvestment-related matters;
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To
take and implement decisions to disinvest in a transparent
manner;
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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:
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.
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* K. Ashok Rao is Secretary General,
National Confederation of Officers Associations Of Central
Public Sector Undertakings (NCOA). |
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