The Hindu Business Line : The politics of disinvestment

AS WITH any other policy initiative, disinvestment has also become a victim of politics in this country. How else would you explain the flip-flops in policy initiatives that have been witnessed the last few years?

There are many issues on which there appear to be unanimity amongst the major political parties, with the exception of the Communists, which oppose disinvestment at the Centre, even while pursuing privatisation in West Bengal.

For instance, the major political parties subscribe to the importance of the public sector in all crucial areas of public importance, such as in power, oil, atomic energy, space, and railway transport. They are also concerned about the lack of performance of the public sector as a whole, and would like this sector to deliver.

They also practise the same methods of interference in the daily running of the enterprises, leaving the managers little or no autonomy. Public sector enterprises have always been treated as extended arms of government, and serve as sources of patronage to politicians and bureaucrats in power.

Innumerable Committees of Parliament continue to waste precious time of senior managers of public sector enterprises. Major investment proposals continue to be approved by Government. Even foreign tour programmes of senior personnel of the public sector enterprises continue to be approved by Government.

The same questions are asked in Parliament, irrespective of which party is in power, and the same replies are given. The same homilies are delivered by the politicians to public sector managers, who grin and bear it. As the French aptly put it: Plus ca change, plus la meme chose meaning the more things change, the more they remain the same.

However, politicians only seem to differ in the manner in which the public sector reform has to be accomplished — whether it should be through repeated efforts at strengthening them or whether they should be disinvested or their management should be privatised to enable better performance. Underlying the latter is the belief that government is at best an inefficient manager of enterprises.

The former decide to pay lip-service to public sector importance by grandly announcing that profit- making enterprises will not be disinvested; on the contrary, they would be strengthened. They forget to say that this is the n{+t}{+h} time that the particular public sector is being restructured.

No questions are asked as to why earlier efforts at restructuring failed and who were responsible for those failures.

Till date, no public sector manager or bureaucrat has been held responsible for poor performance. Accountability for poor performance is often talked about but never practised or enforced. Instead, the financial restructuring moves of public sector enterprises now appear to be something akin to a yearly ritual.

The UPA Government disbanded the Disinvestment Commission, which gave useful suggestions on what and how to disinvest, and instead appointed a Public Sector Restructuring Board and filled it with bureaucrats whose overwhelming merit was that they were perceived to be close to those in power. Disinvestment should have been a restructuring option. However, disinvestment is not even within their terms of reference.

Usually, whenever the word `restructuring' is used, straightaway, the presumption is that it has to be financial restructuring. Why isn't business restructuring, which aims at shedding of unprofitable businesses, considered as part of a package of measures intended to take the enterprise out of the red? What about organisational restructuring? Does it not have an important place in the scheme of things?

The government's attitude towards sick companies has so far defied comprehension. Many public sector enterprises have been closed for years now or are bleeding profusely, without any prospect of mercy killing. Heavy industries in Bihar and West Bengal, fertiliser units in many parts of the country, textile mills in Maharashtra and elsewhere are but a few examples. Workers are still being paid for not working! Slowly, the assets have depreciated or have been pilfered by miscreants. The factory premises are over run with weeds and serve as dens for the criminal gangs.

A fast-track approach to liquidate these firms — selling the land, buildings and machinery on a as-is-where-is basis and getting rid of labour/employees through handsome compensation — would work wonders for the economy and send out a positive signal that the government means business, even if it is closing down unprofitable businesses!

Privatisation, unfortunately, has become a bad word in this country. This is partly due to the fact that there were several complaints of companies being sold for a song. There were any number of questions raised regarding their valuation, hasty decision-making and loss to the exchequer. What is needed is a thorough enquiry into these allegations through the Comptroller and Auditor General or the Chief Vigilance Commissioner and a clearing of the air. Instead of doing this, the Government has chosen to give up privatisation as a policy due to such complaints. This is akin to cutting of one's nose since the cold will not go away.

The public sector, today, has to face severe competition both within the country and abroad. If it has to survive and prosper, it has to be granted requisite autonomy.

Government will have to firmly decide not to interfere in the running of the enterprises. That can only come about if Government is serious about adopting corporate governance practices.

To start with, the Government needs to take a closer look at the working of the Public Enterprise Selection Board (PESB). Since the present Secretary to the Prime Minister was himself earlier a chairman of the PESB, this task becomes easier. One of the issues that the scrutiny could cover would be the enormous delay in the filling top posts in public sector enterprises, and the accountability of the ministries/departments in the government with respect to this. It is understood that, at any given time, more than 25 per cent of top posts in public sector enterprises are always vacant.

Another issue would be the status of the PESB — whether it should be given the same status of the UPSC — in order to enforce its selections. But nothing seems to be happening on these fronts. Instead, we have the spectacle of political parties throwing mud at each other!

The conclusion that one can draw from this scenario is that politicians are busy playing politics while paying lip service to the importance of the public sector.

(The author, a retired IAS officer, was Member-Secretary of the Disinvestment Commission.)

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