Disinvestment, saffron style

Disinvestment, saffron style
Mani Shankar Aiyar

When CPI Rajya Sabha member Gurudas Gupta accused the finance minister of selling the family jewellery to pay the grocer's bill, an indignant Yashwant Sinha demanded to know who the grocer was. The answer, of course, is that the grocer is none other than the finance minister himself. For whether it is he or his predecessors, all have looked on disinvestment as a means of making up the current fiscal deficit through unearned windfall revenue. This conversion of stock into flow is then dignified by the name of "economic reforms".

In the case of Manmohan Singh, the justification might possibly have been that he was pulling the country out of a crisis, but both his successors have been completely wooly-headed as to why the family silver should be disposed of to pay the butler's salary (that, incidentally, is the original English saying, but one would hardly expect the CPI, or recent converts to Hindutva, to know any better!)

There are two good reasons to disinvest. One, to rid the state of the burden ofloss-making units. The second, to make public sector undertakings more efficient through the injection of better management and technology.

However, going by what has been stated in Parliament these last two sessions, disinvestment minister Arun Jaitley has been charged with getting rid of the family silver as an end in itself. Jaitley and his masters do not like the public sector as a matter of principle; therefore, as a matter of policy, they are determined to bring down the government's stake to no more than 26 per cent in every public sector undertaking (PSU); where, that is, they cannot get rid of the damn thing altogether.

Whether the public sector is to be dismantled as a matter of ideology or mere pragmatism, the question of how to set about doing so remains. Clearly, the best place to begin is with the inessential and inconsequential. Ask anyone who rears at the very mention of the public sector and they will demand to know why the state should be in hotels and double-roti (bread).

Goodquestion. Why indeed? But in that case, should priority not be given to first getting rid of these? Yet, which government of the last five - Congress, National Front Mark I & II, and NDA Mark I & II - has put up Ashoka Hotel for sale - or Modern Bread? If not, why not?

Figures cited in the debates in the Lok and Rajya Sabhas show that some 10 of the 243 central government PSUs account for something like 80 per cent of all public investment. Why not then start dismantling the public sector by reducing, or even eliminating, government holdings in these 233 inconsequential PSUs? Yet, while hugely profit making and extraordinarily well-run PSUs like the Gas Authority of India Ltd. (GAIL) and Indian Petro-Chemicals Ltd (IPCL) are being put up for sale, why is Mother Dairy being so assiduously kept in the closet by the privatisers?

The reason, of course, is that there are no buyers for public sector rubbish. And there are buyers for the navaratnas. So, the finance minister puts up the best for sale, althoughthe logic to downsizing the public sector is that the worst should be got rid of. Hence the anomaly of Yashwant Sinha (1998-99) paying himself his grocer's bill by compelling a profitable oil PSU to buy into a less profitable PSU, then dressing this up as "disinvestment". And then Yashwant Sinha (1999-2000) compelling GAIL, the best-run PSU, to off-load its shares at the worst possible price - and that too to its prime international competitors! - only so that the finance minister can report to the nation next March a fiscal deficit a shade less horrendous than it might otherwise have been.

Indeed, if this 24-headed hydra coalition is, in fact, federalism at work, then surely disinvestment should begin with the hundreds upon hundreds of the most inefficient and wasteful PSUs we have - those run by the state governments. Especially as it is these very state governments who have run up mountainous deficits that have rendered the central deficit marginal to the calculation of the overall national fiscaldeficit. What does Jaitley intend to do to bring to heel the PSUs so grossly mismanaged by our state governments? Nothing because if Jaitley dared direct any state-run PSU to follow central government policy on disinvestment, his master's 23 regional allies, singly or together, would quite simply put a precipitate end to Shri Jaitley's nascent ministerial career.

Thus, thanks to disinvestment of the saffron kind, the public sector will remain burdened with the worst while the best and the brightest are sold off to the NDA government's favourites. Sold, moreover, for whatever the favourites are prepared to pay, even if that is a tithe of the market price, as in the case of GAIL. And to do so even if, indeed especially if, it means creating the worst kind of private monopoly, as is being readied for the take-over of IPCL by a private sector giant. After all, what better means than this of getting a bit of lubrication for the party machine?

The other good reason for off-loading a part of public holdings onto a private or multinational operator would be that the partner would bring to the unit management, marketing or technological capacities that would exponentially improve the performance of the PSU concerned. This, in Indian disinvestmentology, is called "strategic disinvestment". Yet, strategic disinvestment is the last thing on the Sinha-Jaitley mindset because, first, this would raise the hackles of the Swadeshi Jagran Manch, a lobby that after a year's quiescence has suddenly started asking its paid-up subscriber, one Yashwant Sinha, what he is doing to advance their cause; and, second, because, for ideological reasons, the BJP would not want to break the nexus between inefficiency and the public sector. It suits their purpose to retain lousy PSUs in the public sector to prove their point that PSUs are lousy; they are also not giving priority to strategic disinvestment in first-class PSUs for fear of improving public sector performance.

This kind of ideological and politically-motivated squandering ofthe assets of the nation, running to over one lakh crore rupees, must be stopped. We do not need a minister of disinvestment. All we need is a one-line legislative amendment that would free the public sector of day-to-day responsibility to Parliament, thus ending the need for any minister to be in charge of any PSU. And then letting these freed PSUs decide, like any private sector undertaking, whether and when and on what terms to sell off their shares to other investors, as also when and whether and on what terms to take on strategic partners. That would be to pawn, not sell, the family silver. And if this, in turn, means Sinha the Butler is left with unsettled dues, let's sack the butler, not shed our ancestral home.

Aiyar is a Congress MP but these views are his own