A V Rajwade: Paranoia about privatisation and FDI

WORLD MONEY

Recently, when Amar Singh, the socialist leader, went to Prakash Karat to lobby support on the phone tapping case, Karat is reported to have emphasised "the larger political point on the threat to national security from the decision to open the country's telecom sector to foreign companies" (The Economic Times, January 5, 2006). To Karat, the point that the phone company in Singh's case was an Indian company with no FDI, was probably irrelevant. But this apart, the Left's paranoia about FDI and, indeed, disinvestment, let alone privatisation, are well-known and it is using its veto power on UPA decisions with as much frequency as Russia used to in the Security Council during the cold war days. Perhaps, it believes that the only patriotic citizens are the netas and babus enjoying the comforts of Luyten's Delhi and the managers/employees of the public sector units.

The fact is that too often, public sector units are managed as the private fiefdoms of the netas and babus, liberally used for patronage distribution. Even the more honest do not find anything wrong in getting PSUs under the administrative control of the ministry, to provide half a dozen cars for self and family, hotel and stay arrangements for personal guests or constituency visitors, jobs for the boys and so on. The less honest ones, or those in charge of fund collection for the party, of course, have far more creative uses for the public sector. The top jobs are often dependent on the willingness of the executive concerned to satisfy the needs of his political master: I personally know of the case of the CMD of a navaratna company, who was asked to call on the boss of the political party of which the minister was a member, for obvious reasons. He refused, and was denied extension.

Even at the operating level, public sector organisations are often more corrupt than the private sector. In a textile company I was connected with a long time ago, the brokerage on sales was a standard 0.25 per cent "" but 5 per cent for supplies to the CSD of the army. The reason was obvious. Non-defence PSUs are no more honest, often worse. Clearly, interest of the public would hardly be harmed with disinvestment or privatisation "" indeed they might well be better served as the privatisation of the telecom industry itself evidences in spades. It is unimaginable that we would have the world's cheapest mobile telecom system under the monopoly of a PSU. Even MTNL's employees rarely ask for money these days to correct faults, as they routinely used to do earlier!

Surely, facilitation of patronage distribution and minor or major corruption is not the objective of the Left. What about the interest of the employees? As far as salaries are concerned, private sector often pays more. And yet both the Left and the employee unions themselves, often oppose privatisation: because they may have to put in a full day's work? In any case, employees in PSUs are no longer proletariat in the traditional sense: most of them have become bourgeoisie, "persons with private property interest". Has the Left become a protector of bourgeoisie interests?

Even reforms of the PSUs seem to be on nobody's agenda. As part of the Common Minimum Programme, the Board for Reconstruction of Public Sector Enterprises was established to advise the government on reviving sick PSUs. It submitted its recommendations on a score of cases, most of which were scuttled by the administrative ministries. In any case, it has now been side-lined by a Committee of Secretaries! Autonomy? Ask Subir Raha of ONGC or any of the units under Ram Vilas Paswan! The fact that senior appointments in PSUs are left unfilled for a long time, years in some cases, is itself an indicator of the seriousness attached to their proper functioning.

Given the lack of autonomy and the cumbersome decision-making processes, the opportunity costs of the public sector can only be imagined. And, by their very culture and mindsets, the babus cannot understand these. Time (and India) is eternal: committees after committees, GoMs, CoSs and so on can keep reviewing even the most routine issues, missing one deadline after another. The world, unfortunately, does not wait. The delay in modernisation of Delhi and Mumbai airports is only the current case in point.

I am also unable to understand the insistence on non-privatisation of profitable units "" with no quantification! As a student of finance, not selling if the price is less than the interest saved on the proceeds is understandable. But a Rs 100,000 crore investment fetching a Rs 1,000 crore return? This apart, if properly used, the opportunity gains from the freed resources can be far more than the interest saved. Surely, the Chinese capitalists must be happy at our lack of will to reform the PSUs: it cripples the biggest competitive threat to the Chinese economy.

Email: avrco@vsnl.com