Reform has to be transparent

It cannot be anybody8217;s case that economic reform would not include a policy of reforming the public sector. But the kind of knee jerk r...

It cannot be anybody8217;s case that economic reform would not include a policy of reforming the public sector. But the kind of knee jerk reactions we have been seeing in the last few days and, more generally, the partial and at times strongly ideological policy pronouncements suggest a grave need for strategic thinking on the issue.

The net worth of central public sector undertakings was Rs 60,300 crore in 1991-92 and went up to Rs 1,61,000 crore in 1999-2000. The net profit to net worth that was 4 per cent in 1991-92, reached 10 per cent in 1995-96 and was 9 per cent in 1999-2000. The public sector employs 70 per cent of the organised sector employment, out of which around half is government employees and accounts for around a quarter of the GDP. The central PSUs are only a part of this. In 2000-01, 31 per cent of gross investment was by the public sector. The government departments dissaved on a substantial scale in the last few years but public enterprises still contributed to positive savings.

There is no policy perspective on this sector. Even if we succeed in disinvestment of around Rs 10,000 crore every year it will take more than ten years to make any major impact on the sector. However for some the only issue to discuss is privatisation and that, too, of the unit at hand. Reform, autonomy, professionalisation, priorities for privatisation and methods to achieve it, are not given focus. When policies fail there is no introspection.

The first thing to underline is that the public sector will continue to exist, but will focus on strategic, hi-tech and essential infrastructure areas and will in these areas need to be strengthened and modernised. The Golden Quadrilateral, the Delhi Metro and the National Power Grid are all in the public sector. In some hi-tech fields in which India faces technology restrictions, for example, there is no other way than to take this route. In some there will be public-private partnerships. In others like dairying and information technology for rural areas there could be newer forms of organisations, like producer associations, non-profit companies and so on.

If it takes 8212; even according to the most gung ho privateers 8212; around seven to ten years to privatise even the service-oriented public sector enterprises, which anyway should not have been there, there has to be a better strategy to modernise them. Out of the Rs 30,000 crore disinvestment that has already happened, around two-thirds was done by selling shares to mutual funds, the public and even workers. The process was open and generally smooth. Since then the strategic sale route is being followed. Its superiority is a debatable proposition. Anyway we have never been told why the transparent market route is less preferred. There must be a road map. The Tenth Plan doesn8217;t have it. Cannibalising the IOC can therefore be suggested with impunity.

Due diligence must mean that the legal aspects and transparency rules are followed. The disinvestment minister did a great service by publicly announcing that a political party in the coalition had tried to intervene in the disinvestment process of a Mumbai hotel. Not only must the law be followed in letter and spirit, the process has to be above board. These questions need a political resolution.

When I was the power minister, a lot of my time was spent on getting a political consensus, behind Jagmohan, who was chairman of the Parliamentary Standing Committee. Finally one of the most controversial bills 8212; on private participation in transmission of power 8212; was sent back as a unanimous report. It later became law through the Electricity Act. Parliamentarians had raised serious objections and these had to be met. My predecessor could not table the Central Electricity Regulatory Commission Bill. I did so in August 1997 in Parliament. I still believe that later governments should not have caved in on the rural power rate stipulations in the Bill I had introduced. They had to do so because they tried to introduce an Ordinance. That Act is also policy now and it is tragic that the bureaucracy was able to get the government to water down the expert requirements of the regulators, initially placed in the Act with a lot of care. Incompetent civil servants want undeserved gravy and they are allowed to get it. Unfortunately, when the consequences of this become manifest, the public sector gets the blame.

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The point is that if the highest court raises issues of law, these have to be squarely faced. If substantial parliamentary opinion raises issues, these have to be handled. Past experience is that in these matters there is no other way but to generate a climate in which consensus works and this can be done 8212; both by generating a larger debate to meet the real issues head on and by cajoling the political system to accept them.