THE SELL-OFF GOVERNMENT

THE
SELL-OFF GOVERNMENT

            The Standing Committee on
Defence,
2017-18 of the Sixteenth Lok Sabha highlights the idea of Buy
Indian-IDDM (Indigenously Designed Developed and Manufactured). The
Committee expressed concern over the import content of equipments produced and
developed by Defence Research and Development Organisation, Ordnance Factories
and Defence Public Sector Undertakings because of the dependence it creates for
military hardware on foreign suppliers. The Ordnance Factory Board’s import
content in 2016-17 was 11.79%, down from 15.15% in 2013-14. Compared to other
big Defence PSUs like Hindustan Aeronautics Limited, Bharat Electronics Limited
or Bharat Dynamics Limited, OFB has one of the least dependence on imports
which points to high degree of indigenisation that it has achieved or
maintained.

            OFs produce main battle tanks,
infantry combat vehicles, specialised armoured vehicles, artillery guns, air
defence guns, rocket launchers, etc. The OFs have stood the Indian government
in good stead during wars in 1947, 1965 and 1999 with Pakistan and in 1962 with
China. Among all the arms of Ministry of Defence, OFs require the least budget,
Rs. 50.58 crores out of a total of Rs. 2,01,901.76 cr. in 2019-10, as they are
able to take care of most of their costs by generating revenues from supplying
items and equipments to Army, Navy and Air Force.

 It says something about the efficient
operation of OFs. Former Chief of the Army Staff General V.P. Malik has also
publicly praised OFB for timely supply of ammunition and equipments during
Kargil war but highlighted the problems faced in procuring items through import
at short notice.

            According to Vice Chairman of
National Institute for Transforming India – NITI Aayog, Rajiv Kumar a big-bang
economic reforms programmes has been undertaken during the first 100 days of
the second Narendra Modi government as part of which high pace disinvestment of
PSUs will take place and organisations untouched so far like Ordnance Factories
will be corporatised. He doesn’t hide the fact that foreign companies will have
smooth access to excess unutilised government land as the possibility of local
community protests will be non-existent. OFB alone has 60,000 acres.

The
government is likely to fully privatise or shut down over 40 PSUs in this
period. It may remove the cap on foreign direct investment to be able to make
is possible to sell companies like Air India, where it didn’t have much success
in the last five year term.

            OFs are required to maintain an idle
capacity to take care of up to three times demand surge during impending wars.
A profit making venture will not be able to do this. In stead, to sustain these
ventures government, in a monopsony market, may have to place orders for things
not required or will have to bear the expenses of these PSUs or may have to
create artificial war like situations to boost demand, none of which is in
national interest.

            The Comptroller and Auditor General
report on Operation Vijay in Kargil reveals that supplies valued at Rs. 2150 cr.,
for orders placed with domestic and foreign private companies, were received
after the end of hostilities in July 1999, of which, supplies worth Rs. 1762.21
cr. were received six months after the end of hostilities. Relaxation of rules
and procedures in the face of emergency cost government Rs. 44.21 cr., supplies
of Rs. 260.55 cr. did not meet quality standards, shelf life of ammunition
worth Rs. 91.86 cr. had expired, purchase in excess of authorisation of
requirement was worth Rs. 107.97 cr. and ammunition worth Rs. 342.37 cr. was
imported whereas it was available indigenously with OFs. This is enough proof
of the famed quality and efficiency of private sector.

            In addition it points to
privatisation opening up new possibilities of corruption. Central Bureau of
Investigation has booked a case against British company Rolls-Royce for having
paid commission of Rs. 18.87 cr. to a Singapore based company Aashmore, which
was appointed as a commercial advisor through its director Ashok Patni, to
procure about hundred orders from HAL in violation of the integrity pact, a
tool for preventing corruption in contracts.

            The asset monetisation, an euphemism
for asset sale, is supervised by Department of Investment and Public Asset
Management, which too has been named to mislead. Once the assets are sold there
will be nothing left really to manage. First ‘demonetisation’ in 2016 created a
panic among people and now there is asset ‘monetisation.’ Both moves were
essentially planned to help the moneyed. The land acquired from farmers,
sometimes without paying any compensation – except may be for the standing
crop, in the distant past is now going to be handed over to foreign companies
in the name of disinvestment.

            Earlier this year two payouts in the
form of dividends and buyback, totaling Rs. 2,423 cr. forced HAL to borrow to
pay salaries to its employees, first time in its history. Life Insurance
Corporation, which holds two thirds of India’s life insurance market share, is
now going to be publicly listed so that its shares will be up for trading, was
forced by the government during 2014-18 to spend Rs. 48,000 cr. to help it
reach its disinvestment target. In 2018-19 the government raised Rs. 84,972.16
cr. exceeding its target of Rs. 80,000 cr. This year the disinvestment target
is Rs. 90,000 cr.

LIC
was also forced to buy the most debt ridden public sector bank Industrial
Development Bank of India wholesale, which had 28% bad loans. It is clear that
when private investment is not forthcoming the government is fleecing its own
entities. Narendra Modi has claimed more than once that as a Gujarati he knows
how to manage the money. While he was Chief Minister, Gujarat State Petroleum
Corporation was created with a loan of Rs. 20,000 cr. When he became the Prime
Minister, a Central PSU Oil and Natural Gas Commission bought it for Rs. 8,000
cr. and is now responsible for its debt servicing.

            The government proposes to create an
autonomous holding company which will subsume all state owned firms and will
not be answerable to bureaucracy when it’ll come to selling assets. This will
culminate the process of sell-off of public assets.

            Now that economist Jean Dreze has
called the bluff on PM about the purpose of abrogation of Articles 370 and 35A
in Jammu and Kashmir to open up the path of its development, whereas J&K is
ahead of most other Indian states in terms of human development indices, it
appears that possibility of additional 2.2 cr. hectares of land becoming
available for possible sale to private companies may have been an important
factor weighing on the Gujarati minds in downgrading the autonomous status of
J&K Assembly.

By Sandeep Pandey,

Vice President, Socialist Party (India)




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