Public Sector Units:
Privatisation or Economic Destruction?

N. Bhattacharyya

It is a misfortune for the successive caretakers of the Indian state that even in the age of globalisation there are still some residents who have the courage to challenge the Government of India’s policy on the sale of the Public Sector Units (PSUs). A large number of these units were built up brick by brick with the money of poor tax-payers. In a semi-feudal and semi-colonial economy, tax collected from indirect sources like sales tax, excise duty etc. and paid by millions of Indian people living in cities and villages has remained around 4 times higher than that paid by the business community of this country as direct tax. In India the highest rate of income tax is 30 percent while in the USA, the so-called heaven of the rich people of the world, it is still as high as 50 percent and tax is paid by businessmen unlike our rich who feel proud of evading it! Around 35 percent of India’s GDP is said to be black money or income not disclosed officially to avoid tax.

The proposal to privatise the Uttar Pradesh (U.P.) State Electricity Board was not only opposed by lakhs of workers and their families but also by the consumers of power in U.P., who wanted an assurance from the government that after privatisation the tariff on power would not go up. There is a well-planned campaign against our workers which says that the loss of power both in production and distribution is due to the corrupt practices of the low-paid employees. It is the business community and their mafia who are primarily responsible for the sickness not only of the power industry but also of the rest of the PSUs. If the employees are corrupt, what stops the bureaucracy from proceeding against them under the various Acts? The Central Vigilance Commission is publishing the names of corrupt bureaucrats, but people are accustomed to these official gimmicks. The U.P. Indian Administrative Service Association once decided to publish the names of its most corrupt members, but nothing concrete happened. Politicians decide where electrical power should be free or subsidised but they blame the workers and poor consumers for the sickness of the industry. In Punjab a rich peasant gets power free of cost, but a poor agricultural labourer has to pay through his nose for his single bulb connection. In Maharashtra the Shiv Sena - BJP Government decided to allow Enron to sell power at the highest rate in the country and at the same time ordered the Maharashtra State Electricity Board to supply free electricity to the rich cultivators particularly to the sugar barons of the state. In Delhi no one dares to disconnect the illegal power consumption of factory and hotel owners who enjoy political patronage cutting across political affiliations. However, the shanty dwellers in Delhi are shown in the media as the main culprits in stealing power, though it is well known that they use power for home consumption and that it is a small proportion of total electricity consumption in the state. The government says it will not shoulder the management of industry and commerce, rather its responsibility will be to look after only law and order issues. Who is stopping them from prosecuting the criminals stealing power according to the laws of the country? Industrial tariff for power in India is very high. In Madhya Pradesh it is Rs 3.81 (if S. Kumar’s hydel project on the Narmada river at Maheshwer / Mandeleswer is allowed to work, the cost of power will rise to Rs 5 per unit). In comparison in Canada it is Rs 1.70, in Thailand it is Rs 0.80 per unit. With the coming of the USA giant Enron into Maharashtra the power tariff will jump to Rs. 5 and above from the existing Rs 3.51 per unit. (Economic Times, 4.2.2000). The Indian state allows power pilferage by the big industrialists and rich farmers while the poor consumers have to suffer paying a higher tariff and endure long periods of load-shedding even in winter when consumption goes down. The Indian state is taking full advantage of the lack of organisation of consumers and the massive illiteracy in the country. It is good that the majority of Indian poor who are called adivasis and dalits and who officially accounted for 24 percent of total population in 1991 have yet to see electric lighting in their rural huts, though the Rural Electrification Corporation has encroached on their small pieces of land to install huge structures to connect transmission lines to carry electricity to the cities. Till today the government cannot blame them for loss of power! We make an attempt to ‘peep’ into the organised loot that is going on in India by vested interests in the name of ‘development’ not only during the last 10 years of ‘reform’ but also since the days the Britishers were planning to hand over administrative powers to the Indian business community and with their consent and retained with themselves economic decision making powers for the Indian market.

The Bombay Plan (1944-45) of the Indian business community which was authored by stalwarts like Sir J.R.D. Tata, G.D. Birla, Sir Shri Ram, Kasturbhai Lalbhai, A.D. Shroff and John Mathai and others affirmed ‘that practically every aspect of economic life will have to be rigorously controlled by the Government’. Wadia and Merchant also said, ‘The future for investment which the authors of the Plan envisage is evidently a holy alliance between foreign capitalists and themselves on a profit-making basis, of which we have had such bitter experience in the past and in the present.’ (P.A. Wadia and K.T. Merchant, The Bombay Plan: a Criticism, Bombay, 1945, pp. 29-40 and pp. 43-47). H.V.R Iyenger of the Indian Civil Service who retired as Governor of the Reserve Bank of India said in the late sixties, ‘Indeed, there seems little difference between the basic approach of the Bombay Plan and the approach of the Planning Commission of the Government of India…’ Though many people still believe that Nehru wanted to make our economy socialistic in actual fact it was the business community who guided the government to build an infrastructure for their ‘profit’ accumulation and appropriation.

A propaganda mill is working overtime stating that the previous license-permit Raj was socialistic and that the new liberalisation, globalisation and privatisation is a fundamental break from socialism. This is absolutely false. Under Nehruvian ‘socialism’ and Indira Gandhi’s ‘nationalisation’ and abolition of ‘privy purses’ drama the big business houses were allowed officially to corner all licenses, they enjoyed absolute freedom to exploit the unorganised ‘bonded’ consumers. Monopoly and oligopoly of both Indian business houses and foreign capitalists were the order of the day. Many committees and commissions clearly established the nexus between policy makers and the business families in this conspiracy against the country. They conspired to bleed the consumers and destroy the natural resources of this country and went on accumulating unaccounted wealth in foreign banks with the connivance of a corrupt bureaucracy and criminal politicians. It is a total fraud on the part of Indian business community to blame the Congress government alone for the present sickness of the Indian economy. An average Indian knows how these business families and their imperial masters colluded with the politicians to rob this country and create an ever-widening gulf ‘between the haves and the have nots’.

Since 1991 Indian big business houses have gone out of their way to welcome the arrival of more MNCs. Some of them immediately sold off their enterprises to them and started afresh their commission agency business from where they had started in the early fifties when foreign capitalists left India and sold their ‘managing agency houses’. Transnational Corporations are busy in acquisition, amalgamation and absorption. Indian big business houses are advertising in the media and through the Internet to sell their units to the highest foreign bidder. There is a rush to sell shares through American Depository Receipts (ADR) or Global Depository Receipts (GDR) or both. Each private operator is trying individually to raise as much foreign loan as possible through the External Commercial Borrowing (ECB). The government of India, now run by the Bhartiya Janata Party led National Democratic Alliance, has no obligation to see that the foreign exchange raised in this process is brought to India and used for the specific purpose for which it was permitted. In the meantime the government has replaced the Foreign Exchange Regulation Act by another soft law called the Foreign Exchange Management Act (FEMA) which has no authority to bring to book foreign exchange manipulators.

The Central government too is competing with the private sector to sell off profit-earning public sector units embodying crores of rupees of hard-earned taxpayers money. The BJP which was previously known as the Jana Sangh is basically a north Indian small traders’ party and today it is in power for the third time in three years, The trading community from all parts of the country is willing to support the BJP. During its 13 months rule in 1998-99 it decided to withdraw the Essential Commodities Act to allow traders to fleece the unorganised consumers. It allowed mustard oil dealers in the capital of the country to poison consumers by selling adulterated edible oil. It also ignored its responsibility when onion wholesale traders hijacked the market and sold onions for Rs 60 and more per kilogram, till public protests compelled the government to intervene and it was forced to import and sell onions through the public distribution system. They promised to bring a new Essential Commodities Act with sharper teeth but nothing has happened. It is a complete breach of trust and well-planned fraud on the citizens of the country.

Recently the Indian government sold off a 75 percent share of Modern Food Industries to Hindustan Lever Ltd. which is a subsidiary of the Anglo-Dutch company Unilever Ltd for the paltry sum of Rs 105 crores. If tomorrow they purchase the rest of the 25 percent share for another Rs 30 or Rs 40 crores, they will inherit a company whose net worth is some thousand crores of rupees. The land value of its Delhi factory alone today is reported to be more than 2000 crores. Is this democracy or simple plutocracy?

The government wishes to have a ‘strategic sale’ of Indian Airlines. It is not unknown to Indian politicians that Margaret Thatcher privatised British Airways in the eighties and today under private ownership British Airways is already declared sick. Will they nationalise it again as our politicians did with a large number of sick private sector units in the past after their owners were allowed to squander the resources of those companies. Will the private air transporters fly on uneconomic routes to different parts of the country as Indian Airlines was ordered to do or will they concentrate only on the profitable routes?

The Indian state officially shows interest in the ‘development’ of this vast country of one billion people, but individually all the states and the centre have declared themselves virtually bankrupt and they cannot meet their day to day minimum administrative commitments without raising additional loans internally. Internal debt as a percentage of GDP was 45.44 percent in 1985-86, it went up to 51.51 percent in 1991-92 and in 1998-99 it stood at 51.05 per cent of GDP. Interest payment on loans as a percent of GDP went up from 2.86 percent in 1985-86 to 4.87 percent in 1999-2000. During 1999-2000 the gross market borrowing of the government is projected at Rs 84014 crores, while the centre would be paying an estimated Rs 88000 crores as interest on its liabilities, up from Rs 77248 crores in 1998-99. Due to the devaluation of the rupee, over- invoicing and under-invoicing of imports and exports respectively, accelerated by the withdrawal of restrictions on imports, the Indian balance of trade is permanently out of the control of the central government. The foreign debt is mounting rapidly and we are paying back to the G-7 countries more than what we are receiving as fresh loans annually. The external debt in billions of US dollars was 83.8 at the end of March 1991, it went up to 99 in 1995 and came down to 95.2 in September 1998. In such a scenario there is no other alternative for a country of one billion people than to behave as a schoolchild under the command of the G-7 countries and their managed institutions like World Bank, IMF and WTO. Our ruling elite had to express its regrets for its nuclear experiments and had to assure USA that it would sign the CTBT and only then did these countries agree to withdraw sanctions. Wherever the multinational corporations have set up their tents in the third world countries, they have wilfully destroyed the natural resources of these countries and virtually made them new colonies without any responsibility to the people. They enter these countries as agents of ‘development’ but end up as agents of ‘destruction’. In India, officially administrative powers were handed over to the elite group who enjoyed their confidence in 1947, but despite tremendous sacrifice made by ordinary people, till today it is a common scene invariably in all cities- small or big- to see human beings fighting for food with dogs in the filthy dustbins. Lakhs of young people in the cities are shown on television merrily drinking soft drinks produced by the MNCs while, in the villages people are forced to drink muddy water and suffer from a hundred and one diseases. Mr. Narasimha Rao, one of the Prime Ministers who was ordered to introduce ‘reform’ in India in 1991 had to agree publicly in a meeting of the Confederation of Indian Industry last year that his reform measures had only introduced producers of fast food industries, consumer durables and big automobiles for the narrow roads of India. It is the President of India who has had to warn the government recently that its ‘privatisation’ policies had only created a market for the MNCs but that growing retrenchment and social disparities have created tremendous social tensions. The number of people below the poverty line has increased tremendously both in the villages and in the cities during the reform regime. Small traders and a large number of small-scale industries are closing down their shutters. Big business has already replaced many of them. The President’s suggestions of the need for ‘pedestrian crossings’ in first track lanes is a clear warning signal against imperialist exploiters and their Indian puppets.

Most of our PSUs are economically viable and the nation receives a huge amount every year of corporate taxes from them. Their counterparts in the private sector evade paying any tax or they pay a very small amount which cannot be avoided. The following Table-I shows that so far as payments of corporate tax are concerned, it is the PSUs who pay the highest amount of corporate tax.

Table I
Top Advance Tax Payers in Mumbai Region

    (Rs. crores)  
  Company Expected Tax in March 00 Tax collected in
* Deposit Insurance Credit Guarantee Corporation 802.53 755.53 6.22
* Life Insurance Corporation 744.91 613.66 21.39
  Videsh Sanchar Nigam Ltd. 697.33 600.00 16.22
* Indian Oil 425.91 452.00 -5.77
** Hindustan Lever 294.67 250.00 17.87
* Hindustan Petroleum Corporation Ltd. 251.89 353.00 -28.64
** Mahindra & Mahindra 66.67 42.53 56.75
** Reliance Industries 64.67 42.53 56.75
** Tata Sons 59.33 65.20 -9.00

*   Public Sector Units
** Private Sector
(Economic Times dated 27.1.2000)

There is need for a large amount of money and these PSUs are laying golden eggs. Till yesterday our politicians used to call them Navratna (the Nine Jewels). Now they are to be handed over to the private sector so that they can enjoy a monopoly in the market economy. The Indian Petrochemical Corporation Ltd., one of the Navratnas which earned huge profits till destabilisation was started by the politicians is going to be handed over to its competitor Reliance with a 26 percent stake so that they may enjoy a monopoly in the petrochemical market! In this game of disinvestment/ strategic sale/ privatisation, our politicians were advised to go slow by their foreign masters and not to be in haste. The following Table II shows how their disinvestment / sale campaign performed during the last decade.

Table II
PSU Equity Disinvestment


































(Rs crores)
(Hindustan Times 10.10.99)

Our imperialist masters understand, that the PSUs which are owned by the Indian public are a threat to the monopoly exploitation by the MNCs and they should be demolished. As US $ 100 billion external debt is due from India the G-7 countries through the World Bank, IMF and WTO have the possibility of controlling the economic and foreign policies of this country.

Indian organised labour, who have gained reasonable economic prosperity after independence in comparison to their lesser privileged brothers in the unorganised sector, should be in a strong bargaining position to stop the privatisation of the PSUs. Moreover, at this moment the BJP’s trade union has the largest membership and they should be reminded of their obligation to the labour movement of this country. In the last ten years the government wanted to collect Rs 44000 crores to meet its budget expenses by selling off the PSUs but it ended up spending hardly 50 percent of the budgeted receipts. That was done also by selling PSU scripts at throwaway prices. Today there is more than one method to sell shares, and if the government followed transparent policies, they could get much better prices. But look, by merely changing Telecom policy last year from a licence fee system to a revenue sharing one the government gave up its legal claim to a huge amount of Rs 50000 crores as licence fees. The office of the Comptroller and Auditor General has given its note of dissent but the scam goes on.

Here we have a government which is compelled to give more and more concessions to the big business houses e.g., no tax on profits from exports, concessions on Depreciation allowances and Development rebate etc. Very large companies who earn huge book profits need not pay any tax, even the minimum amount of corporation tax levied recently on the so-called no tax companies is going to be diluted. Non-performing assets of the nationalised banks stand today at more than Rs 45000 crores and a Confederation of Indian Industry committee suggested the winding up of three such banks with huge non-performing assets. When bank workers suggested that it was the big business houses led by the well known office bearers and members of the Trade Associations who had failed to return the bank loans of the nationalised banks and that their names should be made public, the government departments took the plea of the ‘secrecy’ clause of the Banking Law. Big businesses are the main clients of foreign banks not because they are operationally efficient but because these people have huge sums of money stashed away in foreign countries. But they go to the nationalised banks when they are assured by the politicians that they need not repay their loans, of course against some price. Instead of privatising nationalised banks, an independent tribunal headed by a retired judge should be appointed by the people of this country to find out how these public funds were systematically siphoned off and who did it. In the meantime recovery should be made of outstanding loans by all means including announcing the names of defaulters and humiliating the so-called self imposed ‘trustees’ of this vast economy. The promoters of privatisation should know that the Indian people in the dawn of 21st Century will not allow their country to be destroyed further without registering suitable challenges. The government will definitely sharpen its black laws like the old Terrorism and Disruptive Activities Act and continue annihilating peoples’ representatives as encounter killings in different parts of the country. Indian history is at crucial juncture. The writing on the wall is clear and unambiguous. As Suniti Ghosh has pointed out ‘in the course of the struggle not only will be country be changed but they (the fighting Indian people) themselves will be transformed. The filth of the ages will be swept clear.’

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