20 December 2005

Renewed Efforts to Push Privatization

The finance minister of India, P. Chidambaram, has recently announced that the ministry has identified 20 profit-making public sector companies (PSU) for privatization. Initially, this will consist of diluting of government’s share in these companies through public offerings. According to the finance ministry, they expect to start the selling shares in half-a-dozen companies real soon. On the immediate chopping block are some big PSUs such as Maruti Udyog Ltd, Shipping Corporation of India, Cement Corporation of India, remaining 44% shares of BALCO, NALCO, Indian Airlines, and Air India.

This is only the first move – more for jump-starting the privatization program that has virtually stalled since 2002 as a result of both opposition from the working class and infighting within the highest echelons of the business and political circles.

The latest initiatives were formally put on the agenda by prime-minister Manmohan Singh during the Congress Working Committee on May 16 this year. The initial plan was to go for Rs. 80-100 billion worth of partial sale of a number of “big-ticket” PSUs including “Navratna” companies such as Bharat Heavy Electricals Ltd (BHEL).

The plan ran into some rough weather this summer over privatization of BHEL due to stiff opposition from the left-parties in the parliament that opposed the sale of a “Navratna” company. After having to abort privatization of BHEL, the government seems to have now invoked plan-B that calls for selling shares in a large number of non-Navratna PSUs - both profitable and loss-making. At the same time, there is a move to delist some of the “Navratnas”, such as ONGC.

There appears to be two differences in the current round of privatization efforts. First, the limited sell-off (only 8-10% sale of PSU shares are being proposed currently proposed) is being justified with promises of strengthening the PSUs and the social sector. In the previous years, money raised through the sale of PSUs paid for the reduction of fiscal deficits. However, according to the new plan, money from the current sale is earmarked for the newly created National Investment Fund (NIF). NIF is supposed to reinvest its funds for rehabilitation of the public sector enterprises and for covering social sector expenses.

Secondly, the current stint of sell-off appears to have the blessings of at least CPI(M), one of the biggest parliamentary left party. Prakash Karat, the general-secretary of CPI(M) is on record stating “We are opposed to disinvestment of navaratna companies but shares can be sold in other companies”. He has also recommended the government to adopt the West Bengal model for PSU reforms. The left-front ruled state of West Bengal has already devised an interesting name for privatization: the joint sector route for reviving sick public sector undertakings. Under this scheme, the state government can sell off up to 74 per cent of its stake in a PSU to the private sector through a strategic sale. The British government's Department for International Development (DfID), is said to be financing the pay-off to the workers in PSUs that are sold-off.

We are only in the beginning phase of this current cycle of privatization, which is just beginning to gather steam. It is too early to tell whether the new justifications and support from the left will carry the day for the Indian state. However, one thing is for certain. Indian workers, who have never accepted the rationale of privatization, are only going to intensify their struggles.


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