STATE OF THE ECONOMY

Agenda for inequality: A new report raises red flags over privatisation

Print edition : December 31, 2021

Bank employees stage a protest against privatisation of nationalised banks in Ahmedabad on November 26. Photo: Ajit Solanki/AP

Gautam Adani, founder and chairman of the Adani Group. His net worth increased by 750 per cent between 2016 and 2020.

Mukesh Ambani, chairman and managing director of Reliance Industries Limited. His net worth is reported to have increased by 350 per cent between 2016 and 2020.

Members of National Insurance Corporation Employees Union stage a protest against the budgetary proposal to allow initial public offer in LIC, increase in FDI insurance to 74 per cent and privatising of one general insurance company, in Bengaluru on March 18. Photo: The Hindu photo archives

The People’s Commission report cautions the government against privatisation, as it will find it difficult to deliver on the future challenges emerging on various fronts.

The strength of the Constitution lies entirely in the determination of each citizen to defend it. Only if every single citizen feels duty bound to do his share in this defence are the constitutional rights secure.

—Albert Einstein

THE time has come for every citizen to defend the Constitution, indicates the People’s Commission on Public Sector and Public Services in its interim report titled “Privatisation—An affront to the Indian Constitution”.

Analysis of the State of Economy

Some 230 million people are below the poverty line and nearly 190 million people, that is, 14 per cent of the population, are under-nourished. More than half the female population in the 15-49 age group are anaemic; nearly 35 per cent of children under five are stunted, and 20 per cent are affected by wasting. Unemployment in both urban and rural areas is now in excess of 14 per cent. As a result of the severe stress caused by declining employment and incomes, indebtedness is rising dangerously. Loan sharks, now sporting a digital tag, are charging usurious rates of interest without any checks and balances. The number of suicides by those engaged in businesses increased by a whopping 29 per cent in a single year between 2019-20.

But there is no let-up in the accumulation of wealth by India’s billionaires. According to The Economist, Mukesh Ambani’s net worth increased by 350 per cent between 2016 and 2020. His fellow tycoon Gautam Adani’s net worth increased by a 750 per cent during the same period. The other super-rich have also increased their wealth by 75 to 85 per cent within a year. These are some of the indicators of the state of the economy mentioned in the report.

Why unconstitutional?

The Preamble of the Constitution envisioned the Indian state as a “socialist” state and a “welfare” state as described in Article 38. Further, it guarantees a “social order in which justice, social, economic and political” is accessible to all. Still further, it makes it obligatory for the state to ensure that the “ownership and control of the material resources of the community are so distributed as best to subserve the common good; that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.”

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It thus imposes the pursuit of equity as an obligatory principle of any policy the state may choose to pursue. These are all part of the basic structure of the Constitution and, therefore, no government can alter it. Further, in the constitutional scheme, the Directive Principles of State Policy (DPSP) were regarded as being fundamental in the governance of the country; in fact, it made it obligatory for the state to apply these principles in making laws.

The Directive Principles have been regarded as the “soul of the Constitution” as India is a welfare state. They provide guidance for the interpretation of the Fundamental Rights, as well as the Statutory Rights. There are umpteen number of judgments that uphold these rights and many of them are quoted in the report. Privatisation will further lead to inequality and hence it is unconstitutional explains the report.

Reservation Policy and Public Sector

The report points out that reservation is a unique part of the protective and welfare provisions of the Constitution for the Scheduled Castes (S.Cs), the Scheduled Tribes (S.Ts) and the Other Backward Classes (OBCs). The Constituent Assembly introduced those provisions after elaborate discussions, keeping in view the deep-rooted discrimination meted out to those communities for centuries. Reservation needs to be viewed as a part of the “basic structure” of the Constitution, which cannot be altered either through constitutional means or otherwise. The private sector does not follow the reservation policy. So, privatisation and contract labour are against this constitutional obligation says the report with judgment details and data.

Niti Ayog Against Federalism

The Planning Commission, which was set up through a government resolution in 1950, was an institution specifically meant to translate the constitutional provisions relating to the Fundamental Rights and the Directive Principles of State Policy. The terms of reference as spelt out in the resolution clearly expressed the language of the parts of the Constitution relating to the Fundamental Rights and the Directive Principles. The resolution refers to the Fundamental Rights and reproduces the language of two Articles: Articles 38(1) and Article39(a), (b), and (c) in the Directive Principles. The resolution also explicitly stated that the Commission would pursue its mandated task “in furtherance of the Directive Principles”.

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Unlike the Planning Commission, the NITI Aayog is nothing but a freewheeling “think tank”. In terms of its composition as well as its functioning it has been non-transparent and does not allow for a systematic and adequate representation of the interests of the States of the Indian Union. The conduct of the NITI Aayog is thus another affront to the federal principles enshrined in the Constitution. It is the NITI Ayog that is recommending privatisation, including that of banks, it is pointed out.

Land acquisition for Public Purpose

Apart from the fundamental infirmity of the whole disinvestment process being unconstitutional, there are individual laws that stand violated in the process of disinvestment that is being followed at present. For example, lands were acquired in the past for public sector undertakings (PSUs) under the erstwhile land acquisition law in the name of “public purpose”, a term defined at that time to imply exclusively land acquisition for companies wholly owned by the government. It was the State governments that acquired the land. Allowing such land to be transferred to private companies or monetising them in other ways would violate the land acquisition law.

An argument that has been advanced since 1991, that the PSUs are necessarily inefficient, has been made without any justification or with reference to the facts or the specific contexts in which particular PSUs operate. The government and the media have been repeating this relentlessly as if it is gospel, without any facts to prove their case. For instance, the Visakhapatnam Steel Plant of the Rashtriya Ispat Nigam Ltd., unlike its private sector competitors, has for years not been allotted captive iron ore mines. Air India is another classic example. There are so many such examples, the report quotes.

LIC, a giant trust

The only investment the government ever made was the Rs.5 crore it put in as equity when the Life Insurance Corporation of India (LIC) was established in 1956. When the equity base was expanded to Rs.100 crore in 2011, the amount came from the LIC’s own funds. It is uniquely structured as a corporation in which all profits, barring the 5 per cent dividend to the government for its equity, are distributed to policy holders. Indeed, its structure as a trust, a giant mutual benefit fund in the insurance business if you will, has given it a popular respect that is unrivalled. The sale of LIC, even a minority stake, would thus alter the very character of the illustrious institution that has served the nation well for seven decades. Even if the government retains control of the institution, the disinvestment may well shake the trust of policy holders, thereby affecting adversely its prospects in the future, and with it the reach of life insurance in India that the LIC has so creditably pioneered, the report argues.

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First, it is not even clear that the valuation of the assets proposed to be leased would indeed be worth Rs.6 lakh crore. At the most, it may mobilise Rs.1.5 lakh crore says the report. A detailed analysis of the National Asset Monetisation has been done showing how future revenues will dry up. Public-private partnerships have been a disaster in not only in India but in many parts of the world, details the report.

The report says, “It needs to be reiterated that the agenda of commitments made at the global level by the Indian state in respect of climate change, agriculture transitions (sustainable farming), health transitions and energy transitions require major contributions from the public sector. If the Indian state is going to be hollowed out, as threatened by the privatisation drive, it would be unable to deliver on the future challenges emerging on all these mentioned fronts, including technological self-reliance.” The report is a quick analysis by experts and it needs to be taken seriously by the government or else the citizens will rise up to defend the Constitution.

(For full report visit Reclaim the Republic)

Thomas Franco is joint convener of People First and former general secretary, All India Bank Officers Confederation.

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