Call for stronger public sector
NITI Aayog, the NDA government’s economic think tank that replaced India’s 64-year-old Planning Commission, may have forgotten the reason behind the government’s decision to use taxpayers’ fund and public borrowing is to set up state-owned public enterprises that include manufacturing steel, non-ferrous metals, power, power plant equipment, transmission network, earth moving equipment, mining equipment, machine tools, telephone instruments, cement, ships, defence equipment, spacecraft, aircraft, drugs, and petrochemicals; apart from mining, make fertiliser, and support food production and distribution among others. India produced just about two million tonnes of steel through its two private enterprises – TISCO and IISCO -- in the 1950s.
The country had at least 50 so-called large business houses, all seeking to get rich quick with the help of the then government’s protectionist policies, and turned their less portable enterprises “sick” overnight. They changed and exchanged trade like changing clothes in search of quick profits. They were not inclined to invest big in technology and projects with long gestation period. They were not Japanese Keidanren or South Korean Chaebols determined to develop and build world class technologies and enterprises to become global leaders in trade while building their own national economies.
But for the government’s massive investments in industry, infrastructure, trade and commerce, India would have remained one of the world's poorest economies. Unfortunately, the country's so-called private enterprise patrons, who benefitted naturally as suppliers, contractors, or side-kicks of India's public sector expansion programmes in the first 25 years of planning, have continuously blamed the government for building the high-cost public sector without their contributing much to build the country as a global economic power.
Japan's steelmakers imported cheap iron ore from India and other far-flung countries to become one of the world's top three steelmakers and technology developers through the 1960s, 70s, and 80s. When the People's Republic of China was formed after India's Independence, it produced the same quantity of steel as India did. Thanks to China's major public sector thrust, the country today is the world's largest steel producer, grossing more than the combined output of Russia, Japan, the US, Germany, and India.
China's export thrust since the mid 1980s, made it the world's largest exporter, shipowner, shipbuilder, and owner of seven of the world's top 10 ports. China, along with South Korea and Japan, is the world's largest microchips and consumer electronics manufacturer.
What did NITI Aayog do in the last two years to make India, a major global telecom equipment importer, including cell phones, to impress upon the government the most urgent need for domestic manufacturing of microchips? India's Rs. 1,75,000 crore drug industry is still heavily dependent on China for the import of basic drugs. What is NITI Aayog doing for making basic drugs in India?
Instead of strategic sale of 32 central PSEs and shutting down over half-a-dozen state enterprises, why is NITI Aayog not preparing plans and programmes to utilise the massive physical infrastructure with these PSEs to manufacture products the country needs badly for its next stage of economic development? Why does India need a bankruptcy law to help protect private sector financial defaulters instead of making a stringent law and regulation against the commercial misconduct of importers of capital goods and raw materials? Why did the government allow private sector power producers to import unreliable capital goods from China while its giant BHEL languished for orders?
The government, owning nearly 50 percent of Tata Steel's equity shares through its financial institutions till the late 1980s as against below five percent by Tata Sons, supported the private management on account of its good corporate governance record. It can continue to show similar generosity to excellent Indian private sector enterprises without selling the precious PSE assets like IPCL, Bharat Aluminium, and Modern Bakeries to private owners.
Why did the government leave the serious task of making microchips with a private sector financial offender and a stock market manipulator? What is NITI Aayog's take on this? Maybe, corruption digger Subramaniam Swamy can throw some light on NITI Aayog management's bid to help the government make strategic stake sale in PSEs to temporarily mop up some money.
So far, the government stake sale in tranches in good public sector enterprises has evoked little interest in the stock market. While annually the government made big money out of these sales, roughly ranging from Rs. 20,000 crore to Rs.40,000 crore, the big buyers were the government's own financial institutions such as LIC and GIC. Despite good annual dividends announced by several of these PSEs, their shares in the stock market rarely generated speculative value.
Since this practice can't go on forever, the PSEs are being induced to buy back their own shares to help government disinvestment. NITI Aayog's strategic sale guide may now help the government dispose of the priceless immovable assets with some of the PSEs for bigger and easier intakes. However, such a step is unlikely to be easy this time in the face of strong opposition from labour unions. The latter has already threatened to resist such a move unitedly, irrespective of their political affiliations.
NITI Aayog's proposal to privatise Air India and shut down 28 PSEs has come under fire from all Central trade unions, including the RSS-backed Bharatiya Mazdoor Sabha (BMS). They have threatened to go on strike and sought Prime Minister's intervention in this matter. BMS General Secretary Virjesh Upadhyay had said in a statement that "BMS opposes NITI Aayog proposal to close sick PSUs... BMS demands that the government call a meeting of all stakeholders to discuss the revival plan of sick PSUs before proceeding to decide on the proposal of NITI Aayog. Otherwise, we will be compelled to come on the street to oppose the move."
The other Central trade unions such as AITUC, CITU, and INTUC have severely criticised the NITI Aayog's proposal to wind up 32 PSEs in the name of strategic sale and closure. Many suspect that the government already had private dialogues with some of the prospective buyers as it did in the case of the previous PSE sale under the earlier NDA government. Unfortunately, a concerted trade union action against the PSE sale proposal will severely hurt the economy and its growth agenda.
(Views expressed are personal.)