A Brief Outline of a Critique of the Common Minimum Programme in respect of Public Sector and Public Services K. Ashok Rao

1.0 Preamble

It can and would be argued that the United Progressive Government is a secular alternative to the National Democratic Alliance. The emphasis being on the struggle against communal forces, it is not possible to disturb the equilibrium by raising questions relating to economic policies. Compromise is the essence of political stability and therefore the best that one can hope is some concessions in the neo-liberalism enforced by the gang of four – the Multinationals – Indian big business – the Indian State and the consortium of World Bank-IMF and WTO. In one sentence, using Marxist terminology – why worry about the base when the struggle is located in the super structure? The critical and relevant question that begs an answer is can communalism be fought without worrying about the base?

2.0 Ideological continuity but with a fig leaf

The UPA government is committed to the public sector strategy articulated by the Congress during 1991-96 and by the United Front during 1996-98 when Shri Murasoli Maran was the Industry Minister.

The Industrial Policy Statement of 24th July 1991 stated that the government would divest part of its holdings in selected public sector enterprises (PSEs), but did not place any cap on the extent of disinvestment. In the Budget speech of 1991-92, a cap of 20% for disinvestment was reinstated and the eligible investors’ universe was again modified to consist of mutual funds and investment institutions in the public sector and the workers in these firms. The objectives too were modified: “In order to raise resources, encourage wider public participation and promote greater accountability, up to 20 per cent of Government equity in selected public sector undertakings would be offered to mutual funds and investment institutions in the public sector, as also to workers in these firms”.

The highlights of the Common Minimum Programme of the United Front Government in 1996 were as follows:

• To carefully examine the public sector non-core strategic areas;
• To set up a Disinvestment Commission for advising on disinvestment-related matters;
• To take and implement decisions to disinvest in a transparent manner;
• Job security, opportunities for retraining and redeployment to be assured.

No disinvestment objective was, however, mentioned in the policy statement.
“The question of withdrawing the public sector from non-core strategic areas will be carefully examined subject, however, to assuring the workers and employees of job security or, in the alternative, opportunities for retraining and redeployment. The United Front Government will establish a Disinvestment Commission to advise the government on these steps. Any decision to disinvest will be taken and implemented in a transparent manner.”

Just in case there is any doubt that there is some ideological shift in the neoliberal commitment to privatization, the common minimum programme is quite categorical is assuring continuity.

The UPA government believes that privatisation should increase competition, not decrease it. It also believes that there must be a direct link between privatisation and social needs like, for example, the use of privatisation revenues for designated social sector schemes. Public sector companies and nationalised banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors. Chronically loss-making companies will either be sold off or closed after all workers have got their legitimate dues and compensation. The UPA will induct private industry to turn around companies that have potential for revival.

Even worse the CMP promises complete adhocism.

All privatisation will be considered on a case-by-case basis.

In order to ensure that the left parties are not completely compromised, there is plenty of rhetoric.

The UPA government is committed to a strong and effective public sector whose social objectives are met by its commercial functioning. But for this there is need for selectivity and a strategic focus. The UPA is pledged to devolve full managerial and commercial autonomy to successful, profit-making companies operating in a competitive environment.

Also the distinction between sale of 49 % equity and 51 % equity is maintained in all the super profit companies and it is assured that a fig leaf will be provided to hide the modesty of the left parties.

The UPA will retain ONGC, IOC, HPCL, BPCL, GAIL, NTPC, SAIL and BHEL in the public sector while divestment takes place.

It is difficult to find any major change in the pronouncements of the UPA’s Common Minimum Programme and the Suo – Moto Statement of Shri Arun Shourie, Minister of Disinvestment, made in both Houses of Parliament on 9th December, 2002.

Review of policy and new directions:

The main objective of disinvestment is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in our public sector enterprises. The policy of disinvestment specifically aims at:

• Modernization and upgradation of Public Sector Enterprises;
• Creation of new assets;
• Generating of employment; and
• Retiring of public debt.

Government would continue to ensure that disinvestment does not result in alienation of national assets, which, through the process of disinvestment, remain where they are. It will also ensure that disinvestment does not result in private monopolies.

In order to provide complete visibility to the Government’s continued commitment of utilisation of disinvestment proceeds for social and infrastructure sectors, the Government would set up a Disinvestment Proceeds Fund. This Fund will be used for financing fresh employment opportunities and investment, and for retirement of public debt.

It would probably be argued that while the rhetoric is almost identical, the left parties would work as watch dogs and ensure better implementation because there is no doubt that besides ideology there was outright corruption that was the prime mover of NDA’s policies and implementation.

3.0 A false fault line

A false fault line ahs been found called profit and loss, and this has been made into a watershed for decision-making. Only if a public sector or public service is profitable then privatization is blasphemy. By that argument, all State Electricity Boards should be immediately privatized since they are hopelessly loss making.

It is important therefore to demystify loss making that has been made synonymous with inefficiency that allegedly is caused by public ownership and cured by privatization.

1.1 Conceptual sickness
These are enterprises that were established irrespective of their commercial viability. The reason for setting them up even when there were chances of losses was because they belonged to one of the following groups a) Public Service b) Strategic Units c) Softer political instrument for market regulation. d) Quest for self-reliance.

a) Public Service: Example: Delhi Transport Corporation (DTC). For three years, this was the recipient of the highest productivity award, while showing losses. This was mainly due to administered prices. Similar is the case of the State Electricity Boards where governments have prescribed loss-making tariffs.

b) Strategic Units: Example: Hindustan Copper Ltd. It extracts copper from very low-grade ore and yet it has to compete at international prices. Another could be Mishra Dhatu Nigam (at present a profit making enterprise) that produces, without economies of scale, strategic alloys for defence.

c) Softer political option for market regulation: Example: Food Corporation of India (and other commodity related corporations like for Jute, Cotton etc.). It buys at administered price (to provide relief to farmers) sell at prices that provide relief to the consumers. Super Bazar is another example, where the same products that any grocer would sell were sold to regulate retail trade. These are examples of using PSEs as a softer political option instead of outright nationalizing the trade.

d) Quest for self-reliance: In the fertilizer Industry, plants were set up to use our abundant Indian resource – low-grade coal. Also some of the plants were built at a time when there was acute shortage of foreign exchange. This resulted in sub-optimal equipment being purchased since the choice was restricted only to rupee payment areas.

1.2 Inherited sickness
Industrial sickness and the danger of mass unemployment was the motive and purpose of taking over enterprises from the private sector that had been completed looted and turned sick. A special feature of many of these units is that they have very valuable real estate.

1.3 Sickness due to failure of infrastructure 
Example: Fertiliser Corporation of India, Ramagundam unit. A split second failure of power supply either in quality (like frequency) or quantity would lead to a loss of production of several days. Initially captive stations were not envisaged and installed in Fertiliser units.

1.4 Sickness due to policy decisions 
Example: Engineering Projects India Ltd. that was directed to execute a project in Iraq even when loss was projected. The promise to compensate EPIL was not kept. Similarly, the PSEs were used to mobilize foreign exchange (since they, rather than the Government, were considered by foreign lenders to be credit worthy). Government used the foreign exchange and the enterprises were left to bear the loss caused by exchange rate variation. In some cases, PSEs were even prevented from repaying the loans when conditions were favourable for the enterprise. In recent times, even after the Government has announced the withdrawal of the Administered Price Mechanism for Petroleum projects, the Petroleum PSEs, due to the compulsions of Elections held in 2004, were not allowed to exercise their commercial discretion.

1.5 Indecision by Government 
Indecision by the Government (in some cases deliberately motivated and financed by business rivals) is another major cause of sickness. Example: Hindustan Fertilizer Corporation Haldia unit. There was a major failure during commissioning; no decision was taken on rehabilitating and re-commissioning the units even after obtaining the advice of German (Ube) and a Japanese (Toyo) consultants.

1.6 Due to Managerial failure (including indecision by Government) and labour unrest 
Some of the managerial failures are: a) Inability of managements to keep up with technological changes, b) high inventory build ups, c) inability to react to market changes, d) seeking softer options in industrial disputes without considering the long-term consequences and e) corruption. Several PSEs are victims of these failures that are universal and not unique to the public sector. However, those who are ideologically committed to the privatization of the Public Sector, flag these arguments as the sole reason for losses in the Public Sector and prescribe privatization as the panacea.

1.7 Militant Trade Unionism
Even before the loss making “taken over sick units” (like the NTC and West Bengal-based Engineering units) could be restructured and made commercially viable, wages in these firms were pushed to unrealistic levels making the revival almost impossible.

It can be noticed that most of the industrial sickness can be attributable to causes that are independent of public ownership. On the contrary, private ownership, mismanaged and swindling were responsible for a sizable section of the public sector sick units. The assertion that reversing ownership once again hold the key to redemption of these units fails to make sense except if one realizes that most of the so-called sick units of the “taken over sector” have vast and valuable real estate in Metropolitan cities.

4.0 Conclusion

In India, public sector enterprises and public services are not mere enterprises but a political option in the discharge of the State to provide its citizens access to goods and services in a country where there is inequity in purchasing capacity and underdevelopment across economic sectors and backward geographic regions and communities.

It is also important to recognize that every model has an internal continuity and cohesion. It is not possible on the one hand to modify every single economic legislation be it the Electricity Act, The Telegraph Act, The Banking Act, The Insurance Act etc., to suit the neo-liberal economic model that favours investors over consumers and markets over state intervention. Any attempt to seek minor concession may be politically pragmatic, but do not in any way make any impact to the needs on the ground.

The Trade Unions and all patriotic sections of the Indian people must understand that the defence of the public sector and public services remains the main agenda of their struggle totally undiluted by the common minimum programme of the United Progressive Alliance.

(K. Ashok Rao is Secretary General, National Confederation of Officers Associations Of Central Public Sector Undertakings (NCOA).)