Reforms, ‘via Bathinda’

Successive industry ministers in the past have blocked privatisation. A whole rogue’s gallery of civil aviation ministers have ensured this remains the least reformed sector of our economy. Railways, agriculture, coal, mines, even telecom more recently, are areas where the respective ministers have either opposed the opening up, or muddied the waters. So much so as to give the whole process a bad name.

This is why we must recall the one little nugget that got lost a little bit in the din of the Supreme Court judgement. Union Fertiliser Minister Sukhdev Singh Dhindsa — he is the lone Akali representative in the Cabinet — was reported to have said at a meeting in Anandpur Sahib that the prime minister had agreed to defer the privatisation of National Fertiliser Limited (NFL) for two years. This was ostensibly not so the NDA could ride out the elections meanwhile, but because it would take that long for the markets to figure out the implications of the new fertiliser policy and the impact it would have on NFL’s valuation. The minister quickly denied he had made such a claim — inquiries at the prime minister’s office revealed he had made no such commitments. All he said, he clarified, was that he had advised the prime minister to wait two years, as with the new fertiliser policy the valuation of NFL may go up and the government may end up making more money, though two years later. This is time-tested logic. Patience pays.

Except, it does not seem to work in the case of our PSUs. Not even with the ones acknowledged to be better managed. For example, if the government of the day had been decisive enough to accept Suzuki’s offer on Maruti when it was first made, it would have netted Rs 9,000 crore, which even in fixed deposits would by now have doubled. Now it made just Rs 3,000 crore and it is still seen to be a success. The same applies to VSNL and so many other companies.

But that is not the real point of this argument. If the public sector is being dismantled you would expect resistance from those on the gravy train. But it is more interesting sometimes to go into how trivial the anti-reformers’ motivations can be — which is why the headline of this article sounds so non-serious. One, probably the main, reason Dhindsa and his Akali Dal are up in arms against the NFL privatisation is that it runs a large but hugely loss-making fertiliser plant in Bhatinda in the very political heartland of Punjab. The private buyer will obviously not continue to run this plant and bleed NFL, which made a loss of Rs 12 crore in the last fiscal year. Now the same minister is party to so many reformist policy decisions and resolutions of the same cabinet. Incidentally, he plans to contest the next election from Sangrur, which is close to Bathinda! So when it comes to the crunch, he puts the interests of his constituency above the larger national interest.

How else would you describe this if not as a uniquely Indian phenomenon: Reforming the economy ‘‘via Bhatinda’’. In the north, this is an old metaphor to describe a complicated process of getting to a destination in a manner that defies method or conviction. In the old days, I believe, this is what you said if somebody acquired a degree from a distant, unknown university of doubtful pedigree. So and so is an MA, you said, but “via Bathinda”. More recently, though, Nawaz Sharief resurrected this metaphor when, in an interview to me in which he invited Vajpayee to come on that bus ride to Lahore, he derided the subcontinental tendency to shy away from communicating or even trading directly. We should be more straightforward, he had said, why do all this “via Bathinda”?

While a Dhindsa may have given the phenomenon such a direct expression, you could safely say that fundamentally our whole approach to reform has been via Bathinda. Don’t blame just this NDA government. Ever since Narasimha Rao’s early days, our approach has been to hasten slowly. To reform a bit, but put a hundred conditions to be sorted out at a more opportune time. All governments have promoted the idea of sectoral caps on FDI. Where is the justification, for example, to keep FDI limits so low in insurance, and telecom even now? To begin with, FDI (as in the celebrated case of Pepsi) came with covenants of minimum export quotas. Now they come with management controls and severe limits on shareholding, as in the case of the media.

In no sector has this conditional loosening up been more absurd than in civil aviation. Here the government actually said that foreign investment is welcome from any individual or entity as long as it has nothing to do with aviation business in any way. For a long time, this has been the cause of derision at Indian investment road shows and, sure enough, no foreigner has been stupid enough to come and invest anything in our aviation companies.

So there it is. If you conduct a conversation with the political or bureaucratic class, the one contradiction that strikes you is the constant chanting of the reform mantra even while there is at the same time no display of any instinct for reform or what it takes to change the political economy of a system as complex as India. Nobody even tells you that while it is going to be tough to do this, actually much tougher than in China, the reward at the end of the day could be phenomenal. Most Indian leaders across the political spectrum will be even shy of acknowledging that more people have been pulled above the poverty line in the last 15 years of halting reforms than in the 40 years of independence, including the years of Mrs Gandhi’s socialism and Nehruvian economics before that.

This lack of conviction leads to the “via Bathinda” track. Our leaders are unwilling to even once say that a free market, WTO and globalisation are great opportunities for India and that India should embrace it. Or, in fact, that India given its inherent unique strength in the developing world is particularly well-placed to take advantage of this global opening up. What you hear on the other hand are statements like globalisation is inevitable; that the WTO is standing on our toes; that there is no avoiding competition now, so let us prepare to deal with this. The tone is that of resignation as if globalisation and all the new forces of the free market are an impending calamity and we have to prepare to survive. A little bit like somebody saying now that a jail sentence is inevitable, let us improve conditions in our prisons. This is no way to sell new economic ideas that are sweeping the world to a people who have been brainwashed with slogans of socialism and Indian hypocrisy for 50 years, slogans that have glorified poverty and condemned wealth creation as exploitation.

But the same leaders will celebrate the prospect of 6.5 per cent growth this year. Or the booming stock market, increasing foreign exchange reserves and growth in Indian exports and manufacturing, as if they are the ones who made it possible. Not once will they even acknowledge that some role has been played in this by God who gave us a great monsoon this year. Conversely, if the economy goes bad in a year, they are quick to blame it on the drought. So if things are going right we must have had something to do with it. If they go wrong, the gods are to be blamed. At any point of time the opposition would have exactly the opposite view. If things are going wrong, the government of the day is to be blamed. If they look great, the gods have been kind. This is no way to govern the political economy of nearly one-fifth of humanity which holds within it almost half of the world’s most abjectly poor and destitute, 70 per cent of the world’s blind, nearly a third of those illiterate and, let me add a small footnote, 90 per cent of the world’s rabies cases. So stop thinking about what the Supreme Court did this week. That is one more hiccup in the privatisation process. Focus, instead, on the larger disease. Of why a Dhindsa would block the NFL sale just because a loss making plant in his constituency must be shut down. Or how so many others are able to block all the big ticket reforms from fiscal discipline to labour laws. Forget competing with China, we will not even be able to leave our past in our lifetimes if we continue to move the same way, “via Bathinda”.

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