Selling the Family Silver

After an interval of 12 years, on 28 September, the Cabinet Committee on Economic Affairs approved in principle the “strategic sale” of shares of the Allahabad-based public sector undertaking (PSU) Bharat Pumps & Compressors which manufactures equipment used in the petroleum, chemicals and fertiliser industries. The phrase “strategic sale” is a euphemism to mean privatisation or the handing over of the ownership and management control of a government company to private promoters. The same day, the cabinet also gave its approval for the closure of Hindustan Cables, another ailing PSU, after sanctioning a financial package for payment of dues to its employees, voluntary retirement schemes and converting government loans into equity capital. That the Narendra Modi government would follow in the footsteps of the Atal Bihari Vajpayee government in embarking on the path of privatisation was hardly surprising. What was surprising was that the government took as long as it did, after it was halfway into its term, to start this process. This was partly on account of internal opposition to the sale and closure of PSUs by particular administrative ministries.

There are many in the Bharatiya Janata Party (BJP) government who are convinced that privatisation is a one-shot panacea for resolving the many complex ailments afflicting the working of government-owned corporations. Despite the sharp ideological debates that have raged across the world and in India, such a simplistic view of the benefits of privatisation has been rejected even by right-wing ideologues in advanced capitalist countries, not to mention many in the World Bank and in the International Monetary Fund. It has been argued that the government should not be in the business of running certain businesses. In this country the government has been managing hotels (India Tourism Development Corporation) and in the past had been baking bread (Modern Bakeries), building bicycles (Cycle Corporation) and assembling wrist-watches (Hindustan Machine Tools). But the problems associated with privatisation in India run much deeper than the presence of the public sector in particular sectors and go beyond ideology. The reason why privatisation became such a dirty word in India was on account of a series of blunders that were committed during the term of the Vajpayee government by, among others, the then Union Disinvestment Minister Arun Shourie. Former Prime Minister Manmohan Singh had claimed in 2004 that the BJP had pursued privatisation as an ideological commitment and not as a means of economic reform.