Hope is not a strategy. The truism often echoed in corridors of power reflects the gap between pronouncement and policy implementation. Intent, however sincerely declared, isn’t a strategy either. Success calls for championing articulated agenda.
This week saw the 13-letter word ‘privatisation’ surface on the news map. India was informed that the Niti Aayog has finalised names of public sector banks to be privatised in the current financial year. Also in attendance is the buzz about ten more public sector enterprises cleared for privatisation/ disinvestment.
The good news is that the much-speculated post-poll Bengal effect has not come to be and privatisation continues to be on the government’s agenda. There is what is called the contingency effect, the mounting pressure for resources. Then there is the fact that crises are a high-octane propellant of change in India’s political economy. The not-so-good news is that the list of entities is growing but the expected outcomes, sale and exit of government from defined non-strategic businesses, are yet in the realm of a promised land. In classic management speak, there is much motion and minimal movement.
It is true that the pandemic has imposed constraints on process and potential. But the saga of procrastination predates the arrival of the virus. The facts of the case are as follows: since 2016 the government has cleared or to quote government legalese “given in-principle approval” for “strategic disinvestment” of 35 CPSEs. There is no disputing the flow of announcements, notifications and declarations. But the fact remains that the only big tag disinvestment has been that of HPCL, which was bought by the government-owned ONGC.
Take the case of the sale of Air India. The Niti Aayog recommended the sale of the beleaguered airline, citing rationale and the fragile finances as part of its note in strategic disinvestment of CPSEs on May 12, 2017. The Cabinet Committee on Economic Affairs gave its approval for privatising Air India and its five subsidiaries on August 28. It took nearly 30 months for the issue of preliminary information memorandum for inviting expression of interest. In May 2021, the disinvestment of Air India is yet stalled on the runway.
It is not just privatisation. The virus of delays afflicts listing of state-owned enterprises too. On February 1, 2020, the government declared in Budget 2020-21 that it “now proposes to sell a part of its holding in LIC by way of IPO.” In May 2021, the process of listing is yet underway — these include the legal challenges of converting LIC to a company, the definition of surplus and valuation. The opportunity lost in delays is worth noting — by one estimate in the fiscal year 2020-21, while the listing of LIC was left pending, the market value of stocks listed in Indian bourses vaulted by a stupendous $ 1.27 trillion.
There is the cost of opportunity lost and then there is the price being paid in losses. This column has repeatedly raised the flag on the enlarged presence of the government in businesses that it has no business to be and the continuing erosion of public wealth. Indeed, as per the government’s data (SCOPE 2019) over 70 CPSEs are in losses and have cumulatively lost over Rs 2.65 lakh crore in the past decade— that is roughly Rs 26,500 crore a year, or Rs 70 crore a day.
Time translates into money in the modern economy. Indeed, as time passes, many of the entities listed for sale, may no longer be saleable. And new factors are emerging — for instance, the rise of ESG norms will impact both interest in and valuation of even a prized enterprise such as BPCL and the disruption triggered by Fin-Tech in the financial sector threatens the viability of traditional banks.
It is true that for the first time since the liberalisation policies of 1991, and after decades of semantics over getting government out of business, the politically combustible phrase privatisation has found a place in this year’s budget speech. But the mention needs empowered follow through action. Currently, the process of disinvestment is overseen by a Core Group of Secretaries. This template falls between necessary and sufficient conditions —systemic oversight without political push.
Thomas Sowell, the noted economist observed, “it is hard to imagine a more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” It is no secret that the one brief period when the government succeeded in privatisation was under Atal Bihari Vajpayee when the process was led by an empowered minister, namely Arun Shourie. For intent to progress beyond mention, the government needs to empower and install a minister committed to championing the cause.
The magnitude of challenges faced by the political economy is yet unravelling. There is the immediate circumstance of debt and deficit — already the government is scheduled to borrow over Rs 135 crore per hour this year and pay interest of Rs 92 crore per hour and the impact of the second wave is yet to be quantified. There is also the emerging spectre of creative destruction of businesses and economic models across the economy. The need to invest in human infrastructure to equip a young demography for an uncertain future makes monetising calcified assets more urgent than ever.
Shankkar Aiyar
Author of The Gated Republic, Aadhaar:
A Biometric History of India’s 12 Digit
Revolution, and Accidental India
shankkar.aiyar@gmail.com