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| July 17, 2000 | ||
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PRIVATISATION Vote banks, perks and personal motives of NDA members are stalling the Union Government plans. The inside story. By V.Shankar Aiyar
A few well directed, diplomatic calls later, the BJP's Young Turk from Karnataka relented. The file moved. Assume the face-off over ITDC seems apocryphal. But the truth is harsher: ITDC is one of the easier battles fought in the trenches by the reformist brigade in the NDA Government. Vajpayee and his troopers -- Finance Minister Yashwant Sinha and Disinvestment Minister Arun Jaitley -- are caught in a bind. In fact, it is not the entrenched labour unions or the battered Congress nor the obscurantist Left who form the major stumbling block in its quest for second generation reforms. The biggest blockade to dismantle a system that has been fattened by government support to the order of almost Rs 62,000 crore in the past decade -- enough to fight 50 Kargils -- with returns of only a third of that, now comes from members of the 24-party coalition that is the NDA.
Reading the lips of some of the NDA members' reforms doublespeak makes for an expected, if profoundly disturbing, exercise. Sharad Yadav, minister for civil aviation and Janata Dal (U) chief, says without batting an eyelid: "I am for privatisation but with government control." In other words, somebody else pay the bills while he still gets to call the shots. Heavy Industries Minister and Shiv Sena nominee Manohar Joshi personally prefers "restructuring to disinvestment". This means crores of rupees will go down the drain to help him retain an empire of 48 PSUs of which 26 are with the BIFR, the refuge of terminally ill companies. The BJP's own Ram Naik, minister for petroleum and natural gas, feels, "Oil PSUs are milching (sic) cows. These should be the last to be sold." Given the increasing liberalisation and competition, that's a surefire way of shoving them into the red. If CIS countries managed to divest totally in 1,095 PSUs in one year while India managed only one in 10 years, thank this approach. "World over disinvestment goes with clear-headed political will," former Disinvestment Commission chairman G.V. Ramakrishna sums up succinctly. "Here there is neither clear head nor political will."
Yadav, Joshi and Naik are perfect examples. And they are not the only ones. TDP chief and Andhra Pradesh Chief Minister N. Chandrababu Naidu objects to the sale of Vizag Steel; for him, loss of jobs mean loss of votes. It's the same with DMK chief and Tamil Nadu Chief Minister M. Karunanidhi who is opposing the sale of the Salem Steel plant, and Trinamool supremo Mamata Banerjee, the Alloy Steel plant at Durgapur. Everyone of them has gone back on the dotted line; every party in the NDA is a signatory to the National Agenda for Governance which clearly states, "We will also expedite comprehensive reform of the PSUs, including restructuring, rehabilitation and divestment." So far, it seems there is little the Government is able to do about it. "Even the establishment of a separate Ministry of Disinvestment has not led to major action," says Deepak Parekh, chairman, HDFC and IDFC. "Administrative ministries under which the respective PSUs operate are unwilling to give up control and the unwritten right to political patronage and have consequently made the Ministry of Disinvestment ineffective." (See interview with Jaitley and column by former finance minister P. Chidambaram.) At practically every step, someone sticks out a leg to trip the effort. Citing a case of vote bank woes or sitting on files aren't the only strategies employed; often disparate forces gang up to picket. Ten days before the announcement in mid-June that Air-India (A-I) would be put on the block, the Cabinet Committee on Disinvestment met. Even before Vajpayee could start, Joshi played the classic babu card and raised a ruckus over a circular asking joint secretaries of ministries involved in the disinvestment and privatisation exercise to report to Jaitley's office -- even though it was accepted totally when issued. The move forced a discussion lasting over 40 minutes. Immediately, Yadav picked up the baton and asked for an hour to submit his views on why A-I should not be privatised. A tired Vajpayee postponed the decision and the duo managed a 10-day delay. Mercifully, Vajpayee put his foot down at the next meeting and the decision on A-I was taken.
But such firm action by Vajpayee is rare. And delay is costing the Government, the exchequer and ultimately the public, in terms of opportunity. Two years ago, when Industry and Commerce Minister Murasoli Maran mooted the idea of selling the government's stake in Maruti Udyog to General Motors it was estimated that the government could have collected $1.5-2 billion (Rs 6,700-9,000 crore at current rates of exchange). Maruti's market share has since dipped from 82 per cent to 56 per cent. It is doubtful if the Government will now get even half the price. And what does the government earn from an investment of Rs 4,500 crore-plus? Rs 20 crore as dividend. At this rate, it will take the government at least 335 years to earn what a single sale as Maran suggested would have fetched. Yet, Joshi believes there is not a strong enough case for the Government to sell. In many cases, delay is used as a weapon to tailor details to suit vested interests. For instance a senior politician from Maharashtra -- otherwise pro-reforms -- has been writing a letter a month to protect the business of an existing domestic airline. Aviation industry sources believe that the decision to disqualify foreign players from bidding for Indian Airlines was in keeping with these sentiments. The same tactics were tried with a-i with a different motive -- to enable an airline with wide political backing to be the lone bidder.
Blatant doublespeak is triggering confusion -- the other tactic. Consider the telecom sector which is seen as the major beacon for foreign investment. In Delhi, Communications Minister Ram Vilas Paswan airs doubts over the break-up of the monopolistic dot and hems and haws about opening up of long-distance connectivity. But while addressing the Indo-US Joint Business Council in San Francisco he turns 180 degrees -- purely for effect. At the World Petroleum Congress in Calgary, Canada, Naik talks about foreign investment in new exploration and asserts that the opening up of the sector is on schedule. The truth: newly discovered oil blocks estimated to yield over Rs 1,00,000 crore worth of oil are being held back, and private refineries which were promised marketing rights for their products are now being denied those rights without any explanation. Clearly, Naik's opposition is not ideological. Somebody elected from Mumbai, where some of the richest oil PSUs are headquartered, would find it comforting to hold on to them. There are others looking for this comfort zone. One of the reasons Ananth Kumar cited for his reluctance to privatise ITDC was that he would lose two of his three joint secretaries. Suresh Prabhu has 53 middle- and senior-level bureaucrats under him in the Chemicals and Fertilisers Ministry. Joshi has 43. Add senior PSU staff to this list and the comfort zone of those who stand to lose perks becomes immense. "PSUs mean additional perks," admits a cabinet minister. "This could range from PSU cars parked at most ministers' houses to free catering at home and for parties to payment of foreign travel, five-star hotel and cellular phone bills." Opposition or support therefore depends on who stands to lose what rather than what India stands to gain. As another Union minister reveals to INDIA TODAY without a trace of remorse: "Boss, as long it is not my ministry and my PSU, I am all for reforms, disinvestment and privatisation. When it comes to my turf I show my real colours."
The colours are all too visible. Take banking. Sinha promised to disinvest up to 33 per cent in all banks, but under pressure from its allies and the RSS, the Government has announced it won't give up control. The result of half-hearted partial disinvestment so far is pathetic: for the price of one share in a private bank, HDFC Bank, you can buy shares of half a dozen nationalised banks, all driven to the ground by NPAS and burgeoning overheads. Or the power sector, where no firm decision has been taken on privatisation. That's because if a PSU like NTPC is privatised, debt-ridden SEBs will also have to be restructured and user charges will have to be levied. But how would politicians establish their power without being able to distribute it free? A good example is the brazenness with which Paswan bulldozed the Cabinet to push through the phone freebie despite the presence of a telecom tariff regulator. The Paswan freebie will impact how much consumers will have to pay for telecom services. In such a situation, a valuation of the worth (estimated to be Rs 2,50,000 crore) if the telecom sector were to be privatised totally seems like a bad joke. Worse, many ministers are now scrambling to ensure that even if privatisation were to creep up and hit them over their heads with inevitability, some power and perks remain intact through the ingeniously termed "flagship concept". In other words, each ministry -- Surface Transport Minister Rajnath Singh wants Shipping Corporation of India to be the flagship, Naik suggests IOC, Paswan prefers the Department of Telecom Services -- retains one major PSU to keep its turf alive. Then there's the idea of retaining control even if shares are sold off, the so-called golden shares option. "No investor would accept this," says Ramakrishna. "The idea is to get someone to pay for the PSUs while the mantris and babus continue to hold sway in the name of public interest." To be fair to the NDA, consensus has eluded four successive governments. Neither former finance minister Manmohan Singh nor his successor P. Chidambaram could aggressively implement disinvestment. Also, the prime ministers they served didn't have either the nerve or political support to follow it through. Now, Vajpayee and his key economic ministers are struggling with disinvestment. "The solution is a strong government where the prime minister and the economic ministers have the strength to communicate to the unions and public at large the benefits of privatisation," says Bajaj Auto Chairman Rahul Bajaj. "And then, resolutely carry out (disinvestment) in an open and transparent manner without worrying about consequences." The way is clear but status quo has a way of clogging the will. Last week, a senior cabinet minister told Vajpayee, "You can do whatever is necessary. There is nobody to stop us but ourselves." He has a point. Vajpayee is perhaps most uniquely placed in terms of political strength and stature. He doesn't need to reinvent the wheel. All he needs is to spell out his design and articulate the dictum that common good leads to individual good. That by getting out of business the Government will spend the proceeds of divestment on social infrastructure (every Rs 1,000 crore can build four lakh schools), that it aims to get out of administration and focus on policy after putting in place regulatory mechanisms. "The Government can raise $10-12 billion (Rs 45,000-54,000 crore) in the next two years," says Rajeev Chandrashekhar, chairman, BPL Telecom and member of the Prime Minister's Advisory Council on Trade and Industry and the author of its report on disinvestment. "Think of the impact that money can make on India's villages and socially and economically deprived masses." For most people at the nerve centre of policy-making, it's a done deal, but the idea still has to filter down, if not shoved down. At a recent investors' conference, Information Technology Minister Pramod Mahajan recounted a story to illustrate the inherent political questions raised by privatisation and reforms. An American visiting China was taken to where a dam was being constructed. There were 200 workers working with shovels at the site. The American asked his Chinese friend why they needed so many people and why an earthmover was not used. The Chinese official was surprised and said, "But so many people are employed." To which the American retorted: "Oh, you want to employ people, not build a dam. Why don't you give them spoons to work with?" With reforms, there is no place called a half-way house. |
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For
over three months earlier this year, Prime Minister Atal Bihari Vajpayee's
minders were in a tizzy as to why a junior minister was
"sitting" on the file that dealt with the disinvestment of the
government stake in India Tourism Development Corporation (ITDC) -- on the
cards since the summer of 1997 -- for no apparent reason. Between March
and May, polite queries were aired in the general direction of Shastri
Bhavan, where Tourism Minister Ananth Kumar has his offices. Eventually, a
member of the prime minister's inner circle ventured to inquire and met
Kumar over lunch -- and finally discovered his grouse before dessert.
Kumar's complaint: the file was sent to him by the secretary in the
Disinvestment Ministry. "The minister did not even call while sending
it," Kumar said. "After all, I have to answer to
Parliament."