March 28, 2021

Budget Lays Ground for Total Privatisation of CPSUs

Swadesh Dev Roye

THE revised Public Sector Policy announced in the budget 2021-22 is fully oriented towards total privatisation of central public sector undertakings. It is no longer mere “divestment of equity” of CPSUs. Now it is whole-hog privatisation.  The Congress (I) government led by P V Narasimha Rao with Manmohan Singh as finance minister started divestment of equity through IPO. With the NDA led by Vajpayee in power, the attack of divestment coupled with outright privatisation was doggedly intensified, so much so, a full-fledged ministry of disinvestment was established. Apart from huge amount collected through divestment, more than a dozen CPSUs were completely sold out by the Vajpayee ministry.

So far, the divestment drives were carried out through IPO, FPO, OFS, ETF, buyback, auction and ultimately strategic sale. Now the revised policy is directed towards complete privatisation. Divestment of equity through various routes has been pushed to the backyard. The strategic and non-strategic categorisation of industries is nothing but an eyewash. In the name of incentive to state governments to privatise state PSUs, the Modi government is going to infringe upon “federal freedom” and arm-twist state governments to compel them to sell out state PSUs. 

It is reported that steps have been initiated to constitute an ‘Independent Authority’ comprising private ‘experts’ exclusively for speedy privatisation of identified CPSUs. These steps should be read linking with the speech of the prime minister in the current budget session of parliament expressing his anger at the poor performance by IAS officers (read Secretaries of the administrative ministries) in aggressively privatising CPSUs under their respective ministry. 

With the announcement of the revised public sector policy noted above, now privatisation will be carried out mainly through two instrumentalities: (1) Direct sale of the production, manufacturing and service sector CPSUs; (2) selling of land and so-called ‘infrastructure assets’ through what has been termed as ‘Monetisation of Assets’. It is necessary to understand that the routes and modes of privatisation with catchy nomenclatures is nothing but deceiving and confusing the people. After all, at the end of the day, it is nothing but privatisation. In other words, it is part by part selling out public sector entities.

The union budget 2021-22 has fixed Rs 1,75,000 crore to be collected from disinvestment/privatisation. Many more steps towards privatisation have been announced in the budget including privatisation of two public sector banks and IPO of LIC. Similarly, massive privatisation of distribution of electricity is being pushed. The Electricity (Amendment) Bill 2021 has already been put in public domain.

Finance minister Nirmala Sitharaman has put in concrete terms the concept of Asset Monetisation Pipeline in the Budget for 2021-22.  Now the government has decided to launch a special purpose vehicle called ‘National Monetisation Pipeline’. Target has been fixed to realise Rs 2.5 lakh crore through ‘Infrastructure Asset’ sales during the block of financial years 2021-2024.

The Niti Aayog has asked various union ministries to identify and share information on the assets to be included in the ‘National Monetisation Pipeline’ for sell out. A Core Group of Secretaries for Asset Monetisation has been set up, which met last month to discuss the shortlist of assets identilfied for monetisation in 2021-22. Accordingly, the first list of targets has been identified as shown in the table below:


Ministry                                                   Target 2021-22                                Assets Identified to Sell Out

Railways                                                   Rs. 90,000 cr                                 50 stations, 150 Private Passenger Trains
Telecom                                                   Rs. 40,000 cr                                 Telecom Assets of BSNL, MTNL and Bharatnet
Road Transport and Highways                Rs. 30,000 cr                                 7,000 KM Built Road to be Privatised
Power                                                      Rs. 27,000 cr                                 Existing Transmission Towers and Electrical Lines of Power Grid Corporation
Youth Affairs and Sports                         Rs. 20,000 cr                                 Many Prime Sports Stadia to be Privatised
Civil Aviation                                           Rs. 20,000 cr                                 13 airports of AAI and also AAI’s stake in Delhi, Mumbai, Bangalore and Hyderabad Airports to be Privatised
Petroleum & Natural Gas                       Rs. 17,000 cr                                 Pipelines of GAIL, IOCL and HPCL
Shipping, Ports and Waterways             Rs. 5,000 cr                                   Over 30 Shipping Berths to be Privvatised
                                                                                                                                   Source: Indian Express

The group of secretaries has asked the sports ministry to expedite the appointment of transaction advisor for privatisation of the premier Jawaharlal Nehru Stadium, New Delhi. Reportedly at the first instance, the stadiums are likely to be leased out to the private sector by way of an operation and maintenance contract. As for sale of assets under the Ministry of Civil Aviation in 2021-22, the proposal is to complete privatisation by selling out of Airports Authority of India’s stake in the joint venture of Delhi, Mumbai, Bangalore and Hyderabad airports. Further, the 13 AAI airports will be monetised through the OMDA based model (Operation, Management, Development Agreement).

Other than the public sector assets under the eight ministries noted in the table above, several more are in the offing for asset privatisation. As per reports in the media, some potential ministries that may be included in the privatisation pipeline are the ministry of coal, ministry of mines, ministry of tourism and the ministry of housing & urban affairs.

The economic angle of the privatisation onslaught has to be understood linking with the ongoing systemic crisis of capitalism which took off with the economic meltdown in the USA. It is a data-based fact that even before the Covid-19 pandemic, the economy of the country suffered all-round deterioration.

Now whenever the country confronted any kind of crisis – both financial and physical – PSUs have been pressed for to rescue the government. There are innumerable examples since time immemorial. The Covid-19 pandemic is no exception. Liquid cash extraction from CPSUs by the Modi government has inflicted fatal financial injuries to even the hitherto cash rich Public Sector Entities. Contribution in PM Cares Fund, imposition financial target for Capex apart from extraction of abnormally high amount of dividend, taxes and duties and more are shocking facts.

Most startling example is ONGC, the top most maharatna CPSU operating in highest priority sector. It (ONGC) was compelled by the Modi government to outright buy out HPCL and Gujarat State Petroleum Corporation (floated by Modi during his tenure as Chief Minister). For funding these unwanted acquisitions not only ONGC’s cash reserve of around Rs 25,000.00 crore was exhausted but also it had to borrow Rs 24,881.00 crore from the market. In 2013-14, ONGC had a liquidity reserve surplus consisting of cash and cash equivalent of Rs 1,07,989 crore and now it has become a market indebted company with severe shortage of working capital. Consequently, ONGC’s expenditure on exploration work has got a beating and declined by an average 13.7 per cent during the period 2004 to 2020 resulting decline in production of oil. Courtesy, public sector money ‘extortionist’ Modi government.

More than 55 CPSUs have been rather forced to contribute to the PM CARES (Prime Minister’s Citizen Assistance and Relief in Emergency Situations) Fund. According to available figure, share of 38 CPSUs is more than Rs 2,105.00 crore.

Even before the Covid-19 pandemic, in the face of capitalist crisis driven downslide in the economy, FM Nirmala Sitharaman summoned heads of 32 CPSUs in September 2019 and asked them to speed up their Capex (Capital Expenditure). Because the private sector withdrew from the investment market despite huge packages gifted to them by the government.

Now the Covid-19 pandemic has added fuel to the fire of the capitalist crisis and the horrific picture is before the entire country. Again Finance Minister Nirmala Sitharaman on July 7, 2020 in a video conference with CMDs of 23 CPSEs, asked for speedy and enhanced Capex in order to recover the economy from adverse impact of Covid-19.

The political and ideological angles behind the disastrous drive of privatisation have got explicit expression in the words of Rajiv Kumar, Vice Chairman, NITI Aayog, “Offloading Government equity in public sector units, (…) is not merely a means for revenue generation. It is also a means for giving greater space and opportunity to the private sector.… The biggest change now is that the political leadership at the highest level has made it clear…”

The other political and ideological game behind Modi’s privitasation mission is also directed to cement the confidence of finance and industrial capital that India with Modi government is the safest heaven for private capital with zero tolerance towards public sector. Further, it (Modi government) is demonstratively dedicated to the doctrine of neo-liberalism which is aggressively against even any remnant of public sector. The Modi government is signaling to private businesses that it is exclusively for private sector and conclusively against public sector. The present ruling polity of the country wants to strengthen and sustain the status of ‘Most Trusted Agent’ of imperialism in the Asia-Pacific Region. The political, economic and military campaign centering round China must be understood in conjunction with the foregoing policy measures, and certainly not in isolation! 

The more the depth of the attack on public sector, matching mightier and determined must be the counter combat to defeat the evil design. Today the destructive desperation of the Modi government for privatisation demands knowledge-oriented analysis, articulation and powerful organisation of PSU workers’ movement based on commitment and dedication to defeat the enemies of the country and the people is the urgent need of the hour.

One thing is certain, if the unity and united struggles and the strike actions would not have been carried out in the country, the picture of destruction of public sector industries and attack on workers’ rights could have been unimaginably deeper and wider. The NDA government with Modi as Prime Minister had to stop or postpone or delay many of his destructive moves under the pressure of the united agitations and actions of the working class.

The forthcoming struggle to save public sector must be expanded both horizontally and vertically directing not only for the sake of the employees but for the sake of the economic sovereignty of the country. The imperative task before the working class is to launch massive and vigorous campaign and propaganda on the basis of the foregoing economic, political and ideological understanding in order to mobilise the mass of the public against the disastrous impact of elimination of public sector in our economy, society and polity.