Modi's Privatisation Ambition, Modi's Privatisation Challenge
Privatisation has always been a dirty word in the modern Indian political lexicon, which is built on the foundations of Nehruvian economic principles of state-controlled large enterprises.
Will this behemoth of a challenge that the Modi government has boldly taken on, finally see conquest?
“Wu wei” — literally do nothing — is a key tenet of Taoism, which guided the earliest Hans in China. In administrative terms, the state during the Han dynasty rule was meant to be invisible to maintain its strength.
Action without intention — the state acting as a facilitator only — has been an old idea.
Roughly around the same time in then Akhand Bharat, Kautilya’s Arthashastra was talking about the co-existence of a welfare state with extensive private participation in agriculture, trade and manufacturing — pillars of the economy of the times.
Two millennia later, should the modern Indian state be in business or not is a debate which still evokes passion, high-pitched op-eds and doctrinal viewpoints aplenty.
This is the debate which is likely to rule the digital outrage barometers and media oversimplifications in the next couple of years. The genesis of this — the financial year 2021-22 Indian union budget presented by Finance Minister Nirmala Sitharaman on 1 February.
Privatisation has always been a dirty word in the modern Indian political lexicon which is built on the foundations of Nehruvian economic principles of state controlled large enterprises. Even when the Atal Bihari Vajpayee government actually attempted privatisation, it chose to call its department — later ministry — overseeing the process the Ministry of Disinvestment.
Credited for the privatisation of companies like Balco, Hindustan Zinc, IPCL, ITDC hotels, Modern Foods and VSNL, the Vajpayee government was an exception.
Disinvestment or divestment came to a grinding halt with the change of the government in 2004. Indeed, the word privatisation has since not been uttered very often, except in neoliberal commentary and internet debates.
Until it found its way to the union budget this year, which as the Finance Act is a law enacted by the Parliament. The section on Disinvestment and Strategic Sale in the budget speech mentions that the government is dividing all the business sectors it operates in two parts — strategic and non-strategic.
In the four strategic sectors, it intends to retain the bare minimum number of Central Public Sector Enterprises (CPSEs) with the rest privatised. In the non-strategic sectors, the government intends to privatise all CPSEs.
This is the boldest departure in intent from the Nehruvian consensus on management of Indian economy, building on the foundation laid by the Vajpayee government. Even with the known caveat that the road to supply side economic heaven is paved with good intentions, it appears that the government is getting ready for a serious push on privatisation.
To further bolster the message in the union budget, Prime Minister Narendra Modi made a passionate and emphatic case for divestment in a webinar organised to chalk out the government’s approach to executing its announcement. Curiously, this speech, despite being made in a government policy discussion forum, was broadcasted on all digital platforms and excerpts from it widely circulated on social media.
The 24 February event came just three weeks after the budget speech. Both the timing and the visibility accorded to this event show that the PM wanted to give a strong message in support of privatisation and asset monetisation plans.
This privatisation push comes at a time when every country in the world is mimicking the mimosa pudica flowers — turning inwards at the hint of an external touch. It also coincides with the laser focus on Aatmanirbhar Bharat, a concept pushed by the government since May last year.
In an insular trading environment, a push for self-reliance and the government opening up private participation in the economy may seemingly be termed contradictory objectives. But the government view seems to be that Make In India is not just about import substitution but rather making for India and making for the world.
To up the ante on the stated privatisation objectives, the government has already identified the four strategic sectors in the budget document — atomic energy, space and defence, transport and telecommunications, power, petroleum, coal and minerals and banking, insurance and financial services.
The classification clearly has been made with the view that Indian sovereign security and monetary interests and natural resource need cannot be compromised now or at any point of time in future.
To further make a serious case of the government retaining only a small presence in these strategic sectors, it has already announced the more difficult bits. The budget talks about privatisation of two public sector banks other than IDBI Bank, privatisation of one general insurance company and the Initial Public Offering of Life Insurance Corporation of India.
While the government will face resistance for any privatisation, it has gone straight for the jugular to establish serious street creds for its intent. If it can navigate the bank unions — amongst the most organised numerous and vocal in the public sector — the task of dealing with other labour unions will become that much easier.
There maybe many a slips between the cup and the lip. Blocking access to Delhi has now been established as the favourite tool of protestors — both genuine and those in search of a raison d’etre.
If the government goes ahead with the privatisation plans, quite likely the 2022 Republic Day will see a show of force of labour unions in Delhi and elsewhere. With 32 lakh central government employees in the country and many more working on contractual payroll, the unions may well be able to find the critical mass needed for long street protests.
Additionally, PM Modi will also face shrill and vocal criticism from the opposition parties. There has been a concerted effort to superimpose the “Ham Do, Hamare Do” slogan on PM Modi, Home Minister Amit Shah as the benefactors of two beneficiaries (Mukesh) Ambani and (Gautam) Adani.
This rhetorical flourish will only get louder and more vicious as the CPSEs start to get sold. The private entities bidding for these CPSEs may also become object of substantive on-ground and turgid social media attacks.
The government has to bake in all these execution risks as it progresses on the privatisation agenda. For now, the time is filled with pregnant anticipation of the upcoming Indian economic journey on the road less traversed.
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