Interview: Sitaram Yechury

‘Indian private capital has gained most from the public sector’

Print edition : October 31, 2014

BANGALORE, KARNATAKA, 17/08/2014: CPI (M) leader Sitaram Yechury addressing at a seminar on Media and Social Responsibility, at Kannada Bhavan in Bangalore on August 17, 2014. Photo: V. Sreenivasa Murthy Photo: V. Sreenivasa Murthy

At Hindustan Shipyard Limited in Visakhapatnam. The turnaround of HSL is an example which shows that if you pay proper attention to PSUs you can not only sustain but convert them into profit-making units, says Yechury. Photo: C.V. Subrahmanyam

Interview with Sitaram Yechury, Polit Bureau member of the CPI(M).

Issues regarding disinvestment of public sector undertakings (PSUs) have come up once again, with the Narendra Modi-led BJP government pursuing it more vigorously than the Congress-led governments since the 1990s. The objection of the Left parties to this drive is well known, but it is being questioned by several quarters, including leaders of vital Ministries of Commerce and Finance and by private sector representatives. Their argument is that commitment to public sector is an outdated, socialist, trade union-oriented concept. This argument seems to have gained ground even among those who opposed disinvestment earlier....

It needs to be understood that the public sector in India emerged not only because of the nationalist movement or the Left or the trade union movement. It also owes to a large extent to the private sector. In fact, one of the earliest formulations for the establishment of the public sector in India was made in what is popularly known as the “Bombay Plan”. This was prepared by the major corporate houses of that time, including the Tatas and Birla. Their own concept was that the government should mop up the surpluses from the people and use them as investment for creating the basis for infrastructure. This infrastructure was required in all the major areas, including steel and iron ore. The private sector did not have the capital for creating this infrastructure then. So, the public sector in India was established after the private sector itself contributed by coming up with the basic formulation for it and in the process underscored its own limitations.

Put simply, the proposal that the foundations of the Indian economic structure be set up by the public sector emanated from the capitalist class. And, the public sector created the essential raw materials for the manufacturing growth of the private sector. Therefore, it needs to be borne in mind that it is the Indian private capital that gained the most from the public sector. So, now to suggest that the public sector is being defended merely for workers’ rights or in the interests of the socialist ideology would amount to presenting a wrong historical perspective. Put simply, when it was necessary for them the Indian capitalist class argued in favour of the public sector. Today, when they see that their future and profit maximisation are inextricably tied up with foreign capital, particularly foreign finance capital, they see this investment as an area to be vacated by the public space. As far as we are concerned, the Left has defended the public sector because it reduces India’s dependence on foreign capital and to that extent safeguards the country’s economic sovereignty and helps maintain our autonomy.

There is also the argument that there should be no opposition to the disinvestment of loss-making PSUs. Are the Left parties opposed to disinvestment in general or only of profit-making PSUs?

We do not make a distinction between loss-making and profit-making PSUs. But it is also not our case that PSUs should make losses. We have consistently maintained right from the period the first Disinvestment Commission came up and through the first and second United Progressive Alliance [UPA] governments as also the earlier Bharatiya Janata Party [BJP]-led National Democratic Alliance [NDA] government that loss-making units need to be examined thoroughly. What are the reasons for loss-making? Can’t these be turned around? Study them exhaustively. The question of disinvestment would arise only if these possibilities are exhausted. Till now all these possibilities have not been thoroughly explored. It has been established that a lot can be done if this thorough examination is carried out.

I will give you the example of Hindustan Shipyard Limited (HSL) located in Visakhapatnam. This was a loss-making PSU. But for obvious strategic reasons of Visakhapatnam being our eastern naval headquarters there was no question of handing it over to the private sector. So we suggested that HSL should be taken over by the Defence Ministry. Earlier HSL was not getting orders because private sector was being encouraged in ship-building. But once the Defence Ministry took over, HSL started getting orders.

Along with this we suggested tie-ups with a number of other PSUs with which collaboration was possible. This also came through during the period of the first UPA government. HSL has turned around. Now, this is an example which shows that if you pay proper attention you can not only sustain but convert [them] into profit-making units. We have one of the best examples from Kerala to show how better attention and creative intervention can turn around PSUs branded as irredeemable. The last Left Democratic Front government in Kerala turned 15 “sick” PSUs during its tenure and created a record.

A major argument of the advocates of disinvestment is that it is required for capital formation for crucial projects. The ceiling on disinvestment in the PSUs seems to have gone up exponentially since the 1990s partly on account of this argument. How does the Left address an argument like this which is considered to have a lot of merit by several economists and policymakers?

Now, this is an argument that holds no water. To start with, you are selling an asset for a single-point capital formation. Till now, the experience is that none of the disinvestment procedures has contributed to capital formation or a social programme. The proceeds have all gone to meet your immediate expenditures. That is the record to date. Every government talks about changing it but none has so far.

Still, this time around the voices of opposition are muted. Even forces such as the Bharatiya Mazdoor Sangh, which opposed disinvestment earlier, is silent.

I do not think that these forces will remain silent for long. There is some churning happening in society and within many organisations too, the manifestations of which will be visible sooner than later. However, the fact remains that the working of the present government so far is much more PMO [Prime Minister’s Office]-centric and hence there are lesser opportunities for expression of different perspectives. Even the relative autonomy that is accorded to individual ministries in dealing with issues under their remit does not appear to be in existence. Of course, the political leaders of the government keep saying that it is too early to make a judgment on this, and hence we need to keep watching.

But there is another very interesting peculiarity with regard to this government, which has been stated in so many words on paper. The Rashtrapati Bhavan communication on the briefs of Ministers after swearing in had this interesting additional point which stated that the Prime Minister would be in charge of all policy decisions. Now, this is something that I had not seen before in the many governments that I have observed for a few decades. Usually, the Prime Minister is stated to be in charge of all portfolios or departments not assigned to anybody else. It indeed seems like a new nomenclature that bypasses the major Cabinet committees, namely, the Cabinet Committee on Political Affairs [CCPA], the Cabinet Committee on Economic Affairs [CCEA] and the Cabinet Committee on Security Affairs [CCSA] .

The question of balancing capital formation and social sector expenditure is also something that has come up in the context of these moves. It is an extension of the argument that disinvestment is required for capital formation. Is there a model from global experience that can be highlighted as an alternative?

The universal experience of the continent of South America is one that is the exact opposite of what is being argued in our country. Countries like Venezuela, Bolivia and Ecuador have nationalised their resources, including oil resources. It is the revenues generated through nationalised resources that generated funds for land reforms, public education and the overall improvement of social and developmental indices. This has led to tremendous progress in terms of social indices too.

You also have the opposite international experience from the former Soviet Union. Take Russia, for instance, where large-scale privatising of natural resources, including that of oil, was carried out. The [proceeds from the] natural resources given away to the private sector was not ploughed back in any manner for national development. Nor did it lead to any improvement of either economic or social indices. It is clear that the historical and contemporary experience is that the money that goes into strengthening the private sector at the cost of public funds and institutions never comes back but for some tokenism.