Opinion The grand closing down sale

P Chidambaram writes: By a stroke of the pen, Mr Modi and his Finance Minister have threatened to reduce India’s public sector assets to near zero.

Finance Minister Nirmala Sitharaman at a press conference in New Delhi. (PTI)

5 min readAug 30, 2021 08:58 AM IST First published on: Aug 29, 2021 at 03:30 AM IST

The Big Lie has been exposed. For the last seven years, Mr Narendra Modi and his ministers have vociferously denounced the Congress governments (and all other previous governments including, ironically, Atal Bihari Vajpayee’s) for “doing nothing and building nothing for 70 years”. It was as if India had attained Independence only in May 2014. On August 23, 2021, the Finance Minister released a list of assets that were proposed to be ‘monetised’. However, she failed to disclose when those assets were built. The answer is, during the maligned ‘70 years’!

The list included

26,700 km of roads,
28,698 ckt km of power transmission assets,
6,000 mw of hydel and solar power assets,
8,154 km of natural gas pipelines,
3,930 km of petroleum products pipeline,
210,00,000 mt of warehousing assets,
400 railway stations, 90 passenger train operations, 265 goods sheds,
Konkan Railway and Dedicated Freight Corridor,
2,86,000 km of fibre and 14,917 telecom towers,
25 airports and 31 projects in 9 major ports, and
2 national stadia.

By a stroke of the pen, Mr Modi and his Finance Minister have threatened to reduce India’s public sector assets to near zero. They are exulting in the estimate that the government will collect a “rent” of Rs 1,50,000 crore a year and hold on to a piece of paper that it is the “owner” of the asset. They also boast that the heavily depreciated asset will be “returned” to the government at the end of the transfer period. This is the crux of the National Monetisation Pipeline (NMP).

Objectives, Criteria absent

The policy of disinvestment and privatisation has evolved over the years. All governments since 1991 have fine-tuned the policy. Revenue was only one of the goals of privatisation. Other objectives were enhanced capital investment, infusion of modern technology, expansion of markets for products, creation of jobs etc.

Certain criteria were also set for choosing the units that will be privatised. Among them were:

1. PSUs in a strategic sector will not be privatised — e.g., nuclear energy, defence production, Railways, strategic ports.

2. Chronically loss-making units could be privatised.

3. A PSU having a minimal market share for its products could be privatised.

4. A PSU will be privatised if it will promote competition; it will not be privatised if it may lead to a monopoly.

These criteria have been thrown out of the window and no alternative criteria have been announced. Surprisingly, Railways has been removed as a strategic sector. It is now classified as a non-core asset even while market economies such as the UK, France, Italy and Germany have retained railways (or the bulk of the country’s railway system) in the public sector.

Road to Monopolies

There is genuine concern that the NMP will lead to monopolies (or, at best, duopolies) in key sectors such as ports, airports, solar power, telecom, natural gas pipeline, petroleum pipeline and warehousing. India is relatively a newcomer to the private-sector led economy in industry and services. Such economies will inevitably reach a point when monopolies will emerge. The United States can teach us many lessons in this regard. Presently, the US Congress and government are deliberating on laws and other measures to contain the monopolistic and unfair trade practices of Google, Facebook and Amazon. South Korea has cracked down on its chaebols. China is taking action against some of its technology companies that had become ‘too big to be regulated’. On the other hand, the NMP promises to take the country in the opposite direction!

Apart from the glaring absence of criteria in the choice of PSUs that have been brought under the NMP, it is not clear what the objectives are. Consider the objective of collecting a “rent” of Rs 1,50,000 crore a year. What is not disclosed is the annual revenue currently yielded by the chosen assets. The revenue ‘gain’ (or ‘loss’) to the government will only be the difference between Rs 1,50,000 crore and the current annual revenue. There is also no clarity on jobs and reservation. Will the present number of jobs in the ‘monetised’ units be maintained, and eventually enhanced? Will reservation for SC, ST and OBCs be maintained or abolished?

Hatched in Secrecy

The gravest downside will be prices. Once monetised, the PSU will cease to be a price-stabiliser in the market. If there are one or two or even three private players in the sector, there is bound to be price-fixing and cartelisation. We have found this to be true even in a so-called competitive market in cement. The United Kingdom was shaken to find this true in the banking industry. My apprehension is that prices will rise in many sectors.

Finally, the process reflects the conspiratorial manner in which Mr Modi’s government operates. There was no draft paper on NMP. There was no consultation with the stakeholders, especially the employees and the trade unions. There was no discussion in Parliament and there never will be. The policy was hatched in secrecy and announced suddenly. The media was sufficiently tutored by the government and the captains of the private sector to hail the leader and the policy.

Get ready for the Grand Bargain Closing Down Sale. Get ready to welcome the monopolists.