Disinvestment in 20 years - K. Ashok Rao

1.0 PREAMBLE The then Disinvestment Commission stated, "In India what is needed is a pragmatic approach and not an ideological approach to public enterprises" This is a not only an ideological and political statement, but is also very dangerous. It arrogates to one the right to reject any argument particularly that which does not belong to the mainstream discourse, by dismissing it as "ideological"; and at the same time it provides a rationale to justify even a systemic and abject surrender to the forces seeking privatisation. In all probability, this paper, particularly its title, would be dismissed as "ideological". We have no apologies to offer for our perception of the economic content of patriotism. 2.0 THE ESSENTIAL BACKGROUND 2.1 The reform co-ordinates The following quotations sets the Cartesian co-ordinates that enables an understanding of the process of disinvestment, which is itself an offspring of the process of "reforms", "liberalisation", "globalisation" undertaken by the Government of India, in fulfilment of its commitment to the World Bank and the IMF. In his book `The crisis of global capitalism’ George Soros states, “We are all part of the global capitalist system, which is characterised not only by free trade but more specifically by the free movement of capital. The system is very favourable to finance capital, which is free to pick, and chose where to go and it has led to the rapid growth of global financial markets. It can be envisaged as a gigantic circulatory system, sucking up capital into the financial markets and institutions at the centre and then pumping it out to the periphery either directly in the form of credits and portfolio investments, or indirectly through multinational corporations…..The capitalist system can be compared to an empire that is more global in its coverage than any previous empire. It is not a territorial empire because it lacks sovereignty and the trappings of sovereignty, indeed the sovereignty of the states that belong to it is the main limitation on its power and influence. It is almost invisible because it does not have any formal structure. Most of its subjects do not even know that they are subjected to it or, more correct, they recognise that they are subjected to impersonal and sometimes disruptive forces but they do not understand what those forces are. It has a centre and a periphery just like an empire and the centre benefits at the expense of the periphery.” (emphasis added) On the role of the World Bank and IMF Prof. Prabhat Patnaik states , "Suppose a country decides not to enlarge its import bill or liberalise consumer goods imports; suppose a country decides not to privatise its public sector assets; suppose a country which is receiving substantial inflows of foreign finance, decides not to fritter its reserves away in importing luxury consumer goods but to enlarge welfare expenditures or public investment in crucial infrastructural areas on the strength of these reserves, then the Washington institutions, to the extent that country is bound by conditionalities, enforce them. But even when there are no conditionalities as such, notwithstanding the large accumulated foreign exchange reserves, they start demanding an exchange rate depreciation, on the grounds that such a level of fiscal deficit is unsustainable at the prevailing exchange rate, or that the prevailing rate of inflation demands lowering of the exchange rate. Once they make these demands, speculators start excepting depreciation, and the reserves begin to vanish forcing governments to back down from the autonomous route it had temporarily charted for itself. The role of the Washington institutions extends to enforcing a comprehensive set of measures involving deflation and devaluation upon the primary commodity producing third world economies whose overall objectives is to ensure price-stability in the metropolitan centres which act as the entrepot for global finance.” AND Forty four years ago, this was the assessment of the New York Times - April 18,1966. “ Much of what is happening now is the result of steady pressure from the United States and the International Bank for Reconstruction and Development, which for the last year have been urging a substantial freeing of the Indian Economy and a greater scope for private enterprise. The United States pressure, in particular, has been highly effective here because the United States provides by far the biggest part of the foreign exchange needed to finance India’s development and keep the wheels of Industry turning. Call them“ strings” call them “conditionalities” or whatever one likes, India has little choice now but to agree to many of the terms that United States, through the World Bank, is putting on its aid. For India simply has nowhere else to turn.”(emphasis added) 2.2 Crony Capitalism In the context of IMF's record in Russia, Nobel Laureate and former Chief Economic Adviser of the World Bank Joseph Stiglitz says “There was too much emphasis on macroeconomic stabilisation at the expense of institution-building. Privatisation was pushed too far too fast, and, without the right regulatory framework, was bound to fail. Western advisers wrongly thought that privatisation would create a demand for protection of property rights. Instead, new owners stripped the assets and transferred the money abroad, helped by a misguided liberalisation of capital flows. The result was a country riddled with cronyism and corruption” He also explains the motivation of the Third World governments and local elite when he asserts that privatisation in the Third World was nothing but "briberization”. And in the Indian context Mr. Raghuram G Rajan pointed out that Russia has the most billionaires per trillion dollars of national output. India comes second. Russia, has 87 billionaires for the 1.3 trillion dollars of GDP it generates and India has 55 billionaires for the $1.1 trillion it generates. Rajan added, “Remember, our per capita GDP is tiny, even compared to Russia’s. So we are really an outlier in terms of the wealth of the extraordinarily wealthy relative to per capita income. Brazil, which is thought to have extreme inequality of income distribution, has only 18 billionaires despite a greater GDP than India. And Germany, with three times India’s GDP and a per capita income forty time India’s has the same number of billionaires ….The point I am making is that corruption in India’s political establishment used to be about the sale of permits during the License-Permit Raj. Reforms have created new sources of rents for the establishment, as the political scientist, Ashtosh Varshney argues: Scarce national resources like forests, coal, and minerals can be allocated. Land can be expropriated from those who do not have connections or formal title, converted to industrial use and allocated. Public land can always be disposed off to favored parties. Contracts can be assigned to chosen friends despite a sham of public bidding. In all this, the public exchequer is defrauded, while the rents are shared between the politician and the corrupt businessman. Speech to Bombay Chamber of Commerce, Sep 10th 2008. On the X axis of the Cartesian co-ordinates is the unapologetic statement of purpose of the former colonial powers and the Y axis a clear admission of the growth of crony capitalism. Q.E.D as one would say in a geometry theorem. 2.5 The ideological underpinning The economic and political ideology of neo-liberalism is the message that private is good and public is bad, that market forces are good, state regulation is bad. Its main theme - which finds a great resonance in the present Indian State and media are: • the market always allocates resources where they are most needed; • private ownership always ensures incentives to maximise efficiency; • private management is intrinsically more efficient than public management; • public investment "crowds out" private investment; • people will pay for what they need and do not need what they cannot pay for; • the state should police the effects of inequality but not deal with its causes; • collective provisions and action are enemies of individual liberty; • rational human behaviour puts individual self-interest above other motives; • competition is a sufficient defence against self-interest; • collective provision of welfare services promotes a 'dependency culture'. The entire previous paragraph must be read and re-read and fully understood to understand the changes in the macroeconomic paradigm since 1991 with changes in economic legislation – like the Electricity Act, Air Corporation Act etc- and privatisation (called disinvestment, because of political limitations) of the “Jewels in the Crown” 3.0 Rationalising a compulsion The conditionalties set by the Structural Adjustment Loan mandated privatisation. A political party that has sworn by the slogan “Public Sector should have the commanding heights of the economy” ; a party that amended the constitution to add the word “Socialist” in the defining India could not just make a volte-face. It has to rationalize the compulsion. The first two rounds of disinvestment in December 1991 and February 1992 were a fraud. This was examined and recorded in the Report of the Joint Committee to Enquire into Irregularities in Securities and Banking Transactions as well as the Report of the Comptroller and Auditor General of India . It is a matter of record and an example of ineffective Parliamentary control that no action has been taken on the report. Instead further rounds of disinvestment were carried out. But the entire process had to be rationalised and so a Disinvestment Committee was set up under the Chairmanship of Shri Rangarajan (presently the Chairman of the Prime Minister’s Economic Advisory Council) was set up. The Committee recommended extensive disinvestment. Its terms of reference did not require the commission to examine • the desirability of disinvestment and its alternative • the objectives of the public sector, • the purpose and validity of State intervention at the present stage of Indian’s economic development • the ability of the Indian private sector to replace the public sector • the role and purpose of sale of PSU equity to the MNCs and its implications for national sovereignty. the commission was asked to take as granted that disinvestment was necessary and was asked to determine the extent and manner of disinvestment to be made in various enterprises. A nationalistic Disinvestment Commission should have • examined a sector of the economy - Petroleum, Mining, Electric Power etc., • analysed the international and national situation - the role and power of the Multinational Corporations; presence and control of cartels; • identified the strategic importance of the enterprise to the national economy in the context of the historical experience in that sector and the necessary role of the State. • And in that context evaluated the place and importance of a given enterprise to the national economy and self-reliance. No such exercise has been done. The fact that the Indian state used a public sector enterprise format as instruments of policy for a) the development of the sector of the economy; b) providing a soft political option to control and discipline the wayward private sector; c) providing goods and services to the underprivileged though the device of cross subsidisation using the PSUs and d) controlling national and international cartels and powerful Multinational Corporations has been forgotten. There is neither a discussion on this nor suggestions for alternatives. Such issues seem to have just become irrelevant overnight and the few recommendations that have been made to "reform" the public sector enterprises and "discipline" the bureaucratic interference have been given an expected burial by the Government. 4.0 The myths spun by brokers and apologists The NDA Government’s Minister of Disinvestment Govt. of India Shri Arun Shourie’s concern was, what normally would occupy a “dalal” (a broker) in the Dalal Street of Mumbai, the price/ earning ration or P/ E ratio of shares. In a letter addressed to the Members of Parliament dated 6.11. 2001 Shourie had justified the entire process of selling the Public Sector Units to a strategic partner on the basis of i) Examining the PE ratios of existing shares in what he claims are “similar companies to similar deals in the private sector” and ii) That if the realization from the 1st four sales is put in the bank at 10% interest; the Government would earn Rs. 1 12 crores annually as against Rs. 7 crores it used to earn as dividend, thus gaining around Rs. 105 crores every year from four sales only. It is very naïve to show that strategic sales are more advantageous than retail selling of shares on the basis of comparisons of PE ratios. In the case of each PSU, there are several factors that contribute to changes in PE ratio and it is somewhat unprofessional to make such comparisons out of context and jump to conclusions. In any case, what would be the perception of the market, when a bigoted person like Arun Shourie says that the public sector units were not Navratnas (jewels) but bleeding ulcers. When Minister’s talk such irresponsible rubbish how is the P/E ratio of the Public Sector going to behave. The hard facts are: The growth of operating profits between 1992-1998 of the CPSE was 20.9 % annually against that of the private sector’s 14.7 %. The operating profits of Central Public Sector Enterprises (CPSE) in 1997-98 were 26.9 % despite the stagnation of the terminally sick units taken over from the private sector. Against this the private sector posted only 2.5 % operating profits with the Indian private sector at a negative 1.4 % and Indian Business house 0.7 %. The 50 top business houses did not show any profit at all. The fundamental issue here is whether the government had ever tried to examine whether better outcome could have been expected by providing operational autonomy to the same PSUs and allowing them to function as truly commercial undertakings. In the absence of such an examination, the whole exercise presented in the letter is a futile one that does not lead one to arrive at any worthwhile conclusion. The argument that money obtained from sale of assets if put in bank would fetch more than earnings would hold good all-round, any liquidated urban property would fetch more if sold and deposited in a bank then by way of rent. This is an absurd argument. Would Mr. Shourie sell his personal house on the same argument? Instead of comparing the interest on realization with dividend, what is important is to examine the methodology of valuation of the assets and the liabilities of each company. Has Department Of Disinvestment ever attempted to take the Parliament into confidence and explained the various standard methodologies of valuation, the reasons for choosing one among them and as to what extent the government has been consistent in following such a methodology for different PSUs? Besides all this Dividend payments are a matter of policy. Government of India in fact robbed the cash rich Public Sector Units (e.g. VSNL, MMTC etc) of their reserves by demanding higher rates of dividend payments. The Minister makes sweeping and dishonest statements in his letter to the Members of Parliament for example he claims that privatized companies “are running well and would continue to run at higher capacity utilization and thus would give more taxes and revenues to the State and Central Government” Anybody who has ever managed any business would not make such reckless statements. Another example is the claim, “No worker has been retrenched or would be retrenched (except providing for restructuring through VRS route as is done in CPSUs also). It may be recalled that economic pressures on CPSUs have led the employee strength to reduce from about 2.3 million in 1990-91 10 about 1.7 million today — the privatization cases have so far not led to any reduction” One of the conditions of the Shareholders agreement on the basis on which the sale has taken place is that no worker would be retrenched and conditions of service would remain the same for a period of one year. Comparing this with a ten year turnover of human resources is nothing but dishonest. According to the paper by Prof. R K Mishra and J Kiranmai “The Government appointed the Krishnamurthy Committee in 1991 and the Rangarajan Committee in 1992. Both the Committees recommended disinvestments to fulfill the objectives of modernization of the public sector through strengthening R&D, initiating diversification/expansion programmes, retraining and re-employment of employees, funding the genuine needs of expansion, widening the capital market base, and mitigating fiscal deficits of the Government.” Even a cursory investigation would establish that other than “widening the capital market base, and mitigating fiscal deficits of the Government.” No other objective has been fulfilled. This is the proverbial “selling family silver to pay the butler” on the one hand and strengthening crony capitalism as well as monopoly that Mr. Raghuram Rajan has alluded to in the above paragraph. To claim is the correlation between ownership pattern and modernisation or R&D is too absurd to even comment. The Indian private Sector has since independence not distinguished itself in a) Developing technology b) Entering frontier technologies building a logo Prof Nagraj in his study of the performance of the Public Sector (taken in its broadest sense and not just PSUs) since 1950 has found: “Since the mid-1980s, public sector’s share in domestic investment got nearly halved, but its output share has remained roughly constant at about a quarter of GDP, suggesting sustained rise productivity for nearly two decades. The improvement is also evident from (i) a rise in physical efficiency in electricity generation; (ii) a fall in public sector employment growth, and (iii) an increase in central public sector enterprises’ profitability (even excluding the petroleum sector). Yet public sector finances have remained adverse. why? In electricity, passenger road transport and railways revenue-cost ratio is less than one, and has declined since the early 1990s. Moreover, over the last forty years, public sector price deflator declined by 17 percentage points, relative to GDP deflator. Hence, correct pricing and collecting user charges is probably the key to set the public sector finances right” The arguments that privatisation will improve the efficiency of the public sector would not stand scrutiny. The Indian Private sector is based on funds that are garnered from public financial institutions both legally and illegally (in the form of bad debts or non performing assets) therefore there is no question of additionality of funds being brought in. Indian Private Sector has never developed technology and therefore any claim that the private sector would provide additionality in technology is absurd. The ranks of the private sector are full of managers trained in the public sector and not the other was round. Undoubtedly, the Public Sector in India is the largest reservoir of professional talent. It is the Indian public sector and the medium and small scale sectors that have been the largest exporters, neither the Multinationals nor the “big boys” of the Indian Private Sector. In terms of the local market it is under recession and there is nothing that the private sector can bring. What is the point of selling the public sector to those who cannot add value to the enterprise in terms of funds, technology, market, management, or even exports? Prof. Nagraj has concluded that “If our diagnosis is sound, it suggests that much of the preoccupation of current policy of changing public ownership and control to get greater efficiency seems misplaced. Such reforms are unlikely to make a difference as ownership has little relation to economic outcomes either in theory or in contemporary experience. Moreover, as this study has shown, the real problem is not the lack of efficiency in production, but one of pricing and collection of user charges. Hence, unless these problems are squarely addressed, public sector finances are unlikely shape up” The Guardian reported , “In an opinion poll commissioned by the Public Services Not Private Profit campaign, 74% believed that private companies' priority when running public services was to make profits rather than serve the public. Only 17% supported an increased role for private companies in public services” If today an honest poll was conducted of the privatisation of Delhi’s electricity distribution the results are likely to be similar. 5.0 Gifting the public sector to the MNCs? To ensure that the MNCs take over the public sector the Rangarajan Committee had recommended, “ disinvestment of government equity could be tailored to an informed process of management of external debt. By allowing PSUs to swap the entire or a portion of their outstanding external debt with lenders for an equity stake at negotiated prices, the twin benefit of reduction in debt service obligations to the country as well as to the enterprise concerned and a better debt equity gearing for the equity may be achieved.” What are the implications? Borrowings from foreign commercial banks went up from a meagre $ 331 million in 1980 to over $ 12,000 million by the end of Rajiv Gandhi’s Prime Ministership. A large part of this commercial borrowing was transacted through profitable public sector units such as the oil companies, RCF, BHEL to name a few. These PSUs had to contract these borrowings not to finance their own needs for imported equipment, raw material etc., but to shore up the exchange balance of the Government of India and support the thoughtless import liberalisation programme introduced then. . The cost of setting up a unit equivalent to BHEL would be about hundreds of thousands of Crores of Rupees. The equity and free reserves are only about Rs. 1000 Crores and its outstanding foreign debt is 1.7 times the equity and reserves. Thus, a multi-billion BHEL would go for a mere Rs. 1000 Crores. In Latin America, the commercial banks sold their debts to multinationals. The multinational competitors of the public sector units then swap the debt for equity either directly or by conversion into domestic currency and purchase the shares in the open market either directly or through a front agency. The same could happen with supplier's credit being swapped for equity as happened in Turkey. As if this would not be enough to gift the public sector the Rangarajan committee had further recommended, “the same rules as are applicable to NRIs and foreign investors to buy the equity in private industry may be extended to the foreign investors to buy shares in public enterprises. The question of reserving a portion of the government share holding proposed to be disinvested in favour of foreign institutional investors may be considered when the role of Financial institutions expands in the Indian capital market.” The experience of Maruti Suzuki where Suzuki started as a minor share holder and though manipulation of the Indian politicians and bureaucrats increased its share holding to 50 % and is now busy Maruti is a completely foreign company. The experience of the manner in which Coca Cola and Pepsi Cola have completely destroyed the indigenous soft drink industry, the experience - with different implications - of the ITC-BAT and the ICI-Asian Paints should be enough to establish that privatisation in India would imply control of the Indian industry by MNCs. ICICI and HDFC have been declared foreign banks by the Courts. The committee further recommends, “ It may be desirable to allow share holding by technical collaborations in public enterprises on a preferential basis as a part of modernisation and expansion.” Technology acquisition by enterprises in the Third World has necessarily to be Government policy driven (rather than corporate policy driven) in a much more direct way than in the developed countries. This is due to several reasons. First, in the developed countries, Governments fund huge defence R&D contracts, which effectively subsidise commercial product research; MNCs have a global market for their obsolete technologies; since MNCs are at the frontiers of technology, users have to take risks or do without the technology. Second, for the Third World countries producers all foreign investors (multilateral funding or any other) insist on commercially proven technologies, which for BHEL imply either collaboration with an MNC or purchase of proprietary equipment. Third, unless the Governments of Third World countries provide budgetary support, to enable enterprises like BHEL to set up commercial sized plants, there is no way they can have commercially tested products based on in-house R&D. 6.0 Relationship between equity ownership 6.1 and efficiency. There is no correlation between equity ownership and efficiency of an enterprise. Privatisation of enterprises has not proved that efficiency has improved consequentially. This has not been established even in the United Kingdom. On the other hand several Third world countries have experienced the reverse. In Chile, some of the firms privatised during 1974-78 were renationalised within a few years to salvage them from bankruptcies. In Argentina, privatisation was accompanied by cabinet reshuffles, court battles and allegations of corruption. South Korea has to renationalise its electrical power industry. The limited experience of the last five years has been extraordinary rise in political corruption as is evidenced by the numerous scams some unearthed and some yet to be • the security scam involving the public sector funds and shares. • the NFL scam as a result of decanalising import of urea. • the telecom scam • there are numerous scams as a consequence of the policies of liberalisation and privatisation followed by the Govt. of India since 1991. Many of these would unfold in due course. 6.2 Relationship between equity ownership and autonomy. It has been argued even by CEOs of the public sector as well as SCOPE that they would get autonomy if the Government disinvests upto 51 %. This is an argument that is borne out of frustration and based on the principle of `grass is greener on the other side of the fence’. There following questions arise: • Where there is tremendous inequalities and reservation has been accepted as a principle of social engineering is it possible politically and socially to reverse this merely by sale of equity? • Where the resources as well as purchasing capacities are skewed is it possible to allow free play of market forces ? Would not privatisation result in the process of `cherry picking’ depriving the possibility of cross subsidisation. And if this were allowed would not the lower end of the market be dependent on the state ? • Where the domestic market is intermediated (for example, World Bank loans imply international competitive bidding, bilateral aid implies import of equipment) by the source of funding , can the domestic industry survive without the patronage of the state. • In a geopolitics dominated by a consortium of industrial-financial agglomerates of the G 7 countries (where is growing evidence of slowing down of the economy) and one sided multilateral agreements are being made can large units survive without the might of the Govt. of India behind them? • Can the large units undertake expansion and modernisation without budgetary support or even make large financial arrangements without the might of the Govt. of India. • In several cases public sector is the sector of the economy, for example coal, oil, electricity. Can the Govt. not have anything to do with a sector of the economy? In an under-developing country it is not possible to divorce the Government from business (private or public). As a matter of fact the Indian private sector has grown only on support of the Government. A classic example of this is License Raj (ref. Hazarika Committee report) where in private monopolies used the license to establish monopolies besides access to subsidised infrastructure. 6.3 Relationship between equity ownership and operational autonomy. Operational autonomy is hampered by three factors: • Parliamentary control. • Control of CAG and CVS. • Joint Secretary Raj. Parliamentary Control cannot be removed merely because of selling shares. This is a political question. In an under-developing country like India where politics is in command mere disinvestment would not reverse this by a simple device of disinvestment. Autonomy is a mere fiction unless it starts with self-restraint in Parliamentary control. As long as Ministers are required to answer questions relating to operational details of Public Sector Enterprises and accountability to multiple Parliamentary committees there can be no effective autonomy. . Control of CAG and CVS. In a country where the size of the black economy parallels the official economy removing social control is neither desirable nor advisable. If any, there is a case for a greater social control over the private and multinational sector. What is required is that like CISF, there be a specially trained CAG and CVS staffed with persons who are largely drawn from the industry instead of the IAS and IRS. Another aspect that needs examination is the role of the employees. In the case of MTNL while the shares are being disinvested, the fact is that there are less than two dozen officers (and a majority of the employees) employed by MTNL. The rest of the officers are employees of the Department of Telecommunications (DOT) on deputation. 6.4 Disinvestment and operation under multiple ownership. Disinvestment implies creation of multiple owners. But in actual fact the largest shareholder (the Government) usurp the powers of the Board Directors by determining the wages of the officers and supervisor? Take for example, to determine the pay, allowances, perquisites and benefits for a) the Central Government Public Sector Units Board level functionaries b) Below Board level executives and c) Non unionised supervisory staff. a committee headed by a retired Judge of the Supreme Court is set up then thrust on the Pubic Sector Units through a Presidential Directive. Not only does this exercise remove distinction between the Chairman, Managing Directors, Directors and the executives and the supervisors serving the public sector by making both petitioners but infact usurps the power given by the shareholders to the elected Board of Directors to manage all the factors of production, and, what about minority shareholder oppression? There is a absurd situation that has been created 49 % public ownership means complete freedom from Government and Parliamentary controls and 51 % public ownership means complete minority shareholder oppression. This is totally and legally untenable. 7.0 STAND OF THE OFFICERS’ COLLECTIVES Given below are extracts of a resolution adopted by several Officers' Associations of the financial sector, public sector (PSUs), power sector and telecommunication sector : The reform process being followed essentially aims at systematically de-nationalizing the economic decision making process. It is the World Bank, the IMF and the WTO that are taking all the vital decisions relating to the national priorities in the adoption of economic policies. There is an attempt to confuse the people by presenting the economic reforms and the consequent economic globalisation as being value neutral and unrelated to the colonial and imperialist power structure that ruled India for more than two centuries. Globalisation is a process of power structures and military, social, cultural and economic domination. The entire elite power structure in India including the mass media is ignoring this dimension and peddling a pop version of globalisation. The progress of the interest of multinationals and the stock markets is being made the sin qua non of the economic progress of the nation. Such a distorted vision is causing great damage to the morale of the nation. Privatisation of the Indian people’s assets is being projected as the panacea to the fiscal problems and therefore the problems of poverty and destitution of the Indian people. It is an established fact that Indian private capital has neither the financial nor the technological capability to replace the public sector. Therefore the process of privatisation would eventually result in the commanding heights of the economy passing over to the multinationals. Governments and societies of the third world must have reliable and effective instruments a) to safeguard economic independence in face of the onslaught of international forces of Multinational Corporations and finance capital b) to enable priorities to be assigned for the economic upliftment of the people. Privatisation removes such instruments and opens the space occupied by the State to intervene in favour of the weaker sections. Privatisation extends the sphere of domination of finance capital and increases unemployment and wage differentials. Privatisation would seriously affect the job opportunities as well as job security of all employees. It would defeat the social guarantees of job reservations for SC/ST and OBCs. There is a constitutional obligation on the Government to ensure development with equity. In this direction the policies pursued were to deliberately provide support to the weaker sections of society based on the principle of cross subsidisation. (For example, in the power sector, the agricultural and domestic consumers are cross subsidised by the industrial and commercial consumers; in the financial sector the weaker sections and the agricultural customers are cross subsidised by the industrial and urban customers; in the telecom sector rural telephones are cross subsidised by urban telecom services; in the public sector enterprises several services and goods are provided on the basis of cross subsidisation) Such cross subsidisation would not be possible after privatisation Profits will be privatised (or multinationalised) and losses will be nationalised. Since the State will not be able to carry these losses, rural areas and the weaker sections of society will be denied access to goods and services in all sectors. Besides this, there would be a prohibitive rise in the cost of goods and services. Privatisation would also expose producers to the vagaries of the market and make their economic viability subject to market forces. This will be a real threat to those producing agricultural commodities. There is a lack of public information in matters relating to the economic reforms and privatisation. Memoranda of Understanding and agreements are being signed in an almost conspiratorial manner and there has been an exponential rise in corruption at all levels. Neither is there a consultative process through interaction with the consumer fora or employees organizations. The Indian people have an inalienable right to be fully informed not only on the proposed reforms but also the implications and consequences for every section of society. 8.0 Questions that need to be answered to the people of India - the real owners. • What are the alternatives (to disinvestment) being examined before deciding that disinvestment is the best means of reducing the fiscal deficit of the Govt. of India ? • Since the fiscal deficit is a matter of revenue collection and disbursement against approved expenditure, why are the options of direct taxation, tracking down tax evaded incomes and curbing black money not resorted to instead of sale of assets built up by the earlier generations? • Have the future earnings and losses of the public sector enterprises been estimated and evaluated ? • If the profit making enterprises are disinvested and Government is left with loss making enterprises how will this improve the fiscal and revenue deficit in the coming years ? • Studies have established that in the organised sector labour productivity has been raising while capital productivity has not. How then mere selling of shares rectify the situation ? • Why are public sector enterprises not being financially restructured (like capitalising the reserves) not being done before disinvestment ? • Why questions like control systems under multiple ownership not being examined and spelled out explicitly before disinvestment ? • Why is the stranglehold of the Parliament and bureaucracy not being diluted besides disinvestment ? on the other hand the single largest shareholder has appointed a committee of bureaucrats and ex bureaucrats to determine the wage structure for the managerial and supervisory staff - essentially a managerial function of commercial enterprise ? • Why are state governments not being taken into confidence especially considering that they provided land and other infrastructure at notional prices and labour is a concurrent subject ? • and finally, why is India being recolonised even before the last freedom fighter is dead ? 9.0 CONCLUSION The process of disinvestments must be stopped immediately. The importance of the Indian State at this stage of economic development must be evaluated, the fact that increasingly there is a global tendency on the part of the MNCs to cartelise and/or establish monopolies needs to be carefully examined and in that context the role and importance of the public sector should be established. The instruments of policy required for ensuring progress in various sectors of the economy needs to be studied carefully. The necessary restructuring of the Public Sector control mechanism vis a vis the Government and Parliament as well as enterprise level restructuring should be put into place. In such a restructuring exercise the functioning of a public enterprise under multiple ownership should be accounted for. Then and then alone should the process of disinvestments begin. The question of disinvestment or structural changes in the Public sector should be viewed in totality and Parliament should spell out in specific terms the objectives of the Public Sector as instruments of State with particular reference to • redistribution of wealth • promotion of balanced region development • promotion of import substitution. There is complete dishonesty in respect of the Public Sector. While the Public Sector is still supposed to serve the objectives laid down by a Nehruvian perception of the economy they are supposed to function according to policies laid down by the World Bank translated by the bureaucrats. Between the self serving advice of the World Bank and the lust for large scale corruption the Public Sector is being destroyed. The destruction of the Public Sector will pave the way for colonisation without physical occupation. The public sector is vested with public investment and it is the Constitutional obligation of the Parliament to protect and safeguard public investment.