Indiscriminate selling of Maharatna and Navratna Public Sector Undertakings harms national interests

We have large number of historical facts to show how the feudal lords and aristocrats for maintaining the façade of their power and aristocracy borrowed money from the traders by pledging their property. But this proved to be illusive and eventually they failed to resurrect their pride and prejudice.

The manner in which the Modi government has been putting the maharatna and navratna PSUs on sale reminisces the historical facts. The Modi government is in hurry to sale and disinvest the profit making PSUs. It certainly does not augur well for the country and its economy. The most intriguing is why the prime minister is hell bent to cripple these PSUs.

Disinvestment of Public Sector Undertakings (PSUs) is an avowed policy of the Union government. This has to be done only under the situation when the PSU has been in red, eating into government revenue and failing to produce profit and revenue. But this is certainly not the case with the maharatnas and navratnas. They are all profit making bodies. Some PSUs might have turned irrelevant in the prevailing scenario, but it ought to be not forgotten that these have laid the strong foundation for the modern India.

It is worth noting that the maharatnas and navratnas have withstood the rigours of the globalisation and liberalisation and continue to earn profit. People would certainly like to know the reasons for their disinvestment and sale. There always has to be some rational justification. When a company like Bharat Petroleum Corporation Ltd (BPCL) is also being offered for ‘strategic disinvestment’ along with Shipping Corporation of India and Container Corporation of India, the nation obviously expects to know the reason behind it. A few more PSUs have been selected by the government where its shareholding will be brought to less than 51 per cent.

Is it for augmenting the financial resources of the country or simply to help some private sector players? One can comprehend the logic behind divestment of a loss-making PSU but when a Maharatna or Navratna company is being offered to the private sector, what is the lesson to be learnt? Several of 'maharatna' and 'navratna' companies, including ONGC, IOC, GAIL and NTPC, could soon lose their identity and become part of the empire of the private sector. The Finance Ministry is also planning to approach NITI Aayog to prepare yet another list of PSUs where their holding could be brought down to below 51% and also point out which of these could shed the PSU tag and become independently board-run private companies.

During the 2014-2019 period, the government raised Rs. 2,79,622 crore from the disinvestment of public sector enterprises (PSEs), compared to Rs 1,07,833 crore collected during 2004-14. Recently, five companies were up for 100 per cent disinvestment, including three large profit making companies BPCL, the Container Corporation of India and the Shipping Corporation. The planned disinvestment of these big three is in addition to the proposed 100 per cent sale of Air India, and Industrial Development Bank of India (IDBI). The move towards divesting ownership in strategic sectors will have long term consequences.

Putting on sale the LIC, the largest company in terms of assets, has really come as a shock. It caters to the needs of millions of policyholders. These steps of the government points to some ulterior motives of the policy makers. It would be wrong to view this merely as a part of Nehru bashing mission of Modi and his colleagues. We are consistently fed with the information that PSUs have failed India. But it is not true. A large number of PSUs have been earning huge profit and a simple government push would galvanise them. But ironically the governments are not at all interested to streamline and augment their functioning. An impression is being created by the corporate sector, having blessings of the political establishment that they are burden on the economy of the country. No doubt times have changed and the economy now has other engines of growth, but the PSUs are most dependable for taking care of the strategic sectors of economy.

It is not that the government is simply involved in selling the PSUs, it is already on the mission to withdrawing from health and education sectors, leaving the citizen with almost no choice but to seek costly education and unaffordable healthcare offered by the private sector. The way the government was moving ahead, simply implies that Modi government intends huge amount of cash money in its hands. Centre seems to be more concerned for liquidity than structural adjustment and long-term macroeconomic change.

The success of privatisation depends on the transparency of the process and the effectiveness of the regulators. A private investor is always too willing to purchase a cheap institution. But at the same time it is scared of the future development. The management is sceptical that a future government which will replace Modi government may create complications for it.

While welcoming the private sector, the government should ensure a level playing-field with well-defined rules of the game. Elected governments have an inalienable obligation to reconcile growth with equity. If the growth narrative is going to be overwhelmingly decided by the private sector, governments should necessarily script their own equity narrative. At present there are more than two dozen CPSEs with government stake of less than or close to 60%. .Considering the mammoth infrastructure of PSEs in India, there is a scope for developing start-ups using their unspent resources, a useful starting point for many start-ups. It would be better for India to learn lessons from the experiences of China and Singapore in using PSUs strategically than simply selling them off.

It is worth mentioning that even the Bharatiya Mazdoor Sangh (BMS), the trade union arm of the RSS has opposed the government’s plan to privatise public sector undertakings (PSUs) which was anti-worker 'unjust decisions'. It also described advisors who have suggested to the government to sell PSUs as 'predatory'. It said the government had “no moral right or authority to sell national assets created by its predecessors”.