Destroying the economy twice over

This is twice the then total liabilities of the Central government, which amounted to Rs 600,000 crore. In other words, the sale of the PSUs would more than suffice to pay off the entire debt of the central government.

The government could then save about Rs 100,000 crore a year that it is paying in interest. In comparison, the PSUs are contributing a meager Rs 10,000 crore a year to the national exchequer. The annual foreign investment inflows of about Rs 20,000 crore are only one-fifth of the money that we could save from interest payments by undertaking PSU privatisation. This is the situation of Central PSUs alone. Further investments have been made by the states in PSUs, SEBs, and the like.

Yet, it is true that the World Bank and the IMF have been pressurising the government to privatise the PSUs. They hope that foreign investors will be able to make a killing as they have successfully done in Latin America. But that does not mean that we should backtrack from privatisation. By selling the PSUs to domestic businesses we can turn the tables on this lobby.

We are presently destroying the Indian economy twice over first, by taxing vibrant domestic business to support the ailing PSUs and, second, by calling in foreign investors to make up this deficiency of investment. In protecting the PSUs we are actually protecting foreign investors.

The foreign investors’ lobby wants to buy the PSUs in addition to gaining the freedom to invest. The solution is not to protect the PSUs while allowing them freedom to invest. The solution is to privatise PSUs and prevent them from investing. It should not be forgotten that FDI kills in the long run as evinced by the experience of countries like Ghana which had received high levels of foreign investment in the eighties.

We have turned PSU divestment into the exact opposite of what it was supposed to be. The idea was that since PSUs are inefficient, they should be privatised i.e, their management should be handed over to private businessmen. That would have meant less money, powers and perks for the PSU bureaucracy. But the present divestment process has the exactly opposite effect. Shares of mostly profit-making PSUs are being sold to provide more money for the government bureaucracy while retaining all their powers and perks. Instead of cutting down the bureaucracy, divestment has become a process of making it even more bloated. The so-called increased accountability through the share market is a faint relief given that shares of many PSUs have been sliding ever since their listing.

The idea that PSUs are a means for the welfare of the people also needs to be reexamined. Our MPs repeatedly mention that privatisation would add to the problem of unemployment. The reality is exactly the opposite. PSUs have only managed to create a PSU labour aristocracy. While the PSU employees draw an average salary of Rs 1.5 lakh a year, the common man struggles to earn Rs 10,000. If we have to serve the common man we will have to build johads, roads, canals and plant forests. This can only be done by releasing the huge amounts of public money locked in the PSUs. The real choice is between the interests of 1 crore PSU labour aristocracy or that of 49 crore common people.

Perhaps behind all this hoopla lies an unfortunate self-interest of the politicians themselves. Till the sixties, the politicians could be seen visiting the businessmen for funds during elections. But some time in the seventies it all changed. The politicians realised that they could get much more money from the public sector. The PSU bureaucracy followed suit in bleeding these companies. Thus was established an unholy nexus between politicians, bureaucrats and the labour aristocracy in bleeding the nation in the name of employment generation and social welfare.