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VIEWPOINT: KAUTILYA
Prayer To A Jogi
While wooing investment, the
chief minister lands Chhattisgarh in the smelter.
By Jairam Ramesh
 Edmund
Burke's opening salvo against Warren Hastings was memorable: "It
is difficult to speak but impossible to remain silent." I am somewhat
in the same predicament on the BALCO controversy but ultimately the need
to preserve professional integrity even while serving as a political apparatchik
has won out-perhaps foolhardily.
The privatisation of BALCO was first proposed
by the United Front government in February 1997, although at that time
the cabinet decided to sell only 40 per cent of the company's equity to
a private investor. Subsequently, the NDA Government decided to sell 51
per cent to a private investor on the ground that aluminium is neither
a strategic nor core sector, that there are many private companies who
are more efficient and that the government would never be able to put
in money year after year into running aluminium plants. The decision to
sell 51 per cent made eminent economic sense.
Four years after the initial decision to privatise,
the transaction has actually taken place and the Centre has sold 51 per
cent of BALCO for Rs 551 crore to Sterlite Industries, an Indian private
company. The bidding process was gone through and Sterlite's offer was
higher than 51 per cent of BALCO's market value as assessed by the government's
adviser, Jardine Fleming. But the bidding process has been called into
question. The only way this issue can be resolved is when the Department
of Disinvestment hands over all the papers relating to the sale to the
Comptroller and Auditor-General (CAG) and CAG scrutinises these papers
and submits its findings. Hopefully, CAG's evaluation report should be
ready in three months at the most.
My esteemed colleague, the engineer-administrator-politician
Ajit Jogi, is resisting the privatisation vociferously. He is personally
spearheading an agitation against Sterlite, perfectly justifiable for
a political activist but inadvisable for a chief minister of a new state
desperate for fresh investment. BALCO is virtually under lock-out. The
impasse lingers and the Supreme Court will hear the case again on April
9 by which time BALCO would have become a ghost facility. Is there a way
out?
Jogi has categorically told Sterlite that it
must agree to operate with 49 per cent equity. This is unacceptable to
both Sterlite and the Centre. Jogi has also offered Rs 552 crore to the
Centre to top Sterlite's offer. The Centre is not interested and for a
valid reason. The bid has been closed and the deal finalised. Moreover,
a 51:49 per cent arrangement between a state government and the Centre
at loggerheads with each other is a recipe for continued conflict.
Jogi's other option is to offer Rs 1,100 crore
and buy out the entire BALCO plant from the Centre. The Centre could agree
to this but whether this can actually be done without Sterlite taking
the Central Government to court for breach of contract is very doubtful.
But assuming for a moment that Sterlite can be persuaded to withdraw amicably,
where will Jogi find Rs 1,100 crore? Chhattisgarh's total revenues in
2001-02 will be around Rs 2,400 crore and its share of Central taxes will
come to about Rs 1,479 crore. Let us say Jogi diverts his share of Central
taxes to buying over BALCO. But what will this do to the finances of a
state whose deficit, after payment of interest, salaries and pensions,
will total Rs 664 crore this year? Clearly, the only option for Jogi is
to borrow this money. But from where? And assuming that this can indeed
be done, the legitimate question is-should not these resources be used
for more essential physical and social infrastructure that Chhattisgarh
so very desperately needs? Moreover, the state Government will need to
set aside hefty sums of money, in addition to the down payment for buying
the plant, for the next two years at least to keep BALCO going and bring
it to a condition for a privatisation offer once again.
Successive governments have conclusively demonstrated
their incapability to run the public sector professionally and commercially.
Autonomy in our political and bureaucratic system is a myth. The money
that governments invest in the public sector is money taken away from
irrigation, primary education, public health and nutrition. There is,
however, still a role for the public sector as a venture capitalist in
crucial areas like energy. But with bankruptcy staring us in the face,
privatisation has become an economic imperative. Even Jogi knows that.
He is preparing to privatise power distribution in the state.
Twenty-seven Central PSU privatisations are
on the anvil. The BALCO episode is not without its lessons for the Centre.
Privatisation must bring in foreign investment. State governments must
be fully involved. Transparency should be seen and felt. Arun Shourie's
words alone are not sufficient. And while privatisation must remain an
executive decision, nothing would be lost if White Papers are introduced
in Parliament on each privatisation deal, before it takes place and after
it is concluded.
(The author is with
the Congress party. These are his personal views.)
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