Crony Socialism

In rejecting the list of independent directors recommended by the Department of Public Enterprises (DPE) and instead packing his ministry’s public sector units (PSUs) with small-time Congress politicians, Petroleum Minister Mani Shankar Aiyar has, at one level, only been true to regime change as he interprets it. If the comrades without — the CPI and the CPI(M) — have vetoed PSU disinvestment, the comrades within — and Aiyar’s Marxist affiliations are no state secret — have chosen to stifle PSU autonomy as well. The public sector, in old Congress fashion, is back to being a patronage machine, with the perks and allowances of independent directors the freebies that the ruling party hands out to its chosen children. On display is a mindset that has not moved from the ’70s.

There is one crucial difference — in the meantime the world has changed, and so have the economic verities that drive India. Many of the PSUs have raised money from the stock market, are listed on the bourses and accountable to shareholders. They can no longer be considered part of the jagirdari system. In junking NDA-style privatisation, both the Congress and the Left had promised substantial professional freedom for PSUs, their point being a company could be successful even if owned by the government. Empirical evidence — four decades of Indian socialism — suggests, however, corporate governance at PSUs is often compromised by politics. Aiyar has just added to that body of evidence. Thus ONGC will now not benefit from the counsel of Rajat Gupta — the former McKinsey & Co chief was in the DPE list — but will have to make do with Manish Tiwari, former Youth Congress president. At IOC, an IIM professor has had to yield place to three party hangers-on. The names are not important, the message is: PSUs are only useful if they provide jobs for the boys.

Aiyar is not the first minister to play ducks and drakes with his backyard PSUs. He had illustrious predecessors in the NDA government. The difference was the then PM didn’t let the luddites get in the way of reform. The onus is on the petroleum minister’s boss to refine the crude mess.