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Is this the end for privatisation?
Amberish Kathewad Diwanji |
May 15, 2004
Is it the end of the road for privatisation and divestment?
If statements of the Left parties and the Congress are anything to go by, it might appear so.
Barely 24 hours after it became clear that the Congress and its allies would form the next government with the support of the Left Front, and days away from the new government's swearing in, the Left has begun to dictate its economic blueprint for India.
Communist Party of India leader A B Bardhan, and Communist Party of India (Marxist) chief Harkishan Singh Surjeet have declared separately that the divestment ministry should be disbanded.
"We don't need a divestment ministry," Surjeet told reporters, while Bardhan said the divestment of public sector companies must be stopped forthwith.
The Bombay Stock Exchange's Sensex crashed on hearing the statement and there is real fear about the future of the divestment and privatisation policies of the new government, which simply cannot take office without the support of the Left Front parties.
While India's communist parties have of late accepted the need for foreign investment in certain areas, they have always opposed the divestment and privatization of the public sector giants. Instead, they have argued that if the public sector units, many of which are loss-making firms, should be made more efficient under government control.
The Left has never been too comfortable with the economic reforms initiated, ironically, by the Congress party in 1991, seeing it more as a necessary evil than as something necessary for India's economic growth and prosperity.
Congress leaders tried hard to assuage the fears of the market and play down the statements of Surjeet and his fellow leader of the Communist Party of India, A B Bardhan, who had earlier called for the closure of the divestment ministry.
Jairam Ramesh, considered a market economist and a leading economic strategist for the Congress party, said divestment and privatisation would continue, but in a calculated manner.
"We do not believe in a blanket privatisation of our public sector companies," he told a television channel. "Why should profitable PSU be divested," he asked.
"The Congress believes in reforms with a human face," pointed out Congress party spokesman Anand Sharma. "Our manifesto is clear that divestment is a part of our economic policy, but it has to be done properly."
Interestingly, the Congress economic vision document, does not even speak about divestment or privatisation. The document covers various aspects of the Congress party's plans for the country's economic prosperity, including growth at eight percent and going up to 10 per cent, increasing investment, investing in the social and economic infrastructure, raising competitiveness, and ensuring agricultural prosperity.
The Congress manifesto has a paragraph on the public sector, stating that the party "will strengthen the public sector in key strategic areas, including infrastructure and help the public sector companies emerge as global companies."
The following paragraph, on divestment, says the party will approach privatisation selectively, and that divestment will not be resorted to meet short-term targets but for designated social development programmes.
Asked if the Left parties making such statements even before the new government had been sworn in was akin to blackmail and pressure tactics, the Congress spokesman demurred from replying.
"The Congress and its allies and the Left will soon sit down and hammer out a Common Minimum Programme. And our policies will be dictated by this CMP, to which all parties will adhere," said Anand Sharma.
Will the CMP disown divestment? That only time will tell.
Just before elections were called, the National Democratic Alliance was planning the divestment of India's oil companies such as the ONGC, HPCL, and BPCL, some of India's biggest companies. But it might appear that these companies, all of which are profit making firms, is not likely to take place, at least not in the near future.
"What is the purpose of selling our profit making companies?" asked a Congress leader. "Why should ONGC be privatised?"
With this mindset, and with the Left already declaring that all kinds of privatisation or divestment was unnecessary, the public sector companies have acquired a new lease of life.
Another Congress leader alleged that the reason the National Democratic Front was in a hurry to divest key industries was simply because it was making money on the side. "They have made crores of rupees selling off profitable companies for a song," he claimed.
Paradoxically, leading the Congress side in its talks with the Left Front is Manmohan Singh, considered the father of India's economic reforms, and someone who had first argued that the government had no business running business.
For the Congress, winning the elections will prove easier than forming a government that seeks to meet all the contradictory ideologies of its various constituents.