‘Disinvestment is a corrupt process’

The Centre of Indian Trade Unions, along with other Left trade unions, has been a consistent critic of the neoliberal economic policies of governments at the Centre. Tapan Sen, its general secretary, explains how the NDA is far more aggressive on various fronts, including labour law reforms and disinvestment, in an interview he gave Frontline. Excerpts:

The Modi government has set up ambitious targets for disinvestment. The government has made it clear that it will meet its target of Rs.69,500 crore through divestment and strategic sale of equities.

In the whole strategy of resource generation by the Modi government, disinvestment has been made an important instrument and, accordingly, it has set its targets. It is targeting the profit-making PSUs. It tried this with the big profit-making PSUs like ONGC, NTPC, NHPC and SAIL but failed to meet the targets because of its own policies. The kind of gloom that prevailed in the market shattered the confidence to invest even in the stock market. It is not just an Indian phenomenon; it is a global situation. Even where it succeeded in disinvesting shares in some of the PSUs, like NTPC, it was the government’s financial agency that lifted a substantial part of it, not the retail investor. The success of disinvestment can only be seen if the retail investor picks up shares in the stock market. The experience of disinvestment in the last few years is that the shares have been lifted by public sector agencies. The NDA tried it in its previous avatar as well and was ousted from power. It tried to sell off BALCO, Modern Bread, CMC, IPCL, VSNL and a number of hotels under the Hotel Corporation of India situated in prime locations, and in all the cases, huge public assets were transferred to private hands at throw-away prices. In the first tenure of the UPA, when the Left had an influence, the government could not disinvest some of the Navratnas as planned. In UPA II, it disinvested the shares of NMDC and NHPC. In all the cases of disinvestment so far, be it SAIL, GAIL, BEL, BPCL or ONGC, only a minuscule part of the disinvested shares have gone to the general population, and that has been changing hands over the years from individual to corporate entities. The rest were cornered by FIIs, corporate bodies, mutual funds and other company entities. And yet, the then government called it people’s ownership. If this is not befooling the people, what else is?

The focus of the NDA government is the same as that of the UPA—resource mobilisation and reining in fiscal deficit. The Finance Minister recently expressed his concern about the low consumption expenditure and about rural consumption not picking up. He also spoke about increasing public spending on social infrastructure and rural India.

The global scenario is not encouraging. Wherever the previous government tried to disinvest, the shares were not picked up by the retail investor but by financial agencies, including that of the government, such as LIC. It was clear that this had been done on the directions of the Finance Ministry. What will LIC do purchasing the shares of ONGC or SAIL? This is just to show that the disinvestment process has not failed. The government policy of disinvestment does not have the endorsement of the people. It is a corrupt process of resource generation. It is foregoing a recurring flow of income into the exchequer in lieu of a one-time sale of property. The government is forcing profit-making PSUs to give the dividend at a much higher rate than they are legally obliged to pay under the Companies Act. The kind of price at which disinvestment is being made, it is normally made at running prices in the stock market. The prices are so manipulative. If you calculate the total asset base of a PSU, it will far exceed the ruling market share prices. Even that is not successful.

So can it be assumed that the government is going to abandon its target of disinvestment as a form of resource mobilisation? Do you think the NDA is less aggressive than the UPA?

Even where the government succeeded in disinvesting, as in Rural Electrification Corporation or Coal India, it has been very limited. The comparison is not correct; while the UPA did not succeed in disinvesting in Coal India, this government did.

Is anything happening in terms of other initiatives to boost the economy? The government is now talking about increasing public spending.

It is the state of the economy that is compelling them to make such statements. Investment will come only with the prospect of better returns. Owing to the Free Trade Agreement, our steel and metal industry, particularly aluminium, is suffering huge losses. Imports from China, Russia, Korea, Japan and Indonesia are flooding the domestic market. Anti-dumping measures need to be taken. In some of the steel items, 90 per cent of the imports are from China. Our country’s ports, with the exception of Paradip and the ports in Gujarat, are in a bad shape, and it doesn’t look favourable. Private ports are doing well. Domestic metal industries are complaining; steel industry profits are going down because of dumping at below cost prices. SAIL is going to incur a loss of Rs.6,000 crore this year. The manufacturing scenario has also reported a decline in the last quarter. As money is not coming from other sources and as they are fixated on bringing the fiscal deficit down to 3.9 per cent, they are now talking about public spending, something they have been against for a long time. Most of the FDI that has come in has been in mergers and acquisitions. That is leading, if anything, to layoffs and employment compression. The industrial working class is not the obstacle; the market itself isn’t cooperating due to the government’s own policies.