On April 8, 2010 the UPA government’s Cabinet Committee on Economic Affairs gave its approval for the disinvestment of 5% of the Government of India’s shareholding in the Steel Authority of India Ltd. (SAIL), one of the giant Public Sector Undertakings (PSUs). The approval also covered the issue of fresh shares to the extent of 5% of its existing share capital.
This disinvestment of government holding in SAIL follows closely on the heels of similar actions in recent times. In 2009-10, the government had set a target of Rs.25,000 crores for disinvestment proceeds and almost realised the same. It diluted its stake in five PSUs — National Thermal Power Corporation, Oil India, National Hydro Power Corporation, Rural Electrification Corporation and National Mineral Development Corporation. The total proceeds from this amounted to Rs.23,552 crore.
In the budget speech of Feb 28, 2010, the Finance Minister said "while presenting the Budget for 2009-10, I invited people to participate in Government's disinvestment programme to share in the wealth and prosperity of the central PSUs. Since then, ownership has been broad-based in Oil India Limited, NHPC, NTPC and Rural Electrification Corporation while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam. The Government will raise about Rs.25,000 crore during the current year (2009-10). Through this process, I propose to raise a higher amount during the year 2010-11. The proceeds will be utilised to meet the capital expenditure requirements of social sector schemes for creating new assets”.
The disinvestment policy of the second Manmohan Singh government was first articulated in the President’s speech to the joint session of Parliament on June 4, 2009 followed by the Finance Minister’s statement in the Budget speech in July 2009.
The Cabinet decided in November 2009 that all profitable PSUs should be listed on the stock exchange. Also, that all listed profitable PSUs should have a ‘public’ holding (meaning shares held as private property) of at least 10 per cent. According to the government’s disinvestment policy, listed profitable PSUs that do not meet the minimum 10 per cent ‘public’ shareholding criterion will be made compliant through issuing fresh issue of shares on the market. Secondly, all PSUs having positive net worth and no accumulated losses would be listed on the stock exchange by issue of fresh equity or dilution of government shareholding. Thirdly, the proceeds from selling government ownership shares would be channelised into a National Investment Fund for meeting capital expenditure requirements of selected social programmes.
The UPA government has chosen disinvestment as a way out for gradual handing over of assets in the public domain to private institutions and individuals. The government's choice of this method is to avoid provoking widespread opposition to privatisation. It is a fact that in the nineties, when the NDA government made outright strategic sales of PSUs like Modern Foods, BALCO, VSNL, Centaur and Hindustan Teleprinters to private bidders, there was massive opposition from the workers of these enterprises, and from workers across all sectors.
The essential aim of privatization is to open up new avenues for pocketing maximum profits by the capitalist monopolies and to enable them to consolidate their dominance of the sector.
In the case of Modern Foods, the government claimed that MFIL was making a loss and hence eating into government revenues. So saying, it sold the company to Hindustan Unilver (Hindustan Lever, at that time) which promptly dismantled all the machinery inside the plants and contracted out the making of bread to several small units, to weaken the fighting capacity of the workers for their rights.
In the case of BALCO and VSNL, the sale was to provide the new capitalist owners unprecedented economic advantages in expanding and consolidating their monopolistic hold over that sector. While BALCO, the largest aluminum producer in the country, was sold to Sterlite Industries at a give-away price, VSNL was sold to the Tatas, who were among the handful of capitalists who had plans to expand their hold over the telecom sector. VSNL was an undisputed leader in the country in international long-distance (ILD) telephony, had a free domestic long-distance license, was a major Internet Service Provider and had significant experience in the sector. The acquisition of 25% share in VSNL fitted in neatly with the Tatas' plan of being a major telecom player and taking forward its forays into the cellular and Internet Service Provider (ISP) businesses.
Disinvestment is but another name for privatization, whereby the controlling interest in the undertaking is gradually transferred from the public domain into the hands of profit maximizing institutions including banks, insurance companies and financial corporations.
Proceeds for meeting social expenditure
One of the justifications being offered for disinvestment is the need for raising money to meet the growing deficit and to meet the capital expenditure requirements of social sector schemes for creating new assets. The Planning Commission has pitched for aggressive disinvestment of public sector units to mobilise resources for Plan expenditure and curtailing fiscal deficit.
"... it will be necessary to adopt an aggressive programme of disinvestment in PSUs. Even if the government share of equity must not go below 51 per cent, there is very substantial scope for disinvestment to mobilise resources for Plan expenditure," the Commission said in its mid-term appraisal of the 11th Five-Year Plan, which was placed before Prime Minister Manmohan Singh on March 23, 2010.
This reason is being given by the government in the context of increasing deficits and criticism that there has been very little asset creation by the government in the social sector. However, this is hiding the reason for high deficits - the rising defence expenditure and moneys spent on debt servicing. At the same time, it is a lie to say that lack of funds is the reason for low spending on creation of assets in the social sector. To justify privatisation on both these counts is to divert attention from the real basis for government moves on privatisation; it is to hide the fact that privatisation, by any name, is simply handing over the assets that belong to the public to private capitalist monopolies.
"People's ownership of PSUs"
The Finance Minister and other government spokesmen claim that disinvestment is "broadbasing the shareholding". They want to hide the fact that ownership is in fact being narrowed and concentrated in a few hands through the process of disinvestment.
As was evident in the case of VSNL, BALCO and Rural Electrification Corporation, the main buyers of the shares have been the monopoly corporations like Tatas, Sterlite (Vedanta is the holding company) or institutions like the Life Insurance Corporation. The retail purchase, i.e., shares bought by individual investors, is very small.
State ownership, created in the name of social interest, is being replaced by private ownership by a group of institutions and individuals. This inevitably means that the motive of private profit maximization will replace any pursuit of social interest even in theory.
When the PSUs were created, public funds were invested to create assets in the public domain, in the name of benefiting society as a whole. In actual fact, the domination of the capitalist monopolies over the central state made sure that the public domain was looted to fill private pockets. After robbing public wealth stealthily, the bourgeoisie is now demanding that the public domain be made openly private so that the plunder can be intensified.
Working class must oppose privatisation in all its forms
The working class, its parties and unions, must be vigilant against the bourgeois propaganda that disinvestment is not privatization, or that it is a “better” or “more acceptable” form. No, privatization is not acceptable in any form!
The privatisation programme, whatever the method that is used, is geared to enrich a minority of private interests, at the expense of the workers, and at the expense of the general interests of society. It is aimed at expanding the space for monopoly capitalist plunder for maximum private profit and at intensifying the domination and control of capitalist monopolies over key sectors of the economy.
The working class must wage the struggle against privatisation on the basis of the principle that productive assets created with public funds belong to the people. These assets must be used in the public interest and not for enriching a set of private shareholders.
The working class and communist movement must unite the broad masses of people in opposition to privatization, on the basis of the principles that public assets belong to all, and that the State is duty bound to provide basic public goods and services free of charge or at fees that are affordable to all. Privatisation is an attack on these principles, an attack on basic human rights. It is part of the anti-social offensive of the bourgeoisie, which wants people to accept that the State has no obligation to anyone except the big business interests.
Whether it is the outright sale of PSUs to private monopoly corporate bidders or disinvestment of government's shareholding, whether the PSU is "loss-making" or a "profitable" one, every move in any form towards converting public assets into private property must be opposed. The working class must challenge the right of the central government to sell any share of any public asset to private companies or individuals.