At a time when the Indian economy is facing distress, slowdown and lack of consumption, the Narendra Modi government seems to have unleashed key reforms to counter the downward slide. As part of this larger strategy, two key decisions have been announced, marking a distinct shift in the economic policy matrix of this government: aggressive disinvestments and privatisation of state-run enterprises, and opening up coal mining to commercial exploitation, thereby ending the monopoly of Coal India. Interestingly enough, both these decisions have come just weeks before this government presents its seventh full-year Union Budget on February 1.
Both the decisions have implications for the economy given that in its first term, the government never bet big on selling state-run enterprises lock, stock and barrel. In fact, it came as a surprise when the Centre decided to sell a profit-making enterprise in the key oil sector—BPCL, which has a market valuation of about `1,00,000 crore. Neelachal Ispat, a major steel company with an annual output of `4,000 crore-worth high-grade steel, will also be privatised through open e-auctions. These and the affirmation to sell the loss-making Air India reminds one of the strategy adopted by the NDA government headed by Atal Bihari Vajpayee.
It was during Vajpayee’s regime that aggressive privatisation of PSUs happened. And the Modi government seems to be embracing the same policy not only to kick-start the economy that’s losing steam, but also to mobilise resources for its signature development and social sector projects. Old-timers would be familiar with the Vajpayee government carving out a separate disinvestments ministry and disposing off a dozen major enterprises irrespective of whether they made profits or reported losses. The biggest example was to sell Maruti Udyog to Japanese major Suzuki, which turned the modest company into a bellwether automobile market leader. And there was the important sale of VSNL to Tata. Similarly, big enterprises like Bharat Aluminum and Hindustan Zinc had gone into private hands as part of the economic restructuring attempted with Arun Shourie as the first disinvestments minister.
This raised key questions: Was privatisation the way forward to restructuring India’s manufacturing landscape? Aggressive calls for Swadeshi opposing the handing over of PSUs to foreign companies also gained momentum. Even Sangh Parivar organisations like the Bharatiya Mazdoor Sangh (BMS) under the stewardship of stalwart labour leaders like Dattopant Thengdi had then red-flagged aggressive privatisation. This has not changed now with the BMS organising a day-long industrial strike opposing privatisation and disinvestments intended to mobilise over `1,00,000 crore. Within and outside the government, there may not be consensus on its policy to disinvest.
Opening up the mining of coal to commercial exploitation is yet another call that the government took recently. The rationale offered was that over 235 million tonnes worth coal valued at `1,70,000 crore was imported annually to meet shortages faced by power, steel and manufacturing sectors. Investments by both domestic and foreign companies in coal would bring in new mining technologies and reduce imports, thus saving precious foreign exchange.
What goes without saying is that the monopoly of Coal India will end and it may eventually be privatised to unlock its huge value. Opening up telecom to private players in India is cited as a big success story over the years. Swadeshi groups may not welcome commercial coal mining by foreign players. They argue that improving coal infrastructure and modernisation of Coal India should have been the priority to achieve a 1.5 billion tonne output. Having invested billions of dollars on clean coal technologies as part of a global alliance, should India not reap the benefits of this know-how?
In the past too, both Left and Swadeshi labour unions had opposed any equity sale in Coal India, even in small patches of 5-10%. This vehement resistance had led to a postponement of disinvestments in Coal India. Opponents of disinvestments and privatisation have often cited huge profits and dividends given by PSUs as enough rationale not to ride roughshod on the family silver. As per publicly available data, all PSUs put together have reported profits worth `1,28,374 crore and gave government dividends worth `76,578 crore in 2017-18. These figures may be perfectly right. But do we have an alternative to tackle widespread losses reported by dozens of small and large state-run enterprises reeking with inefficiency and irrelevance given that they were systematically derailed to provide space and market to private as well as foreign companies?
This brings us to the primary question as to whether aggressive privatisation is the most sustainable policy prescription to fight economic distress, loss of jobs and bring back some shine to the lost India growth narrative. Pursuing such a policy calls for a larger debate given that global powers have turned their backs on globalisation and taken recourse to their own version of Swadeshi. Whether it is US President Donald Trump or French President Emmanuel Macron, most global powers have leaned heavily on their internal economic strengths to push for growth, jobs and providing larger dividends to their people. Should our government take the Swadeshi campaign and Indian labour unions more seriously and take a relook at the economic policies?