The near-euphoric official optimism over Indo-U.S. relations following Jaswant Singh's Washington visit is unwarranted. It is a downturn that should be expected under George W. Bush - unless the Vajpayee government cravenly kowtows to him.

NEARLY two weeks after Foreign and Defence Minister Jaswant Singh left the shores of the United States, he still has not disclosed what important "agreements on defence cooperation" he reached in Washington. He had promised (on April 7) to do reveal the details after obtaining "Cabinet clearance". But the Indian public remains in the dark, although the U.S. government knows. However, this has not prevented sections of the Indian media from declaring that India-U.S. relations, on the upswing since President Bill Clinton's visit a year ago, have "acquired a whole new dimension"; indeed that Jaswant Singh "pulled off" nothing short of "a coup" in Washington when President George W. Bush held a 45-minute unscheduled meeting with him in the Oval Office, no less.

Jaswant Singh was giddily upbeat about his visit. He outdid British Prime Minister Tony Blair in singing Bush's praises: "I think a great many things that are being said about President Bush are completely untrue. He is a marvellous person.... It is a completely mistaken notion that he does not have a handle on things. He went straight into the core of the issue...."

Jaswant Singh's discussion with Bush was presumably substantial, not just an exchange of pleasantries. The Minister said he expects Indo-U.S. relations to surpass the high reached during Clinton's last year in office: "I don't just see a smooth (post-Clinton) transition, it's much more. There is clear determination on the part of President Bush and his administration to go faster and very much further forward..." (The Times of India, April 12).

Jaswant Singh now has "no doubt in my mind" that his visit "is the start of a new era." India has finally succeeded in establishing with the U.S. what Jaswant Singh rather infelicitously calls "a non-hyphenated relationship", one that is "not a reflection of or reaction to other relationships. It should stand on its own." It has since been triumphantly declared that the U.S. views India as a "global, not sub-continental player". Washington will further build upon the Clinton "framework" for Indo-U.S. relations.

Routine U.S. official statements on the visit have poured cold water upon this breathless assessment. Of the Clinton "framework", State Department spokes-person Richard Boucher merely said: "They are not scrapping it." White House spokesperson Ari Fleischer even more matter-of-factly said that Jaswant Singh "was in the White House this morning meeting with Dr. Rice (National Security Adviser). He had a brief exchange of pleasantries with the President in the Oval Office. But his meeting took place with Dr. Rice."

And yet, many Indian policy-makers and -shapers believe that Washington today attaches qualitatively greater, even unique, importance to New Delhi; the two can work closely together as "strategic partners" because they share "a lot of common ground". Some people argue that India has expanded its room for manoeuvre after Jaswant Singh's visit. They make much of the fact that he left the U.S. not for New Delhi, but for Teheran. But India's Iran initiative is not some fiercely independent phenomenon. According to outgoing U.S. Ambassador Richard Celeste, Washington had been fully briefed on it (The Hindu, April 14). It is smoothly compatible with a softening of America's own stand on Iran 22 years after the "Revolution".

Some votaries of an Indo-U.S. "partnership" are so obsessed with winning U.S. approbation that they blatantly advocate that India should offer itself as a counterweight to China, America's strategic "competitor". A well-known hawkish security analyst has rationalised this with convoluted sophistry: Defence Secretary Donald Rumsfeld - who rightly emphasises the Pacific Ocean as the likeliest area for U.S. military operations - should recognise that China is the world's worst nuclear proliferator, having transferred missiles and nuclear technologies to Pakistan, Iraq and Saudi Arabia. By contrast, there is no "direct conflict of interest" between India and the U.S. The implication is that the two can be allies against common rival China! (K. Subrahmanyam, The Times of India, April 9).

This is a crude attempt to play upon the worst forms of Cold War Sinophobia within the U.S. Far Right and win its support for another "hyphenated" partnership with the U.S. This speaks poorly of its advocates who otherwise claim to be enhancing India's sovereignty. Some of them are impressed by the fact that like New Delhi Bush too opposes the Comprehensive Test Ban Treaty (CTBT) and is more sympathetic than Clinton to lifting nuclear sanctions on India. But this is only one minuscule policy area. In any case, more than 90 per cent of the sanctions have already been lifted.

In reality, the "strategic partnership" argument glosses over the huge asymmetry between the U.S. and India, including their divergent, sometimes conflicting, economic interests and attitudes to the world order and its reshaping. No "common" interests with the U.S., especially under the Republican administration, warrant India's strategic "partnership", least of all on a Sinophobic basis. If India's national interest lies in a plural, multi-polar world, in a non-hegemonic and equitable global order, and in peace, reconciliation and non-reliance on force, besides greater economic space for itself, then New Delhi and Washington will frequently clash.

The interests of the Indian people diverge widely from the ultra-conservative policies of the Bush administration. Nothing symbolises this more dramatically than the popular reaction to the recent lifting of quantitative restrictions (QRs) on the import of 715 items that could threaten millions of livelihoods, especially in Indian agriculture. And yet, a U.S. trade official termed this liberalisation a mere "mirage" as he demanded still lower duties under 35 per cent.

New Delhi and Washington differ widely on a number of issues: patents and intellectual property, corporate privileges, "freedom" to be granted to U.S. multinationals like Enron (which runs India's single biggest foreign investment project, worth $3 billion), foreign trade regimes, labour standards and their enforcement, not to speak of Kashmir, Central Asia, Russia or human rights.

George W. Bush's record on foreign policy and security matters is extremely conservative - whether on "Star Wars" (missile defence) and global warming, China and Korea, or Palestine and Iraq. Bush's very first decision upon assuming office was to stop funding any government which allows free abortion rights - a capitulation to the U.S. Hard Right's reactionary agenda.

This could be potentially interpreted as a directive to cut off aid and scientific cooperation with Indian agencies too. India, by contrast, has a more relaxed, largely non-religious, approach to abortion.

Bush has declared he will pursue the National Missile Defence (NMD) and East Asian Theatre Missile Defence (TMD) programmes far more vigorously than Clinton. NMD will cost $240 billion (or two-thirds of India's entire annual gross domestic product), strengthen hawkish militarist forces in the U.S., negate recent global arms restraint efforts, and inaugurate a new arms race - indeed, a Second Nuclear Age.

A May 2000 U.S. intelligence assessment says that the NMD could provoke "an unsettling series of political and military ripple effects... that would include a sharp buildup of strategic and medium-range nuclear missiles by China, India and Pakistan and the further spread of military technology in the Middle East." The proposed TMD will threaten China and fuel a new arms race in East Asia. China has threatened to walk out of all recent arms control agreements if the U.S. proceeds with TMD.

India's stated position opposes Star Wars. A TMD will eventually draw India into a ruinous nuclear arms race with China. However, Indian "experts" close to South Block want a "dialogue" on NMD/TMD with the U.S. Ambassador Celeste says there is "ample room for engagement" here between the U.S. and India. He has hinted that India may want such a dialogue (The Hindu, April 14).

All key Bush officials are "Star Warriors". Rumsfeld is devoted to NMD and TMD. He is an unreconstructed Nixon-era hawk and strongly allied to ultra-conservative think-tanks like the National Institute for Public Policy which advocates not just a "deterrent", but a "war-time role", for nuclear weapons.

Rumsfeld is not alone. Secretary of State Colin Powell says "Star Wars" is "an essential part of our strategic system". And Condoleezza Rice, the National Security Adviser, and Stephen Hadley (the Deputy Director of the National Security Council, and earlier Bush Senior's Assistant Secretary of Defence) are both members of a small super-hawkish group formed during the Bush campaign, called the Vulcans, named after the Roman god of fire. The Bush administration is reported (in The Washington Post) to be working on developing new nuclear weapons, especially low-yield armaments with bunker-busting capabilities.

Bushism has revived Cold War-style hawkish attitudes towards Russia and China. Rice is best known for a Foreign Affairs article which demonises Russia and China. Not to be left behind is Dick Cheney, a superhawk close to Rumsfeld since 1969. Cheney played a prominent role during the Iraq War a decade ago.

Bush has done his best to wreck the growing reconciliation between the two Koreas: just one Washington visit by the South Korean President ensured that. Bush has lent partisan support to Israeli Prime Minister Ariel Sharon's vengeful anti-Palestine policy. He even declared that the U.S. would shift its embassy to Jerusalem, thus endorsing the highly contested Zionist claim over the city, and rationalising occupation in contravention of international law. This aggravated matters, and encouraged Sharon to re-enter Gaza on a military campaign that embarrassed even Powell (who called for restraint on April 17/18).

Bush's arrogant rejection of ratification of the Kyoto global warming protocol was a shock to the European Union and Japan, also to his own Environment Secretary (see story on Page 63). More crucially, his refusal to cut greenhouse emissions by just 5.2 per cent is a blow to the universal cause of environmental protection and promotes egregiously hegemonic oil interests, to which Bush is intimately tied. Bush is ominously close to the Houston-based Enron. Enron chief Kenneth Lay made the single biggest donation to the Bush campaign.

All these positions betray a narrow, parochial, ultra-nationalistic, hegemonic agenda. Those who see a kindred soul in Bush because of his opposition to the CTBT should know that this does not arise from an urge for a better, more thorough, test ban, leave alone genuine, rapid, nuclear disarmament. It is driven by nuclear unilateralism - that is, the view that the U.S. should make its own decisions about the size, composition and disposition of its nuclear arsenal without reference to arms control agreements or the opinions of other nations.

THESE yawning gaps between Indian and U.S. orientations are likely to widen even further in the coming months as the world economy goes into a recession, the technology meltdown continues, and protectionist tendencies rear their head in the U.S. India has maintained a less-than-honourable silence on many issues such as the Sino-U.S. spy-plane spat, on Palestine-Israel, even on non-alignment and Group of 77 (whose Havana summit Atal Behari Vajpayee disgracefully boycotted last year - in deference to the U.S. "partnership".)

Most important, it must not be forgetten that the "upgradation of Indo-U.S. relations in Clinton's last year in office was itself the product of a particular conjuncture: unchallenged U.S. economic, technological, military and political dominance of the post-Cold War world; Europe's and Japan's relative quiescence or non-assertion; India's relative success as a democracy (coupled with Pakistan's failure); and the high profile acquired by the Indian-American community with its Silicon Valley successes, besides New Delhi's own open-door economic policy and its desertion of non-alignment.

This conjuncture is unlikely to last. Indeed, some of its ingredients are weakening, even coming apart. The colossal consequences of the "New Economy" meltdown are yet to unfold. But it seems highly probable that Indo-U.S. relations will take a downturn - unless New Delhi under Vajpayee proceeds further along its Banana Republic direction and further capitulates to Bushism.

When basic services and public goods become freely tradeable commodities, the poor are the worst-hit.

THERE was a time, not all that long ago, when it was generally understood that certain basic services should be available to all people, as a fundamental human right. The right to food and shelter were typically seen as being on a par with other rights such as a minimum right to drinking water. Of course, the realities of our unequal world meant that, even when this was generally accepted, it did not mean that all people actually did have access to these things.

However, the role of the state in attempting to provide some of these services, and particularly those which were seen as "natural monopolies", to its citizens was established. Indeed, it would have been hard to find even the most rabid of free-marketeers arguing that these were activities for the private sector.

All that has changed, not just rapidly but quite dramatically. There is now virtually no state activity (even defence, in some African states) which is seen as necessarily the sole preserve of the state. And the trend of privatisation of a range of public services has become so pronounced that it no longer raises eyebrows. Almost all public goods are now seen as freely tradeable commodities, and private ingenuity works out ways to make people pay even when access is hard to limit, and governments fall in step with the dominant ideology.

Nevertheless, the news that from April Fool's Day this year the water supply of the city of Johannesburg in South Africa has been privatised and handed over to a single monopolist supplier comes as a shock. After all, the South African government is controlled by the African National Congress, which came to power in 1994 promising free public services to those who could not afford them, and in fact promised universal public access to clean drinking water only three years ago.

This privatisation of water supply is part of a larger plan, known as Igoli 2002, which aims to turn Johannesburg into a "world-class city". The strategy for this is the dubious one of privatising more than a dozen services, through cleaning hawkers off the streets, paying top executives millions of rands, building on top of the water table thousands of drop toilets with no flush facilities, and through selling off profitable assets.

There has been a massive two-year civic campaign against this privatisation led by the South African Municipal Workers Union. Not only the workers affected but hundreds of thousands of other citizens took part in this protest movement. Not only did SAMWU point out numerous cases across the world where privatisation of public services has led to higher prices and monopolistic practices but it specifically criticised this deal. It emphasised that the new supplier, Suez Lyonnaise des Eaux of France, had made no commitment to provide water to the poor.

Suez Lyonnaise's recent record does not give grounds for great optimism. In Santiago, Chile, the company has insisted on a 33 per cent profit margin in its operations. In the city of Casablanca, within the first year of the company taking over the water supply, prices rose three-fold. Even in France, its record is less than spotless in terms of consumer satisfaction and prices.

While it remains to be seen what happens in Johannesburg, the writing on the wall is already fairly clear. The absence of adequate regulation in this sector and the fact that the company will be effectively a monopoly in the area mean that poor people may face a large hurdle: covering relatively non-subsidised recurrent (operating and maintenance) costs and paying sufficiently high service charges so as to reward investors with the expected 32 per cent rate of return.

The current mainstream discussion is replete with pious statements of how people must be prepared to pay for the public services they benefit from. This ignores the basic points that all citizens effectively pay for the provision of public service through taxation, and that the poor typically pay a much higher proportion of their income in indirect taxes than the rich. Those eager to raise "user charges" for public service provision need to be gently reminded that one major reason why many citizens of developing countries do not pay is that they cannot - they simply do not have the money.

This is why it is so widely found that the poor in any country are inevitably much worse off after a public service is privatised. A recent literature review sums it up thus: The effects of privatisation bear most radically on the poorest in the community; there is widespread evidence of more cut-offs in service and generally a harsher attitude towards low-income "customers". Water in Britain is a case in point. Water and sewerage bills increased by an average of 67 per cent between 1989-90 and 1994-95, and during roughly the same period the rate of disconnections owing to non-payment of bills rose by 177 per cent. The inflexibility and hostility which often characterised the public utilities' attitude towards non-payment has, over the same period, been replaced by an emphasis on pre-payment meters and "self-disconnection" as public goods have been commodified (Hemson, 1997, quoted in Patrick Bond, "Privatisation, participation and protest in the restructuring of municipal services", 2001).

IT is not only the poor who are worse off. It is now increasingly evident that private companies are less likely to observe safety norms, regulate production and distribution in socially desirable ways, and also that they tend to behave in monopolistic ways whenever they get the opportunity.

Of course it is not hard to understand why there is such a strong private lobby for such privatisation within South Africa, coming from multinational companies. Privatised South African infrastructure is potentially highly profitable, with internal rates of return approaching 30 per cent. In South Africa such pressure was reinforced by systematic pressure from the World Bank and its sister organisation the International Finance Corporation, which have been systematically promoting what they call "public-private partnerships".

It is well known now that these are usually a combination of public risk bearing and private profit, but the World Bank has been plugging these as the only solution to the region's severe infrastructure inadequacy. The International Monetary Fund also has been aggressively promoting these: in a recent random review of 40 IMF loans issued in 2000, it was found that in the case of at least 12 of these loans (mainly to poor Sub-Saharan African countries) the IMF conditionalities required either the full privatisation of water supply or policies ensuring full cost recovery.

But soon the World Bank may not be the only source of such pressure. There are strong indications that the United States and some other developed countries wish to incorporate public services into the ongoing negotiations of the General Agreement on Trade in Services (GATS). The potential in this area to open up is immense once all public services are targeted. It means that health, water supply, sanitation, education, social security, transport, postal services and general municipal services can all be opened up not only to private participation but also to free trade.

It is obvious that the potential for profits is immense. One estimate of the current size of the global health market is more than $3.5 trillion a year, which is more than the total value of exports from all the countries of the Organisation for Economic Co-operation and Development (OECD). Similarly, global expenditure on education is estimated to be $42 trillion, and even on water, as much as $2 trillion.

This is not a market that major multinational companies can afford to ignore, especially as the slowdown in a range of other sectors becomes more pronounced. We can thus expect to see such pressure mounting across the developing world, and of course in India as well.

The sad reality is that many of our policy-makers do not even require much external pressure to go in for such privatisation. Thus, in the State of Andhra Pradesh whose government has already become the most eager beaver of privatisers, the Hyderabad Metropolitan Water Supply and Sewerage Board is considering privatising the operation, maintenance and functioning of water supply in Kukatpally as a pilot project for one year.

We have seen dismal pictures of farmers and weavers in Andhra Pradesh committing suicide because of the material stress that has been exacerbated by government policies. Perhaps in the not so distant future, we will have to witness more instances of human misery stemming from deprivation of the most basic of human needs.

The central bank needs to act decisively in order to shield banks from the volatility of whimsical markets.

AS the dust settles around the post-Budget stock market collapse, attention is being directed at the role played by the banking system in the events that led up to the mini-crisis. The explicit role of a few cooperative banks and some smaller private sector banks is now well documented. There were some, like the Madhavpura Mercantile Cooperative Bank and the Global Trust Bank, that where willing to accommodate brokers with funds to invest in shares to an extent where their exposure to particular brokers and to the stock market was far beyond what would be considered prudent. There were others, like Bank of India, that were willing to discount instruments, however safe, representing more than unusually large sums of money, issued by organisations whose ability to back such instruments were obviously doubtful. Yet others have been characterised by a degree of exposure to investments in the affected banks, which could imply large losses that could affect their viability.

These acts of omission and commission (concentrated no doubt in a few cooperative banks in a few centres) which helped finance a speculative run that collapsed in the wake of a bear attack have not merely triggered investigations of varying intensity against individual officials in the system but threatened the existence of at least one bank, forced losses on others and left a large number of small savers with no access to their own money. These developments have raised questions about the adequacy and efficacy of the regulatory framework designed and implemented by the Reserve Bank of India (RBI). The RBI has been quick to respond. Unfortunately, however, that response combines an effort to trivialise the fallout of the crisis for the banking system, to declare that the acts of omission and commission were more the exception than the rule and that minor tinkering with the regulatory mechanism would be adequate to deal with the problem.

This emerges from the following paragraph in the RBI's Monetary and Credit Policy Statement for the year 2001-2002 (portions of which have been highlighted here in order to focus on the thrust of the central bank's reading of the problem): "The recent experience in equity markets, and its aftermath, have thrown up new challenges for the regulatory system as well as for the conduct of monetary policy. It has become evident that certain banks in the cooperative sector did not adhere to their prudential norms nor to the well-defined regulatory guidelines for asset-liability management nor even to the requirement of meeting their inter-bank payment obligations. Even though such behaviour was confined to a few relatively small banks, by national standards, in two or three locations, it caused losses to some correspondent banks in addition to severe problems for depositors. In the interest of financial stability, it is important to take measures to strengthen the regulatory framework for the cooperative sector by removing 'dual' control, by laying down clear-cut guidelines for their management structure and by enforcing further prudential standards in respect of access to uncollateralised funds and their lending against volatile assets."

Clearly, the RBI sees the problem as being largely restricted to the cooperative banking sector. In order to cover itself against the criticism that it ignores the fact that the problem goes deeper and is systemic, the RBI has hastened to add: "In the light of recent experience, some corrective steps to prevent commercial banks from taking undue risks in their portfolio management are also outlined."

A CLOSE look at the evidence suggests, however, that the RBI's response is indeed inadequate. The exposure of banks to the stock market occurs in three forms. First, it takes the form of direct investment in shares, in which case the impact of stock price fluctuations directly impinge on the value of the banks' assets.

Second, it takes the form of advances against shares, to both individuals and stock brokers. Any fall in stock market indices reduces, in the first instance, the value of the collateral. It could also undermine the ability of the borrower to clear his dues. In order to cover the risk involved in such activity, banks stipulate a margin, between the value of the collateral and the amounts advanced, set largely according to their discretion.

Third, it takes the form of 'non-fund based' facilities, particularly guarantees to brokers, which renders the bank liable in case the broking entity does not fulfil its obligation.

As at present, the RBI guidelines regarding bank exposure to the stock market apply only to direct investment in shares. Even these have been substantially relaxed in recent times. According to guidelines issued in October 1996, when banks were being encouraged to invest in stocks as part of the process of financial liberalisation, banks were permitted to invest up to 5 per cent of their incremental deposits in the stock markets. Initially, investments in debentures/bonds and preference shares were included within this 5 per cent ceiling. However, as stock market performance was increasingly accepted as an indicator of the success of reform, and the government was under pressure in 1997 to revive the flagging markets, it sought to encourage banks to invest more in the markets by taking debentures/bonds and preference shares out of the calculation of the limit in April 1997. This made the ceiling only relevant for investment in equities. Driven by these signals, a group of 21 public sector banks increased their investments in equities from Rs.1,488 crores in 1997 to Rs.2,293 crores in 1998.

In September last year, these guidelines were relaxed even further based on the recommendations of a committee comprising senior executives of the RBI and the Securities and Exchange Board of India (SEBI). The committee held that instead of setting a ceiling on bank investments in equity relative to incremental deposits, banks' exposure to the capital market by way of investments in shares, convertible debentures and units of mutual funds should be linked with their total outstanding advances and may be limited to 5 per cent of such advances. This was subsequently accepted by the RBI and is the guideline that prevails now.

The RBI is sanguine about the risk of bank exposure to capital markets because this is well below this much-relaxed ceiling. A technical committee set up by the RBI to review guidelines for bank financing of equities, observed that investment in shares of the 101 scheduled commercial banks constituted 1.97 per cent of all outstanding domestic advances as on March 31, 2000. This, it noted was well below the 5 per cent limit prescribed in the RBI's circular dated November 10, 2000.

As argued above, for banks investments in equity constitute only one form of exposure to the stock markets. Advances against shares and guarantees to brokers provide other forms. But even on this count the RBI's technical committee is quite positive. This is because: "The total exposure of all the banks by way of advances against shares and debentures including guarantees, aggregated Rs.5,600 crores, comprising fund based facilities of Rs.3,385 crores and non fund based facilities, that is, guarantees, of Rs.2,215 crores, as on January 31, 2001 and constituted 1.32 per cent of the outstanding domestic credit of the banks as on March 31, 2000."

HOWEVER, there is much that these figures conceal. To start with, the aggregate level of exposure across the banking system hides the fact that the 'overall' exposure on the part of some of the private sector banks, whose 'dynamism' has been much celebrated, has been far in excess of 5 per cent. As figures collated by the RBI's technical committee reveal, at the end of 2000 the exposure to the stock market by way of advances against shares and guarantees to brokers stood at 0.5 per cent of total advances in the case of public sector banks, 1.8 per cent in the case of old private sector banks, 4.8 per cent in the case of foreign banks and a huge 15.3 per cent in the case of eight new private sector banks. Thus, the so-called 'dynamic' private banks which are seen as setting the pace for the rest of the banking sector, and are attracting depositors by offering them better terms and better services, are the most vulnerable to stock market volatility.

Secondly, this exposure of the banking system and of those that lead the pack in lending against shares, is dominantly to a few broking entities. The evidence on the relationship between Global Trust Bank and Ketan Mehta only begins to reveal what the RBI's monetary policy statement describes as "the unethical 'nexus' emerging between some inter-connected stock broking entities and promoters/managers of some private sector or cooperative banks."

Thirdly, the liquidity that bank lending to stock market entities ensures increases the vulnerability of the few brokers who exploit this means of finance. Advances against equity and guarantees help them acquire shares that then serve as the collateral for a further round of borrowing to finance more investments in the market. These multiple rounds of borrowing and investment allow these broking entities to increase their exposure to levels way beyond what their net worth warrants.

Finally, by undertaking direct investments in shares while providing liquidity to the market, the banks themselves are further endangered.

BANKS are built on trust. As intermediaries they accept deposits from risk-averse savers, who are offered avenues to make relatively small investments in highly liquid financial assets characterised by low income risk, to fund large investments that are relatively illiquid and characterised by a high degree of capital and income risk. They are able to play this role because of the belief that sheer scale allows them to cover costs, hedge against risk and honour their commitments.

These institutions need to be shielded from market volatility. It is possibly for this reason that the RBI technical committee on bank lending against equity, while holding that the basic framework of regulation need not change, recommends that the 5 per cent ceiling on bank exposure to stock markets must not apply just to direct investments in equity but to all forms of exposure including lending against shares and guarantees to brokeRs.

But this small step in response to the recent crisis may prove extremely inadequate. Five per cent of advances, while small relative to total bank exposure, is indeed large relative to the net worth and the profits of the banks. Major losses as a result of such exposure can therefore have devastating consequences for the viability of individual banks. Given its blind commitment to financial liberalisation, India's central bank appears reluctant to learn its lessons.

Tripartite talks involving the trade unions, the Chattisgarh government and the Centre fail, and the workers continue their fight against the privatisation of Balco.

IT is an unprecedented situation in Indian corporate history. More than six weeks after purchasing a controlling stake in the public sector Bharat Aluminium Company Ltd (Balco), Sterlite Industries remains unable to establish control over the affairs of the company. The sale, positioned as the first of a "big ticket" public sector undertaking (PSU) in the country, has been stonewalled by the trade unions representing more than 7,000 workers at Korba in Chattisgarh since March 3.

The first attempt at resolving the imbroglio through tripartite talks in Delhi failed on April 16. The talks, involving the State and Central governments and the seven trade unions in Balco, started the previous day after Chattisgarh Chief Minister Ajit Jogi wrote to Union Minister for Mines Sunderlal Patwa on April 12 seeking his intervention on behalf of the Centre to arrive at a negotiated settlement. Jogi had asked Patwa to consider playing a formal role in resolving the problem on a formal request of the workers. He pointed out that he was making the request because Balco was under the charge of the Union Ministry of Mines.

The unions representing Balco workers, unified on a single platform, have insisted that they will not negotiate with Sterlite Industries because they do not recognise the company as Balco's new owner. More important, they have maintained that they are willing to be flexible on all issues except the privatisation of the profit-making, cash-rich company.

Although S.C. Krishnan, managing director of Sterlite, rushed to Delhi from Korba on the eve of the talks, he was kept on the sidelines. Industries Minister Mahendra Karma and Industries Secretary Narain Singh represented the Chattisgarh government. Eight representatives of workers, belonging to the Indian National Trade Union Congress (INTUC), the All India Trade Union Congress, the Hind Mazdoor Sabha, the Bharatiya Mazdoor Sangh (BMS), and the Centre of Indian Trade Unions (CITU), attended the two rounds of talks.

The workers stuck to their demand for the reversal of the sale and offered Patwa four options to achieve this objective. Brahma Singh, representing the INTUC-affiliated Balco Employees Union (BEU), the biggest union in Balco, said that a range of options were provided with a view to highlighting the fact that although the trade unions were committed to the core demand of reversing the sale, they were willing to be flexible on the ways and means to achieve it.

The first option presented by the unions was for Balco to remain a central PSU with the Union government holding at least 51 per cent of its shares. If the Centre did not wish to retain a controlling stake, the Chattisgarh government should have the first claim on the disinvested shares. Under no circumstances, the unions told Patwa, should an investor get more than 49 per cent of the shares. The second option was to allow the workers to hold 10 per cent of the shares, reducing the private investors' stake to 40 per cent and keeping the Centre's holding at 50 per cent. If the Centre was unwilling to take a 50 per cent stake in the company, the unions said, the Chattisgarh government should be allowed to exercise the offer it made in an affidavit before the Supreme Court that it would buy 51 per cent of the shares at Rs.552 crores. As the third option, an imaginative one, the unions suggested that the State and Union governments run Balco as a joint venture. They did not reveal any preference for majority ownership in such a venture. The last option sought the implementation of the now-defunct Disinvestment Commission's report of 1997 that related to the Union government's disinvestment in Balco. The Commission, which was headed by G.V. Ramakrishna, had suggested in its second report in April 1997 that the Government divest 40 per cent of its stake in Balco. It had also suggested that a portion of the shares be sold to the company's employees.

Speaking to Frontline before the talks concluded officially, union leaders were pessimistic about a resolution of the crisis. Deb Roy of the CITU said that the unions and Chattisgarh's Industries Minister spoke in one voice at the meeting, making it clear that they were unwilling to settle for anything less than a rollback of the privatisation. In fact, they pointed out that the proposals they presented to Patwa were made jointly. Patwa's offer to discuss the workers' service conditions was rejected outright by them.

Deb Roy said that the Union government was trying to allure the workers with its offer to discuss their service conditions. Brahma Singh pointed out that the workers need not have travelled to Delhi to seek Patwa's help in settling the service conditions because this would have been well within the purview of the State government. Moreover, he pointed out that the Ministry for Mines had remained silent for months before the Balco sale when workers expressed apprehensions about working under a private management. He said he told Patwa that it was too late to discuss this issue with him.

Patwa blamed Jogi for the failure of the talks. He said: "I fail to understand Jogi's behaviour. The stalemate is because of the Chattisgarh Chief Minister." Disinvestment, he said, had already taken place and the government had accepted the money, so there was no question of discussing this issue. He alleged that Jogi went back on his assurance prior to the talks that he would attend the meeting along with the representatives of the Sterlite management at his residence in Delhi. He also maintained that his role as a negotiator had been an informal one and that the Chattisgarh government and the unions had adopted an intransigent position at the negotiations.

Baleshwar Jha, who heads the Balco Bachao Samyukta Abhiyan Samiti, the coordination committee of the seven unions representing Balco workers, vehemently denied Patwa's charges. He said that while the unions were flexible in their approach, Patwa "did not budge an inch". According to him, Patwa maintained that the four options submitted by the unions could not be considered because all of them involved the reversal of the Balco sale. "We have crossed that bridge. I am powerless to take a decision of this nature," Patwa told the unions.

Jogi told Frontline that "the ball was now in the Central government's court". He said that his government was prepared to work towards any solution that was "within the parameters set by the workers". He also said that efforts must be made to continue the dialogue. Significantly, after the breakdown of the talks, Mahendra Karma had suggested to Patwa that the Balco management revert to the situation before the sale of the company to Sterlite on March 2. He said that this interim arrangement would prepare the ground for resumption of work at the Balco plant in Korba and avoid further losses to the company, the third largest integrated aluminium producer in India.

THE strike that started on March 3 has imposed great hardships on the workers. Having had to live without any income for two months, they are under pressure. However, trade unions from public sector units and other sections of the industrial working class have contributed financial and logistical support to the agitating workers. The langar near the plant remains active. Financial and material help have been pouring in from workers across the country. Notable among them have been those made by bank and insurance workers and those from coal mine workers and workers of other PSUs. Leaders of various political parties and trade unions have visited Balco Nagar and offered their solidarity with the workers.

At a meeting in Delhi on April 19, the major central trade unions sought the intervention of the Prime Minister and the Union Labour Minister in arriving at an "amicable and respectable" settlement. They have also warned that if no solution is found, they would launch a countrywide industrial action by mid-May. The unions have called upon workers to stage demonstrations all over the country on May 4 in support of the Balco workers' struggle.

The women in the industrial township are at the forefront of the struggle. The Mahila Sangarsh Samiti (Women's Struggle Committee), an organisation comprising women volunteers from Balco Nagar, is active in providing logistical support to the striking workers. Brinda Karat, general secretary of the All India Democratic Women's Association (AIDWA), said that this was significant, considering that Chattisgarh was a backward tribal area.

The strike is unique in many ways. To those who have criticised the trade unions for having been content with raising only economic demands, the strike has come as a revelation - that they would also take up larger issues such as privatisation. Another significant revelation is that the prolonged strike has been conducted peacefully by a group of workers, the majority of them tribal people, who were never known for their militancy.

The recently-formed Citizens' Forum Against Balco Privatisation held a convention in Delhi on April 13. It condemned "the ongoing loot of public wealth through the privatisation of profit-making PSUs". Prabhat Patnaik, eminent economist, was among those who spoke at the convention and Rajinder Sachar, former Chief Justice of the Delhi High Court, presided over it.

The forum demanded the immediate reversal of the "scandalous BALCO deal".

In another twist to the Balco affair, elements in the Sangh Parivar, fearing loss of their support base among the industrial working class, mounted a scathing criticism on the government. On April 16, thousands of workers belonging to the BMS, the labour wing of the Bharatiya Janata Party, along with the activists of other Parivar outfits such as the Swadeshi Jagran Manch (SJM) and the Bharatiya Kisan Sangh (BKS), launched a "mass movement" against the government's economic policies. The Balco issue figured prominently in their list of complaints against the government.

In a bitter attack on the government, particularly Finance Minister Yashwant Sinha, SJM founder Dattopant Thengadi described the privatisation of publicly-owned companies like Balco and Modern Foods as a "fraud committed by bureaucrats". Referring to the changes proposed to be made in the labour laws, which the Finance Minister announced in his Budget speech, Thengadi accused Sinha of having committed a grave constitutional impropriety by encroaching into the domain of the Labour Ministry. Politicians, bureaucrats and private vested interests were manipulating the privatisation of public sector companies, he said, and alleged that these companies had been rendered sick for "extraneous considerations".