The roadblocks in the Modi govt's grand PSU disinvestment initiative

For starters, the Bharatiya Mazdoor Sangh (BMS), the trade union affiliated to the Rashtriya Swayamsevak Sangh (RSS), has strongly opposed the Centre's plans to privatise public-sector undertakings (PSUs). The BMS has, in fact, gone so far as to invite employee unions of all PSUs on 15th of November to discuss the future course of action against privatisation. 

But resistance to divestment is just the tip of the iceberg. The larger issue before the government is the slow pace at which its privatisation drive is progressing. Consider this: Six months into the current financial year, the Modi administration has been able to garner only Rs 12,357 crore, or 12 per cent, of its disinvestment target of over Rs one trillion. 

While the government's stake sale in Bharat Petroleum Corporation (BPCL) could clear the decks for ONGC to bring in a strategic private or foreign partner in its subsidiary Hindustan Petroleum, the Centre's method of dealing with the public sector universe is lopsided, and could impact the financial health of enterprises operating in this space. Consider this: A staggering 94 per cent of the over Rs six trillion infused into PSUs under the Modi government's first tenure was gobbled up by just four of the 250-odd state-run enterprises in the country.

To make matters worse, the financial woes of BSNL, MTNL and FCI present another layer of the Modi government’s engagement with public sector organisations, which is both problematic and potentially harmful for its fiscal health.

The government appears to be having second thoughts on a proposal from the department of telecommunications to bail out Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), probably because the revival package cost is massive, estimated at over Rs 74,000 crore.

Such a review is understandable. The suggestion that the two enterprises be closed down after offering a compensation package to their employees through a voluntary retirement scheme (VRS) is worth a closer look. And the cost of closing down would be cheaper as several employees are actually not direct recruits in the two organisations. According to one report, just about 10 per cent of the employees are direct recruits, mainly technicians and the cost of offering a VRS to them would not be huge. The remaining employees either belong to the Indian Telecom Services (ITS) or have been deputed from other public sector enterprises.

Both firms have long been a drain on the public exchequer and on the state’s borrowing capacities, saddled as they are with insurmountable losses and huge manpower. There is little reason to imagine retaining the two firms in their current state. The emphasis must now be on how their assets can be sold so as to ensure higher productivity, and how their manpower can be absorbed elsewhere where necessary and let go otherwise.