PSU MINES FIELD

PSU MINES FIELD

Troubled Galaxy Destroyed Dreams: Chapter 159

Palash Biswas

Commission's Reports
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Parliament session to begin on Thursday

11 Feb 2009, 1802 hrs IST

With Lok Sabha elections not far away, the UPA government is expected to come under attack from friends and foes alike in the brief session of Parliament beginning tomorrow on a range of issues like "misuse" of CBI, turning it into a stormy affair.



No place for untouchability in politics: Advani

11 Feb 2009, 1631 hrs IST

BJP leader Advani said, "If we cannot tolerate untouchability in social life, why should we ever even think of untouchability in politics?"
Public sector units in india are white elephants?
white elephants means passive and difficult to maintain

Answerer 1

One have to be very unbiased in answering questions like this.Even though there are many white elephant PSUs in India we cannot say blindly that all PSUs are the same.
There are shining examples in which PSUs outshined even corporates.These are the few examples for your info

1)Bharat Electronics Limited

2)Bharat Heavy Electricals Limited

3)Bharat Petroleum Corporation Limited

4)GAIL (India) Limited

5)Hindustan Aeronautics Limited

6)Hindustan Petroleum Corporation Limited

7)Indian Oil Corporation Limited

8)National Aluminium Company Limited

9)NTPC Limited

10)Oil & Natural Gas Corporation Limited


11)Shipping Corporation of India Limited

12)Steel Authority of India Limited

The list is not final......!!
All these companies made our country proud.....!!Its pure motivation,determination, planning,commonsense and hard work that script success stories.Be it Corporates or PSU if any one lack it ,they will become White Elephants.No doubt.....!!
Jai Hind

Answerer 2

Because of the corrupted officials it has become white Elephants. If it is run independently that is with out interference of Politicians and by non corrupted officials, it will become golden fish.
Please go through the example of GSFC, only with in two years one IAS officer ( sorry I forget the name of officer) change GSFC from non profit to profit organization two years back. Other example is Gujarat Electricity Board which were running always under loss but Narendra Modi had taken such action that now it has been having surplus since last three years.
So if political wish is there, definitely White eElephantcan be changed to golden fish

Answerer 3

I think the facts R shah put in here are true and if willing politicians can change the scene vice verse too.congrats Gujarat.when will other people have such things in India.
http://in.answers.yahoo.com/question/index?qid=20090124073201AAK4WiN

See the NEWS of ultimate HYPOCRICY!

The Hindu : Front Page : Left opposes disinvestment in 35 public ...
28 Oct 2004 ... Left opposes disinvestment in 35 public sector units ... to the Proliferation Security Initiative that the U.S. wants India to join. ...
www.hindu.com/2004/10/28/stories/2004102808310100.htm - 16k - Cached - Similar pages -

In fact, the Narasimha Rao government with Washington Planted First Finance Minister rooted in World Bank and IMF only did Introduce Neo Liberalism in India with economic Reforms on theoretical level. It is only during the United front Governments led by DEVEGAUDA and Indra Kumar Gujral, the Campaign of LPG ws launched FULL STEAM on the Basis of COMMON MINIMUM PROGRAMME created by the Marxists led by so called Anti Capitalist Marxist leaders like Jyoti Basu and Har Kishan Singh Surjeet. The SELL OUT PSU strategy was finalised by the GOI with full participation of Marxists and LEFT TRADE Unions. EVEN the Controversial Disinvestment MINISTRY provision was invented by the UF front GOI and The Marxists themselves! The DISINVESTMENT MINISTRY working on reports of Disinvestment Committees led by PRIVATE SECTOR Industrialists, CII,FICCI,ASSOCHAM finalised the PRIVATISATION Strategy and SYSTEMATIC phase by Phase Privatisation with a SOFT shock Absorber name DISINVESTMENT, was decided to set up by , SORRY to say, not by the CAPITALIST FASCIST RSS NDA, but by our Comrades Marxists and their friendly UF government during 1997-98! Disinvestment Ministry was planned and implemented IMMUNE to Judicial Jurisdiction, Criminal Investigation, Parliamentary Responsibility and Liability, Audit,etc. SINCE the LEFT and the Marxists have the MONOPOLY in the TRADE UNION sector they had an ADVANTAGE to NULLIFY whatsoever RESISTANCE making up with forged Juggling Opposition in vein.


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Indian PUBLIC SECTOR Units like Post, Railway, SAIL, BHEL. Coal India, ONGC, OIL Companis,SBI and Nationalised Banks, LIC, SHIPPING Corporation and so on to be DIS INVESTED and Privatised have become MINES FIELD thanks to LPG MAFIA Ruling India.


But TRADE UNIONS and their ECONOIstic Movements spare no SPACE to realise the DANGER AHEAD with SWIFT CURVE. It is DECIDED and PREDESTINED. Let the Loksabha POLLs get over!

I dare not to convince my wife at home.

Savita challenges my vision quite AGGRESSIVELY, `how do you say that?”

I have every EVIDENCE, Hard and SOFT TEXT to prove the theory to be implemented STRATEGICALLY. But I may ot discuss it with my wife fearing a NUCLEAR FUSION! Until a SOLID RESISTANCE mobilised, we may not open all our CARDS at hand!

The RULING Marxist KAYASTHA Brahaminical Hegemony in West Bengal have transformed the TEA as well as Cotton and JUTE Industries into Graveyards. More than FIFTY SIX Thousand factories and Industries had been CLOSED and the Land sold out to Promoters, Builders and retail Chain under Marxist supervision following Marxist Capitalist DE INDUSTRIALISATION Drive!

These Marxists hold the MONOPOLY in Indian Trade Union Movement and all the PSUs are the BASEs of Marxist resource Mobilisation. PSU employees worship trade union leaders as they worship their gods and goddesses. I have no FORUM to break this Illusion! Neither of us. Medha Patekar leads the Save Narmada Valley Movement but the DISASTER never stops. Medha and Ulka Mahajan have been leading Navi Mumbai Resistance movement. They have stopped to visit Navi Mumbai. We never see Medha in Singur or Nandigram nowadays. Now Medha JUMPS into GORKHALAND! But she never cared to see the DEATH Processions in Darjeeling tea gardens. This METHODOLOGY of our Mass Movement leaders backed by NGOs stand nowhere!

Thus, I am trying my best to HOLD on the available Information and Evidences of Betrayals and PLOTs most unholy until a REAL Resistance is mobilised!

I dare not to answer the queries of the General Audience as they quote Marxist and Trade Union Leaders and finally the Current Recession to prove the RESILIENCE of PSUs denying their Mines field status!

The daily Passenger Friends in Down Majherhat Local train welcomed me back from Maharashtra with warmth. But they won`t believe my contention. They tend to make it light as they believe their Trade union Marxist Masters!

Mumabi based kanai Lal biswas happens to be a very DEDICATED worker of Mulnivasi Bamcef, led by VAMAN MESHRAM. He belongs to the BANGAON Rural area in North 24 Parganas of West Bengal. he was brought up in Bangaon at his maternal Uncle`s house. He shifted to Mumbai having passed High School in seventies and started his career as a PORTER in Mumbai dock where he happens to be working as a third class employee. He happens to be one of the most Prominent Host for me in Mumbai.

On 31st January, while we were interacting with Feroze Mithiwala and his associate on ZIONISM and Judaism, he landed at YADAV residence. After the meetings, kanaida inted to accompany him to KANDIWALI where another Bangaon based Bengali friend MR Haldar has a flat. I followed and it happened to be a very pleasant EVENING for me.

Mr Haldar belongs to Thakur Nagar, famous for Matua Head quarter!

Haldar was an engineer but opted for business in construction sector. He has an excellent apartment in Kandivoli. While we landed in the apartment, Mrs Haldar, an ANTHROPOLOGIST welcomed us and informed that Mr Haldar was away in VELLORE for the treatment of his ailing mother. But mr Haldar rang kanaida several times to visit his home. In fact, kanaida as well as Mr haldar wanted me to get introduced to their daughters RINKY and PINKY. Luckily they planned it.I was not feeling well. As I was tired of long Discussions all the day long on very complex subjects like Zionism and Political Economy!

First Pinky appeared from her room. Rinky was hesitating. But her mother drove him into the drawing Room. Very soon we became FRINDLY as I personally love to interact with generation next!

I enquire about their studies. Pinky is a Post Graduate student in Commerce discipline and plans to become an Industrialist. I asked about her syllabus. She pronounced the specific paper of Strategic market and Strategic marketing with other common papers. but she could not enlighten me on the subject. though I was damned INTERESTED!

Pinky has a Model Personality. She is a TEENAGER Beautiful Love able girl! Pinky informed me that she was selected among the fifty girls for modelling but withdrew her name for Cultural barrier. I enquired whether they know anything about Cultural Barrier or Cultural shock as economic terms! They could not elaborate. RINKY wants to innovate latest kinds of Mobile as opting for Electrical Engineering. She is crazy about gadgets. I understand it very well as my only son, STEVE is also damned busy with the Gadget CRAZE. I was pleased with the pleasing personality of the two young girls and had been lucky to share their dreams and ambitions!

At a point while Pinky was defending her parents very violently, I was prompted to say,` I would love to have a daughter like you! I adopt you!’

Unfortunately I could not connect either Pinky or Rinky while I was leaving Mumbai and even till this date. though I requested kanaida to help me connect with the Family!

The term Strategic Market and Marketing Strategy struck me very hard as I am dealing with the issue of strategic sale of PSUs at this point!

Next day, while I visited my Host Major Siddhartha Burve`s residence to have the Lunch and meet more than a SCORE of selected Social Activists in Mumbai to interact on Political economy and Applied economy along with the Economist Mr SP Yadav, the term was working very hard in mind. My voice was not helping me. But I had to continue with intakes of Hot water time to time. I had to speak for almost FIVE hours with some breaks including the Lunch break! And it was a CONTROLLED Discussion holding back some vital information and strategies as well!

Please see:
http://planningcommission.nic.in/plans/stateplan/sdr_maha/ch-7-14-02-05.pdf

New Delhi

Call for privatisation of public sector units to boost growth

Special Correspondent

Indian Liberal Group for greater employment generation with labour reforms








NEW DELHI: The Indian Liberal Group (ILG) on Friday called for vigorous disinvestment and privatisation of public sector enterprises and greater employment generation along with labour reforms.

It stressed the need for achieving growth in agriculture, while bringing the sector under the tax net as part of its 15-point package of initiatives for the Government's consideration.

In a document titled `Liberal Budget 2007-08: Taking Reforms to the Poor,' the fourth such in its annual series, the ILG sought to project the liberal viewpoint on all matters pertaining to the economy and budget-making so that the benefits of the high GDP growth and various reforms reached the poor and became "inclusive" instead of widening the disparities.

Highlighting the initiatives suggested, at a seminar organised jointly by the ILG and the Press Institute of India here, Sunil Bhandare, economist and chairman of the drafting group of the Liberal Budget (called LB4), said the country's growth would depend on the acceptance of liberal values and the promotion of free enterprise. In this respect, "it [LB4] is a structure of fiscal management with a view to achieving maximum welfare of the community within a democratic framework."

In its document it said economic reforms by the UPA Government were being diluted due to constraints of coalition politics, particularly by "attacks from the Government's own Left Front allies."

Economic reforms





To put the reform process back on track, the Group stressed that disinvestment and privatisation of PSEs should be pursued vigorously to mop up about Rs. 35,000 crore immediately and about Rs. 50,000 crore in the next three to four years.

On the labour front, it said reform of obsolete labour laws was essential while introducing flexibility. Only then would 10 million jobs be created annually to help tackle the unemployment problem. As for agriculture, the laggard that has been impeding faster growth, it urged the formation of special zones to promote the farm sector. At the same time, it has formulated a scheme for taxing agricultural income as an integral part of the Income-Tax Act.

Another major suggestion pertains to fiscal discipline as envisaged in the FRBM Act. Terming the legislation sacrosanct, it rejected "any compromise" on this score, except in the event of a fiscal emergency or unprecedented counter-cyclical considerations.

Turning to poverty alleviation, the ILG said such programmes should assume centre-stage in the Government's scheme of things.

http://www.hinduonnet.com/2006/11/04/stories/2006110416601000.htm



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Proposal on Privatization in India: Ideas on Implementation

January 15, 2000

The following proposal on how to implement privatization of public sector companies in India is prepared by a committee consisting of the following individuals:

K. Palepu, Harvard Business School; C.K. Prahalad, University of Michigan; R. Rajan, University of Chicago; H. Raghava, Merrill Lynch; Marti Subrahmanyam, Stern School of Business (NYU); Abraham George, The George Foundation; V. Gandhi, Morgan Stanley; N. Vaghul, ICICI Ltd.

Preamble

The millennium offers a vantage point from which to reexamine the priorities of the Government of India (GOI). The new government and the opposition parties are united in their determination to increase the spending on human development and welfare in primary and secondary education and basic health care for all. The target is to increase the current spending which is at 1% of GDP to 6% of GDP over a period of five years. Simultaneously, GOI is interested in privatization of public sector to improve the efficiency and productivity of the Indian economy. Subsidies for the public sector units is expected to rise significantly in the coming years. We believe that more than $100 billion can be raised (in potential market capitalization) over the next three years by a workable privatization initiative. We see the two goals -- enabling investment in human capital and unlocking the value of past public sector investments -- as two sides of the same coin. We suggest that GOI see the task as one of shifting priorities from owning, managing and subsidizing commercial ventures which mostly benefit the few to investments in human infrastructure that benefits all, especially the poor and the needy.

Principles

We believe that a task of this magnitude cannot be managed without a clear framework of principles. Ad hoc, partial or expediency-driven actions will not do. We outline below the broad principles that should govern the privatization initiative. We believe that these principles address not only the economic but political and social issues arising out of privatization of the public sector in India.

1. The goal of privatization should be improve the competitiveness of India's industrial infrastructure and enable it to become world class. Privatization should not be motivated only by our current account deficits.

2. All commercial public sector units should be privatized over a five-year period. Speed is the essence. The longer we wait, the lower will be the market value of public sector assets in today's terms. Also quicker privatization will allow for faster investment in healthcare and education of the current generation.

3. The social implications of privatization, namely, unemployment and the need for a social safety net must be dealt with openly and fairly. We should strive for a process of privatization that represents a "win-win" for all. To this end, current employees of public sector units should be allowed to share in the benefits of privatization. Further, part of the proceeds of privatization should be earmarked to provide for unemployment compensation, retraining, and reemployment of employees displaced by privatization. In particular, privatization can provide more prosperity and stability for employees whose human capital is currently locked up in over-manned and under-performing units with an uncertain future.

4. There should be a nodal point for the privatization effort. Accountability must be fixed in one senior minister reporting to the Prime Minister. This minister should have the authority to expedite and approve all privatization efforts. Responsibility for the effort will be focused. The multiplicity of ministries and authorities currently involved should be disassociated with the initiative.

In sectors that are natural monopolies or involve public safety, privatization will require some regulatory infrastructure. Independent regulatory authority is critical to regain the trust of the public, create transparency, and for the market to function effectively.

5. Implementation should be decentralized. The Board of individual units should be responsible for implementation of privatization within the broad framework of principles laid down by the Privatization Ministry. If necessary, Boards of public sector units should be strengthened so that they are well equipped to perform this function.

6. Government should choose the first set of public sector units for privatization using the following criteria:

1. Degree of demand for these assets (e.g. petroleum, hotels)

2. Influence that the efficient operation of this sector will have on the rest of the Indian economy (e.g. telecom, infrastructure)

3. Degree of capital intensity and size of investment required in this sector to be globally competitive (e.g. mines, shipping, steel)

The goal should be to attain early successes, rapidly improve the competitiveness of Indian industry (not jus the public sector) and accelerate resource realization.

7. To make sure that employees will benefit from privatization, and also have the incentive to improve value so as to fetch the best price to the nation, all public sector units should be allowed to allocate up to 20 % of the stock, free of charge, to the entire workforce as of a target date; say march 31st., 2000. All employees of record on that day should become co-owners of the company along with GOI.

8. Once a unit is chosen for privatization, its Board should be expected to submit, to the Privatization Minister, within a period of 6 months, its plan to restructure and revitalize the unit. Each unit should examine its portfolio to identify its core and non-core businesses, as well as the general approach to revitalizing the unit will be as follows:

1. Identify the portfolio of businesses, products and services, which the Board and management feel can propel the company into an efficient operation that can sustain itself without any help from the GOI. Each unit must retain only the minimum complement of employees needed to make that unit very efficient. For this unit all subsidies in all forms will be cut off from the date of completion of its privatization.

2. The Board should identify and group all surplus employees. Preferably, they will be housed in a different location. These employees should be provided a safety net of up to two years. Their current salaries and benefits should be protected for that period. During that time, they should be retrained and encouraged to seek other opportunities. They may choose to receive their benefits as a lump sum. Each unit should be encouraged to offer outplacement services. The private sector should be given tax incentives to retrain and employ displaced public sector workers.

3. Non -core businesses may be offered as a Management Buyout option to its current managers and associates, or divested.

4. The Board may seek any external assistance in determining their actions and timetable.

9. A portion of the shares of the privatized firm, say 25%, will be available to the Indian investing public. Public participation, at the time of privatization, may be a way of allowing the upside to be widely shared.

10. The Board should be free to form alliances, JVs or seek domestic and foreign investment subject to the current laws of the country. If a substantial stake is to be sold to a strategic investor, earn out arrangements should be used to alleviate potential concerns regarding the sale price. Also, wherever possible, attempts should be made to establish a market price for shares before a strategic sale.

The Boards should be required to abide by governance procedures that protect the interests of minority shareholders.

11. The Privatization Ministry should review all plans before they are put in motion. The Ministry will be supported, in its judgments, by a group of 12 eminent individuals who prescribe to the basic principles of privatization and fervently believe in making India a preeminent industrial power. The Ministry can take up to a maximum of two months to respond. If the Ministry does not raise any objections to proposals from the Board of the public sector unit, within this time period, the unit should have the authority to proceed with the proposal.

12. These proposals must be seen as an integrated package. If the policy makers "pick and choose", the benefits of the privatization initiative will not be fully realized.

What is Different about this Proposal?

We believe that our proposal addresses several important issues that stymied past privatization efforts in India.

1. It clearly addresses the potential benefits of privatization to the Indian public - redirecting public investments to education and healthcare, and creating an economy that is concerned about creating efficiency and jobs. Such articulation is likely to increase public support for privatization.

2. It addresses the concern of public sector employees. It makes them stakeholders in the privatization process, and it provides for a safety net for displaced workers.

3. We recommend separating people from assets in the privatization process. This allows us to create a very efficient public sector enterprise, before it is privatized, increasing its market capitalization significantly. All benefit from this process - GOI, current employees, and the Indian public. Secondly, we protect the interests of the employees - by protecting their wages for two years and retraining and out placing them.

4. It deals with the potential concern that he sale prices may be too low in two ways. First, we require 25% of the shares to be sold to the Indian public, so that they benefit from subsequent price appreciation if the share price at sale is too low. Second, we recommend earn-out provisions that will help GOI receive a portion of the post sale profits.

5. Our proposal recommends centralized supervision and decentralized implementation. As a result, we think that the privatization process is likely to be quick and transparent. It is also likely to encourage experimentation and learning.

6. Because our proposal is geared toward increasing the efficiency of the current public sector units, rather than as a mere fiscal exercise in bridging the budget gap, it will reduce the overall cost of doing business in India and increase the competitiveness of the Indian industry as a whole. Therefore, our proposal is likely to get the support of the private sector as well.

7. Since the proposal focuses on the creation of an efficient and profitable industrial sector, rather than merely balancing the budget, it creates a favorable climate for foreign investment. The long- term effects of this process go beyond the benefits of privatization.




http://www.tgfworld.org/critical-proposal.htm
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Panel seals fate of three public sector vaccine units
18 Dec 2008, 0113 hrs IST, Kounteya Sinha, TNN

NEW DELHI: It's now almost certain that the Central Research Institute (Kasauli), Pasteur Institute of India (Coonoor) and BCG Lab (Chennai) will
not manufacture vaccines anymore.

The fate of these three public sector vaccine units has almost been sealed with the Union health ministry's expert committee saying in its latest report that these facilities have inherent problems for renovation and "cannot be renovated to meet the expectation of the current Good Manufacturing Practices (GMP) standards and vaccine cannot be manufactured."

The licences of these three units were suspended for non-compliance with GMP norms from January 15 this year.

Till then, BCG manufactured anti-tuberculosis Bacillus Calmette-Guerin vaccine for the last 60 years, while PII produced DTP and anti-rabies vaccine. CRI, on the other hand, was the main contributor of the DPT group of vaccines.

The report, submitted to the ministry recently, has recommended that CRI should be developed into a measles surveillance centre. It said that CDL should function as a national reference centre for vaccine standards, test vaccines and "take up work related to stem cells". The institute has also been asked to prepare a detailed plan for new manufacturing facilities for yellow fever vaccine, influenza vaccine (seasonal and pandemic), acetone killed vaccine and tissue culture anti-rabies vaccine and create an anti-sera facility.

With regard to the BCG lab, the committee has recommended that it be converted into a Central Drugs Laboratory (CDL) for testing of cosmetics.

PII, on the other hand, has been asked to prepare a detailed plan for manufacturing tissue culture anti-rabies vaccine. It will also be turned into CDL for testing of medical devices like orthopedic implants, cardiac stents and catheters.

"The Institute can impart training to scientists of other institutes in the field of vaccine production and quality control and train post-graduate students in vaccinology, microbiology and biochemistry," said the report.

The expert committee was headed by the drug controller general of India, Dr Surinder Singh.

Union health secretary Naresh Dayal had told TOI earlier that instead of producing vaccines, the units would now function full time in testing the safety and efficacy of drugs and vaccines produced and sold within the country or exported, besides detecting counterfeit and spurious batches of drugs.

Dayal had said: "We will not lay off any of the staff from these three manufacturing units. Till now, they made vaccines. Now, the staff will be retrained into testing drugs."

According to experts, India, with its rapidly growing pharma industry, is in dire need of central drug testing laboratories. Nearly 2,500 crore vaccines — 35 different types by nearly 15 different pharma companies — are produced in India annually. But to test them, India has just two labs — BCG (Chennai) and CRI (Kasauli). To test general drugs, India has just 26 seven central and 19 state drug testing laborites.

Around Rs 4,500 crore worth of drugs are sold in India annually by 8,000 various manufacturers. "Less than 1% of the drugs manufactured are presently tested due to lack of staff and labs. Each of the 26 drug testing labs has a backlog of 6-9 months. Ideally, a sample sent should be tested within 6-8 weeks," officials said.
http://timesofindia.indiatimes.com/India/Panel_seals_fate_of_three_public_sector_vaccine_units/articleshow/3853165.cms

GM cuts 10,000 jobs, Nike another 1,400

11 Feb 2009, 1000 hrs IST
General Motors Corp. is planning to slash another 10,000 salaried jobs this year, saying the cuts are unavoidable with a government restructuring deadline looming and industrywide sales in one of the worst downturns in history.
Oil prices tumble after US rescue plan unveiled

11 Feb 2009, 0304 hrs IST
Oil prices fell alongside the broader markets with few details released about a Treasury Department program to raise more than $1 trillion in public and private funds to free up credit markets.
Senate approves stimulus bill

11 Feb 2009, 0407 hrs IST
The United States rolled out a rescue plan to purge up to $500 billion of bad assets from banks' books while the Senate approved a stimulus bill to tackle America's worst recession.

http://timesofindia.indiatimes.com/Business/articlelist/1898055.cms

http://www.revolutionarydemocracy.org/rdv6n1/psus.htm


Interim Budget unlikely to spring surprises
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BSNL EMPLOYEES UNION SCORES A HAT-TRICK WIN
People's Democracy - 31 Jan 2009
The necessity of sustained struggles against disinvestment/IPO and privatisation was focused. The promotion policy agreement which was recently signed was ...
Fair-housing advocate ponders mayoral bid
Louisiana Weekly, LA - 26 Jan 2009
That position taught Perry about the city’s struggles with urban blight and neighborhood disinvestment. He also became acutely aware of the challenges and ...
Mission '09: Cong toils to beat slowdown, anti-incumbency
Economic Times, India - 1 Feb 2009
Even as the concerns of the aam aadmi — unemployment and job security — will be the highlights, once top-of-the-charts buzzwords such as disinvestment and ...
Pvt sector quota: UPA let it pass, Cong puts it in draft manifesto Indian Express
Congress to use ‘progress and performance' as poll plank SamayLive
all 5 news articles »



Public Sector Units:
Privatisation or Economic Destruction?
N. Bhattacharyya

It is a misfortune for the successive caretakers of the Indian state that even in the age of globalisation there are still some residents who have the courage to challenge the Government of India’s policy on the sale of the Public Sector Units (PSUs). A large number of these units were built up brick by brick with the money of poor tax-payers. In a semi-feudal and semi-colonial economy, tax collected from indirect sources like sales tax, excise duty etc. and paid by millions of Indian people living in cities and villages has remained around 4 times higher than that paid by the business community of this country as direct tax. In India the highest rate of income tax is 30 percent while in the USA, the so-called heaven of the rich people of the world, it is still as high as 50 percent and tax is paid by businessmen unlike our rich who feel proud of evading it! Around 35 percent of India’s GDP is said to be black money or income not disclosed officially to avoid tax.

The proposal to privatise the Uttar Pradesh (U.P.) State Electricity Board was not only opposed by lakhs of workers and their families but also by the consumers of power in U.P., who wanted an assurance from the government that after privatisation the tariff on power would not go up. There is a well-planned campaign against our workers which says that the loss of power both in production and distribution is due to the corrupt practices of the low-paid employees. It is the business community and their mafia who are primarily responsible for the sickness not only of the power industry but also of the rest of the PSUs. If the employees are corrupt, what stops the bureaucracy from proceeding against them under the various Acts? The Central Vigilance Commission is publishing the names of corrupt bureaucrats, but people are accustomed to these official gimmicks. The U.P. Indian Administrative Service Association once decided to publish the names of its most corrupt members, but nothing concrete happened. Politicians decide where electrical power should be free or subsidised but they blame the workers and poor consumers for the sickness of the industry. In Punjab a rich peasant gets power free of cost, but a poor agricultural labourer has to pay through his nose for his single bulb connection. In Maharashtra the Shiv Sena - BJP Government decided to allow Enron to sell power at the highest rate in the country and at the same time ordered the Maharashtra State Electricity Board to supply free electricity to the rich cultivators particularly to the sugar barons of the state. In Delhi no one dares to disconnect the illegal power consumption of factory and hotel owners who enjoy political patronage cutting across political affiliations. However, the shanty dwellers in Delhi are shown in the media as the main culprits in stealing power, though it is well known that they use power for home consumption and that it is a small proportion of total electricity consumption in the state. The government says it will not shoulder the management of industry and commerce, rather its responsibility will be to look after only law and order issues. Who is stopping them from prosecuting the criminals stealing power according to the laws of the country? Industrial tariff for power in India is very high. In Madhya Pradesh it is Rs 3.81 (if S. Kumar’s hydel project on the Narmada river at Maheshwer / Mandeleswer is allowed to work, the cost of power will rise to Rs 5 per unit). In comparison in Canada it is Rs 1.70, in Thailand it is Rs 0.80 per unit. With the coming of the USA giant Enron into Maharashtra the power tariff will jump to Rs. 5 and above from the existing Rs 3.51 per unit. (Economic Times, 4.2.2000). The Indian state allows power pilferage by the big industrialists and rich farmers while the poor consumers have to suffer paying a higher tariff and endure long periods of load-shedding even in winter when consumption goes down. The Indian state is taking full advantage of the lack of organisation of consumers and the massive illiteracy in the country. It is good that the majority of Indian poor who are called adivasis and dalits and who officially accounted for 24 percent of total population in 1991 have yet to see electric lighting in their rural huts, though the Rural Electrification Corporation has encroached on their small pieces of land to install huge structures to connect transmission lines to carry electricity to the cities. Till today the government cannot blame them for loss of power! We make an attempt to ‘peep’ into the organised loot that is going on in India by vested interests in the name of ‘development’ not only during the last 10 years of ‘reform’ but also since the days the Britishers were planning to hand over administrative powers to the Indian business community and with their consent and retained with themselves economic decision making powers for the Indian market.

The Bombay Plan (1944-45) of the Indian business community which was authored by stalwarts like Sir J.R.D. Tata, G.D. Birla, Sir Shri Ram, Kasturbhai Lalbhai, A.D. Shroff and John Mathai and others affirmed ‘that practically every aspect of economic life will have to be rigorously controlled by the Government’. Wadia and Merchant also said, ‘The future for investment which the authors of the Plan envisage is evidently a holy alliance between foreign capitalists and themselves on a profit-making basis, of which we have had such bitter experience in the past and in the present.’ (P.A. Wadia and K.T. Merchant, The Bombay Plan: a Criticism, Bombay, 1945, pp. 29-40 and pp. 43-47). H.V.R Iyenger of the Indian Civil Service who retired as Governor of the Reserve Bank of India said in the late sixties, ‘Indeed, there seems little difference between the basic approach of the Bombay Plan and the approach of the Planning Commission of the Government of India…’ Though many people still believe that Nehru wanted to make our economy socialistic in actual fact it was the business community who guided the government to build an infrastructure for their ‘profit’ accumulation and appropriation.

A propaganda mill is working overtime stating that the previous license-permit Raj was socialistic and that the new liberalisation, globalisation and privatisation is a fundamental break from socialism. This is absolutely false. Under Nehruvian ‘socialism’ and Indira Gandhi’s ‘nationalisation’ and abolition of ‘privy purses’ drama the big business houses were allowed officially to corner all licenses, they enjoyed absolute freedom to exploit the unorganised ‘bonded’ consumers. Monopoly and oligopoly of both Indian business houses and foreign capitalists were the order of the day. Many committees and commissions clearly established the nexus between policy makers and the business families in this conspiracy against the country. They conspired to bleed the consumers and destroy the natural resources of this country and went on accumulating unaccounted wealth in foreign banks with the connivance of a corrupt bureaucracy and criminal politicians. It is a total fraud on the part of Indian business community to blame the Congress government alone for the present sickness of the Indian economy. An average Indian knows how these business families and their imperial masters colluded with the politicians to rob this country and create an ever-widening gulf ‘between the haves and the have nots’.

Since 1991 Indian big business houses have gone out of their way to welcome the arrival of more MNCs. Some of them immediately sold off their enterprises to them and started afresh their commission agency business from where they had started in the early fifties when foreign capitalists left India and sold their ‘managing agency houses’. Transnational Corporations are busy in acquisition, amalgamation and absorption. Indian big business houses are advertising in the media and through the Internet to sell their units to the highest foreign bidder. There is a rush to sell shares through American Depository Receipts (ADR) or Global Depository Receipts (GDR) or both. Each private operator is trying individually to raise as much foreign loan as possible through the External Commercial Borrowing (ECB). The government of India, now run by the Bhartiya Janata Party led National Democratic Alliance, has no obligation to see that the foreign exchange raised in this process is brought to India and used for the specific purpose for which it was permitted. In the meantime the government has replaced the Foreign Exchange Regulation Act by another soft law called the Foreign Exchange Management Act (FEMA) which has no authority to bring to book foreign exchange manipulators.

The Central government too is competing with the private sector to sell off profit-earning public sector units embodying crores of rupees of hard-earned taxpayers money. The BJP which was previously known as the Jana Sangh is basically a north Indian small traders’ party and today it is in power for the third time in three years, The trading community from all parts of the country is willing to support the BJP. During its 13 months rule in 1998-99 it decided to withdraw the Essential Commodities Act to allow traders to fleece the unorganised consumers. It allowed mustard oil dealers in the capital of the country to poison consumers by selling adulterated edible oil. It also ignored its responsibility when onion wholesale traders hijacked the market and sold onions for Rs 60 and more per kilogram, till public protests compelled the government to intervene and it was forced to import and sell onions through the public distribution system. They promised to bring a new Essential Commodities Act with sharper teeth but nothing has happened. It is a complete breach of trust and well-planned fraud on the citizens of the country.

Recently the Indian government sold off a 75 percent share of Modern Food Industries to Hindustan Lever Ltd. which is a subsidiary of the Anglo-Dutch company Unilever Ltd for the paltry sum of Rs 105 crores. If tomorrow they purchase the rest of the 25 percent share for another Rs 30 or Rs 40 crores, they will inherit a company whose net worth is some thousand crores of rupees. The land value of its Delhi factory alone today is reported to be more than 2000 crores. Is this democracy or simple plutocracy?

The government wishes to have a ‘strategic sale’ of Indian Airlines. It is not unknown to Indian politicians that Margaret Thatcher privatised British Airways in the eighties and today under private ownership British Airways is already declared sick. Will they nationalise it again as our politicians did with a large number of sick private sector units in the past after their owners were allowed to squander the resources of those companies. Will the private air transporters fly on uneconomic routes to different parts of the country as Indian Airlines was ordered to do or will they concentrate only on the profitable routes?

The Indian state officially shows interest in the ‘development’ of this vast country of one billion people, but individually all the states and the centre have declared themselves virtually bankrupt and they cannot meet their day to day minimum administrative commitments without raising additional loans internally. Internal debt as a percentage of GDP was 45.44 percent in 1985-86, it went up to 51.51 percent in 1991-92 and in 1998-99 it stood at 51.05 per cent of GDP. Interest payment on loans as a percent of GDP went up from 2.86 percent in 1985-86 to 4.87 percent in 1999-2000. During 1999-2000 the gross market borrowing of the government is projected at Rs 84014 crores, while the centre would be paying an estimated Rs 88000 crores as interest on its liabilities, up from Rs 77248 crores in 1998-99. Due to the devaluation of the rupee, over- invoicing and under-invoicing of imports and exports respectively, accelerated by the withdrawal of restrictions on imports, the Indian balance of trade is permanently out of the control of the central government. The foreign debt is mounting rapidly and we are paying back to the G-7 countries more than what we are receiving as fresh loans annually. The external debt in billions of US dollars was 83.8 at the end of March 1991, it went up to 99 in 1995 and came down to 95.2 in September 1998. In such a scenario there is no other alternative for a country of one billion people than to behave as a schoolchild under the command of the G-7 countries and their managed institutions like World Bank, IMF and WTO. Our ruling elite had to express its regrets for its nuclear experiments and had to assure USA that it would sign the CTBT and only then did these countries agree to withdraw sanctions. Wherever the multinational corporations have set up their tents in the third world countries, they have wilfully destroyed the natural resources of these countries and virtually made them new colonies without any responsibility to the people. They enter these countries as agents of ‘development’ but end up as agents of ‘destruction’. In India, officially administrative powers were handed over to the elite group who enjoyed their confidence in 1947, but despite tremendous sacrifice made by ordinary people, till today it is a common scene invariably in all cities- small or big- to see human beings fighting for food with dogs in the filthy dustbins. Lakhs of young people in the cities are shown on television merrily drinking soft drinks produced by the MNCs while, in the villages people are forced to drink muddy water and suffer from a hundred and one diseases. Mr. Narasimha Rao, one of the Prime Ministers who was ordered to introduce ‘reform’ in India in 1991 had to agree publicly in a meeting of the Confederation of Indian Industry last year that his reform measures had only introduced producers of fast food industries, consumer durables and big automobiles for the narrow roads of India. It is the President of India who has had to warn the government recently that its ‘privatisation’ policies had only created a market for the MNCs but that growing retrenchment and social disparities have created tremendous social tensions. The number of people below the poverty line has increased tremendously both in the villages and in the cities during the reform regime. Small traders and a large number of small-scale industries are closing down their shutters. Big business has already replaced many of them. The President’s suggestions of the need for ‘pedestrian crossings’ in first track lanes is a clear warning signal against imperialist exploiters and their Indian puppets.

Most of our PSUs are economically viable and the nation receives a huge amount every year of corporate taxes from them. Their counterparts in the private sector evade paying any tax or they pay a very small amount which cannot be avoided. The following Table-I shows that so far as payments of corporate tax are concerned, it is the PSUs who pay the highest amount of corporate tax.

Table I
Top Advance Tax Payers in Mumbai Region

(Rs. crores)
Company Expected Tax in March 00 Tax collected in
1998-99 Difference
%
* Deposit Insurance Credit Guarantee Corporation 802.53 755.53 6.22
* Life Insurance Corporation 744.91 613.66 21.39
Videsh Sanchar Nigam Ltd. 697.33 600.00 16.22
* Indian Oil 425.91 452.00 -5.77
** Hindustan Lever 294.67 250.00 17.87
* Hindustan Petroleum Corporation Ltd. 251.89 353.00 -28.64
** Mahindra & Mahindra 66.67 42.53 56.75
** Reliance Industries 64.67 42.53 56.75
** Tata Sons 59.33 65.20 -9.00

* Public Sector Units
** Private Sector
(Economic Times dated 27.1.2000)

There is need for a large amount of money and these PSUs are laying golden eggs. Till yesterday our politicians used to call them Navratna (the Nine Jewels). Now they are to be handed over to the private sector so that they can enjoy a monopoly in the market economy. The Indian Petrochemical Corporation Ltd., one of the Navratnas which earned huge profits till destabilisation was started by the politicians is going to be handed over to its competitor Reliance with a 26 percent stake so that they may enjoy a monopoly in the petrochemical market! In this game of disinvestment/ strategic sale/ privatisation, our politicians were advised to go slow by their foreign masters and not to be in haste. The following Table II shows how their disinvestment / sale campaign performed during the last decade.

Table II
PSU Equity Disinvestment

Year
Budgeted
Actual

1991-92


2,500
3,038

1992-93

2,500
1,961

1993-94

3,500
-48

1994-95

4,000
5,078

1995-96

7,000
362

1996-97

5,000
380

1997-98

4,800
912

1998-99

5,000
9,006

1999-2000

10,000
1,500

Total

44,300
22,189
(Rs crores)
(Hindustan Times 10.10.99)


Our imperialist masters understand, that the PSUs which are owned by the Indian public are a threat to the monopoly exploitation by the MNCs and they should be demolished. As US $ 100 billion external debt is due from India the G-7 countries through the World Bank, IMF and WTO have the possibility of controlling the economic and foreign policies of this country.

Indian organised labour, who have gained reasonable economic prosperity after independence in comparison to their lesser privileged brothers in the unorganised sector, should be in a strong bargaining position to stop the privatisation of the PSUs. Moreover, at this moment the BJP’s trade union has the largest membership and they should be reminded of their obligation to the labour movement of this country. In the last ten years the government wanted to collect Rs 44000 crores to meet its budget expenses by selling off the PSUs but it ended up spending hardly 50 percent of the budgeted receipts. That was done also by selling PSU scripts at throwaway prices. Today there is more than one method to sell shares, and if the government followed transparent policies, they could get much better prices. But look, by merely changing Telecom policy last year from a licence fee system to a revenue sharing one the government gave up its legal claim to a huge amount of Rs 50000 crores as licence fees. The office of the Comptroller and Auditor General has given its note of dissent but the scam goes on.

Here we have a government which is compelled to give more and more concessions to the big business houses e.g., no tax on profits from exports, concessions on Depreciation allowances and Development rebate etc. Very large companies who earn huge book profits need not pay any tax, even the minimum amount of corporation tax levied recently on the so-called no tax companies is going to be diluted. Non-performing assets of the nationalised banks stand today at more than Rs 45000 crores and a Confederation of Indian Industry committee suggested the winding up of three such banks with huge non-performing assets. When bank workers suggested that it was the big business houses led by the well known office bearers and members of the Trade Associations who had failed to return the bank loans of the nationalised banks and that their names should be made public, the government departments took the plea of the ‘secrecy’ clause of the Banking Law. Big businesses are the main clients of foreign banks not because they are operationally efficient but because these people have huge sums of money stashed away in foreign countries. But they go to the nationalised banks when they are assured by the politicians that they need not repay their loans, of course against some price. Instead of privatising nationalised banks, an independent tribunal headed by a retired judge should be appointed by the people of this country to find out how these public funds were systematically siphoned off and who did it. In the meantime recovery should be made of outstanding loans by all means including announcing the names of defaulters and humiliating the so-called self imposed ‘trustees’ of this vast economy. The promoters of privatisation should know that the Indian people in the dawn of 21st Century will not allow their country to be destroyed further without registering suitable challenges. The government will definitely sharpen its black laws like the old Terrorism and Disruptive Activities Act and continue annihilating peoples’ representatives as encounter killings in different parts of the country. Indian history is at crucial juncture. The writing on the wall is clear and unambiguous. As Suniti Ghosh has pointed out ‘in the course of the struggle not only will be country be changed but they (the fighting Indian people) themselves will be transformed. The filth of the ages will be swept clear.’

Click here to return to the April 2000 index.


































(Rs crores)
(Hindustan Times 10.10.99)

Our imperialist masters understand, that the PSUs which are owned by the Indian public are a threat to the monopoly exploitation by the MNCs and they should be demolished. As US $ 100 billion external debt is due from India the G-7 countries through the World Bank, IMF and WTO have the possibility of controlling the economic and foreign policies of this country.

Indian organised labour, who have gained reasonable economic prosperity after independence in comparison to their lesser privileged brothers in the unorganised sector, should be in a strong bargaining position to stop the privatisation of the PSUs. Moreover, at this moment the BJP’s trade union has the largest membership and they should be reminded of their obligation to the labour movement of this country. In the last ten years the government wanted to collect Rs 44000 crores to meet its budget expenses by selling off the PSUs but it ended up spending hardly 50 percent of the budgeted receipts. That was done also by selling PSU scripts at throwaway prices. Today there is more than one method to sell shares, and if the government followed transparent policies, they could get much better prices. But look, by merely changing Telecom policy last year from a licence fee system to a revenue sharing one the government gave up its legal claim to a huge amount of Rs 50000 crores as licence fees. The office of the Comptroller and Auditor General has given its note of dissent but the scam goes on.

Here we have a government which is compelled to give more and more concessions to the big business houses e.g., no tax on profits from exports, concessions on Depreciation allowances and Development rebate etc. Very large companies who earn huge book profits need not pay any tax, even the minimum amount of corporation tax levied recently on the so-called no tax companies is going to be diluted. Non-performing assets of the nationalised banks stand today at more than Rs 45000 crores and a Confederation of Indian Industry committee suggested the winding up of three such banks with huge non-performing assets. When bank workers suggested that it was the big business houses led by the well known office bearers and members of the Trade Associations who had failed to return the bank loans of the nationalised banks and that their names should be made public, the government departments took the plea of the ‘secrecy’ clause of the Banking Law. Big businesses are the main clients of foreign banks not because they are operationally efficient but because these people have huge sums of money stashed away in foreign countries. But they go to the nationalised banks when they are assured by the politicians that they need not repay their loans, of course against some price. Instead of privatising nationalised banks, an independent tribunal headed by a retired judge should be appointed by the people of this country to find out how these public funds were systematically siphoned off and who did it. In the meantime recovery should be made of outstanding loans by all means including announcing the names of defaulters and humiliating the so-called self imposed ‘trustees’ of this vast economy. The promoters of privatisation should know that the Indian people in the dawn of 21st Century will not allow their country to be destroyed further without registering suitable challenges. The government will definitely sharpen its black laws like the old Terrorism and Disruptive Activities Act and continue annihilating peoples’ representatives as encounter killings in different parts of the country. Indian history is at crucial juncture. The writing on the wall is clear and unambiguous. As Suniti Ghosh has pointed out ‘in the course of the struggle not only will be country be changed but they (the fighting Indian people) themselves will be transformed. The filth of the ages will be swept clear.’

Click here to return to the April 2000 index.

http://www.revolutionarydemocracy.org/rdv6n1/psus.htm








How to get Disinvestment Going
Building India's Future





Report of the Special Subject Group






Members :



Shri GP Goenka
Shri Rajeev Chandrasekhar
Shri Nusli Wadia






How to Get Disinvestment Going

"Building India’s Future"





1. Why disinvest?

Since reforms began in 1991, this is the first time after 1993-94 that one feels that reforms are going to go forward. Except industrial delicensing and some changes in the financial sector, almost nothing has so far happened on domestic economic reforms. The second generation of reforms is about domestic economic reforms. And domestic economic reforms have to begin with public sector reform and privatization. Without this as a prerequisite, nothing else is possible. Nothing else can happen. Modern Foods is a good beginning. This report will express some skepticism about what is proposed for Indian Airlines. But more than these two, what has been reported in the media about the government’s intentions is the really positive signal. Why is disinvestment necessary?

THE CITIZENS’ CHARTER
v Who are shareholders of public sector undertakings (PSUs)? Indian citizens are, the government only acts on their behalf.

v As percentage of GDP (gross domestic product), does the government need to spend so much? The government in India spends 32.6% of GDP. Indonesia spends 16.2%, South Korea 17.8%, Malaysia 23.2% and Thailand 18.6%.

v Only 3.5% of GDP is spent on education.

v If government expenditure is reformed, 5.1% of GDP can be saved – 1.5% from privatization and repurchase of public debt, 0.6% from fertilizer subsidies, 0.2% from PDS, 0.3% on public administration and 2.5% from smaller transfers to States. This is an additional expenditure that can be made on primary education and rural health care.

v The government subsidizes losses of almost Rs 80 billion per year made by around 120 Central PSUs.

v Each individual citizen pays Rs 80 a year, each household pays Rs 400 a year. Are 6 million jobs in PSUs worth it?

v The government has no right to decide, shareholders must decide.

The future of India is at stake.

India’s balance sheet is in a mess. It is obvious that over the last 50 years huge amounts of Public money have been invested into the public sector. Hundreds and thousands of Crores of Public money has been invested into various Public Sector Units. However, these investments have not resulted in creation of value on the balance sheet. All in all investments have yielded very little or no return on investments, but creating a huge hole in the balance sheet. This huge hole in the balance sheet is being further exasperated through the excessive borrowings every year and the resultant interest burden



India’s revenue – Profit & Loss statement is also in a mess If one adds up four items of current revenue expenditure – interest payments, defence expenditure, wages and salaries of government employees and subsidies – and compares this figure with total current revenues (tax plus non-tax), there already is a deficit. That means that even if the government stops functioning and ceases to do anything else, there will be a deficit.

This is not tenable. The government should have a surplus on the revenue account to finance a deficit on the capital account. Capital expenditure is what the government should be doing. But there is no money for this. The government should be spending on infrastructure – social and physical. The government should be spending on primary education and rural health care. But there is no money for this.

The situation is worse. A deficit can only be financed through borrowing, which pushes up interest rates and crowds out necessary private sector investments, or through monetisation of the deficit and resultant inflation. Inflation is the most regressive form of taxation that there is. It hurts the poor more than the rich, the poor don’t have inflation-indexed incomes. The government doesn’t have a treasure chest. The poor will pay through higher interest rates or higher inflation.

Inefficient PSUs are largely responsible for the macroeconomic crisis India faced in the 1980s, a phenomenon that spilled over into a balance of payments (bop) crisis in 1990-91.

Some of these PSUs shouldn’t have existed in the first place. That is, they are sick private sector units that should have been closed down. Instead, to protect a few existing jobs, they were absorbed into the public sector.

It is necessary of course to point out that the public sector can mean various things. The government itself (Centre or State) sometimes runs undertakings, these are PSUs proper. Then there are departmental enterprises like railways, post offices or telecommunications, which are not separately incorporated, but are run as government departments. Finally, there are those that are separately incorporated and are run as independent companies. Since such distinctions are not important for this report, when the expression public sector is used, it means all three types.

EMPLOYMENT

v A 7.5% growth rate means 11 million new jobs a year.

v A 6% growth rate means 9 million new jobs a year.

v Lack of PSU reform implies a loss in growth rate from 7.5% to 6% - a loss of 2 million jobs a year.

v In three years, the country can recover the entire present employment in PSUs.

A large chunk of revenue expenditure is interest payments on past government borrowing. If the interest payment problem can be solved, there will no longer be a fiscal deficit problem and the government will have money to spend on capital expenditure or infrastructure. In a country like India, there cannot be a moratorium on interest payments. While borrowing at market-determined interest rates and curbing present government expenditure disciplines future borrowing, the only solution to the debt overhang of earlier borrowing is disinvestments that can be used to retire public debt. That is what the ordinary citizen stands to gain from successful disinvestment.

This argument can be reinforced. PSUs (public sector undertakings) were not created only for the purpose of providing employment.1 They were meant to generate surpluses that flow into the government’s non-tax revenue.2 This hasn’t happened. Disinvestment will improve PSU performance, it will improve PSU competitiveness. Those who have jobs in PSUs will enhance their job and economic security. Disinvestment accomplishes more.

RETURNS
v Who will be satisfied with a return on capital of between 2 to 5%?

v That’s the figure for PSUs.

v If one excludes the ones that are monopolies, the rate of return is lower still.

v The government borrows at 12% for this rate of return and citizens pay for this stupidity.

Inefficient PSUs also constrain the efficient performance of the private sector, since the private sector requires inputs and infrastructure services provided by monopoly suppliers in the public sector. Not everyone can have a job in a PSU. Disinvestment improves efficiency and pushes up growth rates. Growth provides jobs and employment. If the Indian economy can grow at around 7.5%, the backlog of unemployment will begin to disappear.

These points were made with the Central government in mind and the Central government has equity in around 240 PSUs, 27 banks and 2 insurance companies. But at the level of the States, where there are around 1000 PSUs3, the situation is even more serious. Most States are bankrupt. They don’t have money to pay wages and salaries of government employees, forget education and health care, or infrastructure.

India is bound to have a current account deficit in the foreseeable future. This current account deficit has to be financed through capital account inflows. Such inflows can be borrowing or non-debt creating inflows like foreign direct investments (FDI). As the East Asian experience also demonstrates, non-debt creating capital inflows like FDI are preferable. Disinvestment helps to attract global capital. In fact, it helps to attract domestic capital as well.



1 Coal India employs 700,000 people, of whom, one-third are redundant. In the entire governm ent, 2 million people are believed to be redundant. This is out of a total employment of 20 million, of which, 6 million is in PSUs, 3 million in the Central government, 7 million in State governments and 2 million in local bodies.




2 The cash value of most PSUs is more than the present value of profit flows, even if the cash value is evaluated on book value of assets. The conclusion is stronger if valuation is done at current value. Perhaps it is necessary to mention that some loss-making PSUs also have positive market value.



3 Roughly half of these make losses. Of the ones that make losses, roughly half have eroded their net worth and these figures are only for the Centre.


BUILDING INDIA’S FUTURE
SECOND GENERATION REFORMS



PSUs have never earned profits that have exceeded 6 per cent of capital employed (Table 1)4. Their return on capital has been between 5 and 7 percentage points below the rate of interest on long term government bonds. That is just one measure of the lost opportunity cost of return.

Table 1: Profitability of Indian PSUs


91-92




92-93




93-94




94-95




95-96




96-97





No of PSUs




237




239




240




241




239




236





PAT as % of CE




2




2




3




4




6




5





PAT as % of GS




2




2




3




4




4




4





No of profitable PSUs




133




131




121




130




132




129





No of non-profitable PSUs




104




108




116




109




102




104














These poor returns have occurred despite huge rents that accrue from government monopolies like petroleum and power. Once these are netted out, PSUs show negative return (Table 2)5.











4 Public Enterprises Survey. PAT = Profits after tax; GS = Gross sales; CE = Capital employed.

5 L. Bhandari and O. Goswami, The Wasted Years: The Public Sector in India, National Council of Applied Economic Research, forthcoming, 2000.



Table 2: Differential PSU profitability (%)



PAT/Net Sales




91-92




92-93




93-94




94-95




95-96




96-97





All non-service PSUs




2




2.2




3




4.4




4.9




4.4





Less petroleum




0.1




- 0.1




- 1.2




1.6




3.4




2.7





Less petroleum & power




- 2.4




- 2.3




- 3.4




- 0.2




1.3




0.1





Less petroleum, power, coal & lignite (pure manufacturing PSUs)




- 5.3




- 5.4




- 6.9




- 2.3




- 2.4




- 4.3






The controlling shareholder of PSUs has distinctly different objectives. Commercial viability, profitability, cost minimization, optimal investment decisions rarely figure among the concerns of a typical Member of Parliament or a Minister. Next in the hierarchy of shareholders’ representatives comes the civil servants. Bureaucrats specialize in proper procedures. This creates an inconsistency between the organizational forms of governments and those of modern financial and industrial entities: governments and their agents are process oriented, whereas firms have to be result oriented. The mismatch gets exacerbated by a civil servant’s aversion to risk taking.

Given such non-commercial objectives of the representatives of shareholders, most chief executives of PSUs quickly adopt the line of least resistance, develop the ‘don’t rock the boat’ syndrome. Thus, organizational changes are not made, erring staff remain undisciplined, loss-making plants are neither down-sized nor closed, wages are not linked to productivity, and redundant workers are not retrenched.

Above all this, there is Article 12 of the Constitution of India, which defines ‘the State’ as "the Government and Parliament of India and the Government and Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India". Since most PSUs have more than 50% government ownership, they fall under the ambit of ‘the State’. This has affected PSUs in several adverse ways.

All PSUs are expected to achieve a wide variety of non-commercial objectives which are imposed by the Ministries and the Parliament.

There is an annual audit by the Comptroller and Accountant General (CAG) in addition to the audit by the statutory auditor. The area where CAG audits inflict the greatest ex ante damage is in purchases and tenders. PSU managers invariably veer towards selecting the lowest bid, even when they know that the quality is poorer. Innumerable CAG allegations of financial impropriety only on the basis of rejecting the lowest bid have taught PSU managers that propriety dominates profitability.

There are constraints on appointment of senior management personnel, which can only be done through the Public Enterprise Selection Board (PESB) and, thereafter, clearance from the Department of Personnel, the Home Ministry, and, in many instances, by the Office of the Prime Minister. This has led to delays, non-appointment of CEOs and executive directors, and excessive emphasis on seniority — which means that very few CEOs can enjoy their full term.

Since PSUs are interpreted as ‘the State’, they are subject to writ petitions to the Supreme Court under Articles 32, and High Courts under Article 226 of the Constitution.

Again by virtue of being considered as servants of ‘the State’, managers of PSUs are often subjected to criminal investigation by the Chief Vigilance Commissioner and the Central Bureau of Investigation.

State status limits managers from down-sizing plants, retrenching or re-deploying employees.

Finally, the directors of PSUs have little autonomy in finalizing investment decisions.

For a while, governments tried the system of having target-setting memoranda of understanding (MOUs) between PSUs and their administrative ministry. The idea was to make a PSU achieve greater efficiency without diluting the government’s majority ownership and control. Despite the Department of Public Enterprises showing high ‘success’ rates, the MOUs failed.6 First, there is a sample selection bias: virtually no loss-making PSU signs a MoU. Thus, over 55% of the PSUs remain outside the MOU ambit. Second, the targets are set low enough to ensure achievement. The post-MOU performance of the so-called ‘excellent’ and ‘very good’ achievers is no better — and often worse — than before.


6 Bhandari and Goswami (2000).

2. Tactics and strategy



There is a difference between tactics and a strategy. So far, disinvestment has been driven by the tactical compulsion of financing the fiscal deficit. This is perhaps the reason why the word privatization has not been used until recently, the word disinvestment tending to imply a soft choice. This is in contrast to a country like Britain, where privatization and disinvestment were driven by a conscious recognition that this improves efficiency.7 However, there are no soft choices. As countries like Peru, Brazil, Chile, France, Morocco, Poland, Indonesia, Malaysia, the former German Democratic Republic, the Philippines, Pakistan, Sri Lanka, Taiwan, Indonesia and New Zealand have recognized, the fiscal deficit or releasing resources for social or infrastructure sectors cannot be the only reasons for disinvestment. Other reasons are improved efficiency and competition and broadening and deepening the capital market.

PSU reform attempts go back to the 1980s, where there was some attempt to increase functional autonomy of PSUs, without privatization and disinvestment. Post-1991, there were ad hoc equity sales in around 50 PSUs, with equity sales ranging from 5% to 49%. There was a hang-up about letting go of more than 51% equity.8 This led to some improvement in efficiency and pre-tax profit as a percent of capital employed in PSUs more than doubled from the base figure of 3.4% in 1990-91.9 This illustrates what is possible with full-fledged reforms.

7 However, the Rangarajan Committee Report (Report of the Committee on Restructuring Public Enterprises), 1992, did mention improved efficiency as an objective.

8 As a parallel move, fresh issues of equity in global markets for expansion also diluted government equity.

9 See detailed figures in M.S. Ahluwalia, “India’s Economic Reforms: An Appraisal” in Jeffrey D. Sachs, Ashutosh Varshney and Nirupam Bajpai edited, India in the Era of Economic Reforms, Oxford University Press, 1999.



SECURING THE FUTURE OF INDIA’S PSUs









The hang-up about giving up more than 51% equity was possibly given up with the setting up of the Disinvestment Commission in 1996, a commission that has now been wound up. The Disinvestment Commission examined 50 PSUs, ostensibly non-strategic and non-core, where government equity could be brought down to zero and management handed over. In most cases, it is now accepted that government equity can be brought down to 26%. The 51% figure is important. Any firm where the government has more than 50% equity is legally interpreted as part of Article 12 of the Constitution and is accountable to administrative ministries, government audits and Parliament. There will also be the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI). Moreover, with a 51% hang-up, new private shareholders will always be a minority on the boards. Naturally, bids would have been higher had the government agreed to dilute equity to 26% in a time-bound fashion.

However, driven by tactical considerations, the entire disinvestment process so far has been left to bureaucrats who do not necessarily have a perfect understanding of how capital markets operate or how international investor decisions are taken. Therefore, issuance is piecemeal, there are long delays in appointment of lead managers and finalization of IPOs (initial public offerings) and flawed criterion used in selection of lead managers. There has been lack of transparency, a fact that reports of the Comptroller and Auditor General (CAG) of India have also commented on. It should not be surprising that foreign investments in the disinvestment process in India are a trickle compared to global investments that flow into disinvestment processes world-wide. It is remarkable that not a single PSU is yet under autonomous private management and the cross-holdings by oil companies is a particularly perverse illustration of this phenomenon.

It is only recently that the government has become a bit more serious about disinvestment. As the following will make clear, this report favours what has been done for Modern Foods, but not what has been done for Indian Airlines, unless that is a temporary step.

Unlike what happened historically, a strategy will have a proper vision and plan of action.







First

, the management and responsibility of the entire disinvestment process should exclusively be with the Disinvestment Ministry (DM). Setting up such a DM ensures transparency and fairness and also contributes to a comprehensive approach to disinvestment, as opposed to ad hoc decisions. This is one reason why most developing countries have opted for formal structures. Other ministries can be co-opted only if it is absolutely necessary. The Secretary of DM must have sufficient capital market experience. For each proposal, the DM will be responsible for taking the proposal to a Cabinet Committee on Disinvestment that will consist of the Prime Minister, the Finance Minister, the Disinvestment Minister and any other economic ministry that may be necessary from the point of view of the specific proposal. The DM will be a specific pre-determined target of capital that will be raised over a fixed time horizon, say the next two years. Thus, for the next two years, the DM will develop a plan and course of action that addresses individual companies and sectors and draws up a strategy for each. The strategy need not be the same across all companies or across all sectors. To ensure a realistic and successful course of action, the DM will have an Advisory Board. The Advisory Board will have as members, individuals who have sufficient capital market and international investor experience. Examples are representatives from financial institutions, management consultants, merger and acquisition (M&A) experts and private companies. It is important to ensure that the DM and politicians and bureaucrats involved in the disinvestment process are granted immunity from prosecution and investigation by the Central Bureau of Investigation (CBI) or Central Vigilance Commission (CVC). If the process is transparent, as is argued in this report, the need for these will not arise. In this framework, there is no need to revive the Disinvestment Commission. It has no further role to play.

HOW MANY OF THESE JUSTIFICATIONS FOR PSUs ARE VALID NOW?

v Infant industry

v Heavy industry based development strategy

v Right distribution of ownership of capital

v Lack of resource

v No technical competence in private sector

v Under-developed capital market

v Balanced regional development

v Employment promotion

v Protection

Second

, the candidates for disinvestment must be chosen carefully. Stronger PSUs are the ones that must enter the market first, in the immediate short run (the first four years). This will whet the appetite of investors and make India a success story, a phenomenon that tends to snowball. Creation of markets is in fact an indirect positive fallout of successful disinvestments. In the medium term however, all government companies that are non-strategic should be candidates for disinvestment. Strategic or core must be carefully defined. Other than arms, ammunition and defence equipment, atomic energy, radioactive minerals and railway transport, there is nothing else that can appropriately be defined as strategic or core. Therefore, in every other case, there is no reason why government equity should not be brought down to 26% and this includes banking, insurance, aviation, the petroleum sector and tourism. 26% equity is enough to ensure that the government has some influence over corporate decision making. The only caveat to 26% can be if prior privatization of management enhances valuation. The disinvestment process is best managed if there are a defined number of large transactions per year, as opposed to a large number of small transactions. Perhaps some overall restructuring of PSUs through mergers and acquisitions (or even winding up) is therefore necessary prior to disinvestment.

Stated differently, one of the first decisions the DM has to take is on the extent of disinvestment. Will there be total disinvestment? Will there be partial disinvestment with managerial control retained by the State? Will managerial control be handed over to a strategic investor, with only minority share holding granted to such an investor? As the statements above indicate, this report argues for total disinvestment. The selling of bundles of portfolios of shares will not work. Moreover, selling lots of 5 or 10% is counterproductive because buyers know that further shares will be offered. The mindset that a PSU, even if does not make losses, is a going concern must change. Instead, the block of assets must be sold. Whether the enterprise will continue to be a going concern or not, is for the new management to decide.

There is some urgency in doing this. Before liberalization, many PSUs were monopolies. They are now being exposed to competition. This process will intensify as further liberalization of trade (cuts in tariffs and elimination of quantitative restrictions) and investments (foreign direct investments) take place. To get a good value for these PSUs, the time to disinvest is now. Not later.

Third

, the present system of selecting lead managers on the basis of bidding for fees is entirely unsatisfactory. Second-best lead managers are chosen and are often not interested, or do not deliver their best resources, to issuances. Globally, there are only 5 or 6 top lead managers. All these should be empanelled and additions to this panel can be through co-managers from smaller investment banks. The norms for fees can be fixed and such norms can be suggested by a team of financial institutions that have requisite expertise. These empanelled lead managers can be allotted initial issuances in random fashion and further issuance mandates can be based on performance (over-subscription, market-making, pricing). All this will eliminate delays in the process of selecting lead managers.

Fourth

, the process of disinvestment need not be completely capital market driven, as it is today. The capital market focus, the small percentage of equity disinvested and an overall lack of clarity result in a less than optimum value being derived from the disinvestment process. There are nine, not mutually exclusive, options possible for the disinvestment process and PSU reform and all nine can be used to ensure flexibility and maximum value from disinvestments. Often, the choice may be dictated by whether the eventual shareholding is meant to be narrow or wide. These nine options are the following. First, there can be strategic majority sales to a partner and global trends show that there is more realizable value (about 20 to 30% more) through strategic sales to companies in the same sector. 51% or even 100% equity can be sold to such strategic buyers. Second, there can be open public auctions for units to bidders, with or without pre-qualifications. However, sales should not be only to public sector financial institutions and their subsidiary mutual funds. Third, there can be public sales through stock exchanges in the domestic capital market. One can continue with capital market disinvestments, except that larger shares of equity must be off-loaded through initial IPOs. It is necessary to privatize management before IPOs for value to be maximized. Global trends are that 20 to 30% more value is obtained through disinvestments after privatization of management than before privatization of management. Fourth, it is possible for PSUs to enter into joint ventures (JVs) with the private sector and transfer their business for stock in the new enterprise. However, in such cases, shareholder agreements between the private company and the PSU must over-ride government decision making or policy. Once the JV route has been followed, capital market transactions are possible. Fifth, GDRs/depository receipts can be issued in international capital markets.10 Sixth, as an imperfect framework of disinvestments, there can be management contracts for limited periods of time with private operators. Seventh, there can be sales in blocks. Eighth, despite all attempts at reform, there will be some clear cases of winding up. Ninth, there can be mergers and restructuring. For Central PSUs, this report later gives suggestions about what modality can be attempted for which PSU.

Since employees and Indian citizens in general have to be part of the disinvestment process, employees must first be given up to 10% of stock at par or at discounts on market values. This can be spliced with deferred payment for employees and loyalty bonus of shares if shares are held for a minimum period. In addition, a small additional IPO or up to 10% of capital can be offered to Indian citizens in individual capacity. There can be a caveat that a single individual cannot have more than 1000 shares. This will eliminate some resistance to disinvestment and employees or others will become part of the process that creates more value for their company. PSUs will move from being employment creators for those who are employed with the company to enterprises that create wealth for their share-holders, the citizens of India. This is what should have happened with PSUs in the first place. In addition, it may be necessary to ensure that willing employees are provided attractive severance packages. Without the possibility of surplus manpower being shed, bids will be marked down. The role of a media campaign in generating consensus also needs to be emphasized.

What is the need to privatize profit making PSUs?

v Because it fetches better prices.

v Unless an enterprise is in the strategic sector and unless the market structure is a monopoly, profit making is an argument for disinvestment – not an argument against it.

There will continue to be a problem with loss-making PSUs, many of which historically are loss-making private sector enterprises that should have been closed down, but were nationalized in the 1970s. The Board for Industrial and Financial Reconstruction (BIFR) is supposed to examine these and recommend ones that cannot be revived. Not a single one has been closed down, primarily because of court intervention on labour grounds. While loss-making PSUs that have positive market value can be sold, this is also true of loss-making PSUs that have eroded their net worth,11 provided that the assets are sold as a block. There may be a few cases where actual closing down is necessary. Properly used, the National Renewal Fund (NRF) can be used to retrain and re-deploy people who are retrenched because of closing down. However, the NRF cannot be equated with a Voluntary Retirement Scheme (VRS). As originally stated, the NRF was supposed to be used for VRS, retraining and unemployment insurance. Only the first has come about. The proceeds of disinvestment should not go into the Consolidated Fund of India. They have to be used to retire the public debt or for a genuine NRF (from which Rs 1000 crore can be earmarked for VRS). In fact, the present value of future wage and pension flows of workers is easy to compute. From funds obtained through sales, this amount can be set aside, so that a worker who loses a job does not lose the income security.

There has to be fresh legislation to ensure fast transfer or leasing of government land and user rights. This can even provide for special tribunals, without violating Article 14 of the Constitution. Otherwise, the entire process can get stuck in the court system.

10 In passing, there should be greater resort to the American Depository Receipt (ADR) route, which has greater depth and can therefore offer higher valuation.

11 A rough figure will be 60 at the Central level and at least 60 at the State level.

3. Sequence and transition



For the entire mechanism and process to be credible, two units must be sold by 31 March 2000. Thereafter, there should be a clear target for the next two years. 12 billion US dollars over the next two-year time span is a reasonable target, that is, Rs 52,000 crores.

It is not possible for this report to be specific about the time sequencing of disinvestment. However, some principles can be mentioned. First, there is urgency about sectors where monopoly is being threatened because of liberalization. Second, the government is generally bad in areas where there is a service orientation. Therefore, services, manufacturing and trading are sectors where the initial flush of disinvestments can take place. This emphasis on service orientation also explains why banks have to go first.

Barring the strategic sectors, no more than 26% government equity need be retained. But in the interim period, the government might wish to continue as the single largest shareholder. Retaining government shareholding directly will constrain PSUs because of interference from government ministries, Parliament and government audits. Once government equity is below 50%, decisions on appointing management must be left to Boards and not to Joint Secretaries in administrative ministries. Another advantage of bringing equity down to 26% is avoidance of the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI) and the Prevention of Corruption Act (PCA). Section 13 of the Prevention of Corruption Act defines that a public servant is guilty of criminal misconduct (corruption) if a decision taken by the public servant benefits a third party, unless it can be proved that this benefit to the third party is in the public interest. Any decision taken benefits a third party and it is impossible to prove that this benefit to the third party is in the public interest. Therefore, public servants become risk averse and don’t take decisions. There is no point asking PSUs to function along commercial principles as long as such a section continues.

Ideally, until the government shareholding is brought down to below 51%, there should be a National Shareholding Trust as a non-profit trust under the Societies Registration Act or the Companies Act. The entire government shareholding can be transferred to this Trust. On the advice of the DM, the Trust will sell equity in block sales to banks, financial institutions or mutual funds or directly to retail investors. In the interim, there can be a stipulation that shares held by the Trust will not drop below the 26% threshold. The Trust will be preferable to a Special Purpose Vehicle as it will take the enterprise out of the purview of the CVC, CBI, PCA, government ministries, Parliament and government audits. However, if this is not done and government shareholding is more than 50%, the enterprise must still explicitly be taken outside the CVC, CBI, PCA, government ministries, Parliament and government audits. The salaries paid to management must also be delinked from government salary structures. Management salaries have to be decided by boards and by no one else.

There has to be a proper competition policy to cover unfair and restrictive trade practices and issues like transfer pricing. The competition policy must also cover mergers and acquisitions. At present, no prior approval is required for mergers and acquisitions, although that is the practice in many developed countries also. Subsequent de-monopolization through breaking up involves significant transaction costs. It is a better idea to require prior approval.

One must also be careful in some service sectors. With many individual countries, service sector liberalization depends on reciprocity clauses – banking and aviation are examples. These may have to be renegotiated if government equity drops below 50%.

Incidentally, there is no reason to exclude banking from disinvestments, although changes in the Banking Regulation Act will be necessary. Banks, when privatized, can have certain guidelines on lending for priority sectors. But these guidelines must be set out by the Reserve Bank in the offer letter itself, and not introduced subsequently.

In line with these points, this report suggests the following modalities for Central PSUs. In the annexure table, "X" indicates that the route is appropriate for a PSU, the absence of "X" indicates that for that PSU, that route is not appropriate.

4. The road map

Explain to citizens the benefits of disinvestment – more expenditure on education, health care and infrastructure, higher growth, more employment, lower interest rates, lower inflation and costs of the present status quo. Use media campaigns.

Disinvestment should be driven by efficiency, rather than fiscal deficit compulsions.

There should not be ad hoc sales, nor any hang-ups about clinging on to 51% equity. With a 51% threshold level, new private shareholders will be in the minority on boards and realizations will be higher without this limit.

If government equity is brought down to 26%, the enterprise will no longer be "State" as defined by Article 12 of the Constitution. It will thus be outside the ambit of the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI), administrative ministries, government audits and accountability to Parliament.

Disinvestment cannot be left to bureaucrats who have no experience of capital markets or international investor sentiments. They will delay appointment of lead managers, finalization of IPOs (initial public offerings) and develop non-transparent processes. As a result of this, not a single PSU has changed hands since 1991.

There must be Disinvestment Ministry (DM), other ministries can be co-opted only if absolutely necessary. The Secretary of DM must preferably have capital market experience. DM will be responsible for taking the proposal to a Cabinet Committee on Disinvestment consisting of the Prime Minister, the Finance Minister, the Disinvestment Minister and any other economic ministry considered necessary. There is no need for a Disinvestment Commission. The DM will have an Advisory Board consisting of members who have sufficient capital market and international investor experience and there will be a transparent and strategic approach.

The DM will have a specific pre-determined target of capital that will be raised over a fixed time horizon, such as, 12 billion US dollars over the next two years.

The DM and politicians and bureaucrats involved in the disinvestment process must be granted immunity from prosecution and investigation by the Central Bureau of Investigation (CBI) or Central Vigilance Commission (CVC). If the process is transparent, the need for these will not arise.


POSSIBLE STRATEGY FOR DM
v Monopoly market, efficient PSUs and high social obligation sectors – retain 51% initially

v Monopoly market, efficient PSUs and low social obligations – down to 26%

v Competitive market, efficient PSUs and high social obligations -– retain 26%

v Competitive market, efficient PSUs and low social obligations – down to 0%

v Monopoly market, inefficient PSUs and high social obligations – management contracts

v Monopoly market, inefficient PSUs and low social obligations – joint ventures

v Competitive market, inefficient PSUs and high social obligations – down to 0%, sales as block

v Competitive market, inefficient PSUs and low social obligations – down to 0%, sales as block or close down

Candidates for disinvestment must be chosen carefully by the DM. The stronger PSUs must enter the market first, so as to create an appetite for investors. Before this, there may be a need for mergers and acquisitions and winding up among existing PSUs.

All non-strategic government companies should eventually be brought down to 26% government equity, unless prior privatization of management ensures better valuation. 26% is enough to ensure influence on managerial decision making. There must be a defined number of large transactions per year, not a large number of small transactions.

Arms, ammunition, defence equipment, atomic energy, radioactive minerals and railway transport are the only strategic sectors. Everything else can eventually be divested, including banks.

The present system of selecting lead managers on the basis of bidding for fees is unsatisfactory. Globally, there are only 5 or 6 top lead managers and they can constitute the panel.

Empanelled lead managers can be allotted initial issuances in random fashion and further issuance mandates can be based on performance (over-subscription, market-making, pricing).

The disinvestment process should not be capital market driven and all nine forms of disinvestment and PSU reform can be judiciously used by the DM – first, strategic majority sales; second, open public auctions for units to bidders, with or without pre-qualifications; third, domestic public sales through stock exchanges; fourth, joint ventures, where shareholder agreements must override government decisions; fifth, GDRs/depository receipts; sixth, management contracts; seventh, block sales; eighth, winding up; and ninth, mergers/restructuring.

Until government shareholding is brought down to below 51%, there should be a National Shareholding Trust as a non-profit trust under the Societies Registration Act or the Companies Act. The entire government shareholding can be transferred to this Trust. On the advice of the DM, the Trust will sell equity in block sales to banks, financial institutions or mutual funds or directly to retail investors. The Trust will be preferable to a Special Purpose Vehicle as it will take the enterprise out of the purview of the CVC, CBI, Prevention of Corruption Act, government ministries, Parliament and government audits.

However, if this is not done and government shareholding is more than 50%, the enterprise must still explicitly be taken outside the CVC, CBI, Prevention of Corruption Act, government ministries, Parliament and government audits. Managerial salaries should be delinked from government salaries.

To address the political economy of the disinvestment process, employees can be given 10% of stock at par or at a discount on the market value. There can also be an additional IPO of up to 10% to citizens in individual capacity, with a stipulation that no individual can hold more than 1000 shares.

PSUs that have eroded their net worth must be closed.

Disinvestment proceeds should not flow into the Consolidated Fund of India and be used to finance revenue expenditure. A stipulated percentage can be earmarked for capital expenditure and building physical and social infrastructure. Another percentage can be used for retiring public debt. The remainder, which should be a smaller percentage, can be used for a National Renewal Fund, which should not be equated with a Voluntary Retirement Scheme only.

There must be fresh legislation for the transfer of government land and assets. Special tribunals to dispense with time-consuming court procedures need to be set up.

Enact a competition policy and renegotiate reciprocal service sector agreements where necessary.





PSU


Strategic sales


Open public auctions to select bidders


Domestic capital market sales to public


Joint ventures


GDRs, ADRs


Management contracts


Block sales


Winding up


Mergers, restructuring



Air India, Pawan Hans


X


X



Indian Airlines


X


X



Airports Authority


X


X


X



Bank of Baroda, Bank of India, Canara Bank, Corporation Bank, SBI, Syndicate Bank, PNB


X


X


X



All other banks


X


X


X



BCCL, CCL, NCL, SECL, WCL, Coal India


X



Bharat Earth Movers


X


X



BHEL


X



IOC, ONGC, GAIL


X


X



BPCL, HPCL, IPCL, IBP, Bongaigaon Refinery, Cochin Refineries


X


X



Cement Corporation


X



Central Inland Water Transport

Corporation


X


X



Central Warehousing Corporation


X


X


X



Cochin Shipyards, Goa Shipyards, Hindustan Shipyard


X



Container Corporation


X



CMC


X



Cement Corporation


X



DTC


X



Dredging Corporation



EIL/EPIL


X


X



ECGC


X


X



Fertilizer Corporation, FACT, GSFC, Madras Fertilizers, National Fertilizers, Southern Pesticides


X


X


X



Paradeep Phosphates


X


X



FCI


X



Handicrafts & Handloom Exports Corporation


X



Hindustan Antibiotics


X


X



HAL (spinning off airframes, engine maintenance)


X


X



Hindustan Cables, Hindustan Copper, HEC, Hindustan Fertilizers, Hindustan Fluorocarbons, Hindustan Latex, Hindustan Insecticides


X


X



HMT


X


X



Hindustan Newsprint, HindustanPaper


X



HOCL


X


X


X



HTL


X


X



Hindustan Zinc


X



Hotel Corporation


X


X



HUDCO


X


X



Indian Additives


X



IDPL


X


X



IFCI, IDBI, LIC, GIC


X


X


X



ITI


X



IISCO, Sponge Iron


X


X


X



ITDC


X


X


X



KRIBHCO


X


X



Kudremukh Iron Ore


X


X



Konkan Railway, IRCON, RITES


X


X



Lubrizol India


X



MTNL


X


X


X



MMTC, STC


X


X


X



BALCO, NALCO


X


X


X


X


X


X



NBCC


X


X



NHPC, NTPC


X



NFDC


X



National Seeds


X



NTC


X


X



Neyveli Lignite


X


X


X



PFC


X



Power Grid Corporation


X


X


X



Semiconductor

Complex


X


X



SCI


X


X


X


X



SAIL


X



VSNL


X


X


X



Vizag Steel


X


X









--------------------------------------------------------------------------------






Basic listings
Balmer & Lawrie
Established in 1867 by two Scotsmen, George Stephen Balmer and Alexander Lawrie, the company represents a tradition of stability and resilience. High standards of customer service, innovative outlook and dedicated human resources have enabled the organization to achieve a leadership role in today's highly competitive markets.
web site url : http://www.balmerlawrie.com
Bharat Coking Coal Limited (BCCL)
Bharat Coking Coal Limited (BCCL) is a Public Sector Undertaking engaged in mining of coal and allied activities. It occupies an important place in as much as it produces bulk of the coking coal mined in the country. BCCL meets almost5 50% of teh total prime coking coal requirement of the intregrated steel sector. It also supplies substantial quantity of coal to the pig iron sector and bulk of the coal requirement of the power station in the Northern region.
web site url : http://www.bccl.nic.in/
Bharat Dynamics Ltd
BDL was established in July 1970 under the control of Ministry of Defence with the prime objective of establishing a production base for guided missiles in India. It is now one amongst a few strategic industries of the world having the capability to produce the most advanced guided missile systems for Armed Forces.
web site url : http://bdl.ap.nic.in/
Bharat Earth Movers Ltd
Bharat Earth Movers Limited is a premier ISO 9001-2000 Company in India and the second largest manufacturer of earthmoving equipment in Asia. A four- decade-old multi-locational and multi-product company, BEML has vital applications in diverse sectors of economy such as coal, mining, steel, cement, power, irrigation, construction, road building and railway. It has expanded its product range to cover high-quality hydraulics, heavy-duty diesel engines, Welding robots and undertaking of heavy fabrication jobs.
web site url : http://www.bemlindia.com/
Bharat Heavy Electricals Limited (BHEL)
BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide network of BHEL's 14 manufacturing divisions, four Power Sector regional centers, over 100 project sites, eight service centers and 18 regional offices, enables the Company to promptly serve its customers and provide them with suitable products, systems and services - efficiently and at competitive prices.
web site url : http://66.39.99.160/bhel/
Bharat Refractories limited
Bharat Refractories limited, a public sector company under administrative control of ministry of steels, Govt. of India came into existence in 1974. Since inception, the company has crossed major milestones to become one of the largest refractory producers in India. The company is world renowned for its quality and has been successfully catering to the requirement of the steel industry and other users.
web site url : http://www.bharatref.com/
Bharat Sanchar Nigam Limited(BSNL).
On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was christened Bharat Sanchar Nigam Limited(BSNL). Today, BSNL is the No. 1 Telecommunications Company and the largest Public Sector Undertaking of India with authorized share capital of $ 3600 million and networth of $ 13.85 billion. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections.
web site url : http://www.bsnl.co.in/
Bongaigaon Refinery & Petrochemicals Ltd
Bongaigaon Refinery & Petrochemicals Limited (BRPL) was incorporated as Government of India Undertaking under the administrative control of the Ministry of Petroleum and Natural Gas on 20th February 1974. The company became a subsidiary of IndianOil on 29th of March 2001 after disinvestments of share by Govt of India.
web site url : http://www.brplindia.com/
Cement Corporation of India Limited (CCI)
Cement Corporation of India Limited (CCI) was incorporated as a Company wholly owned by Government of India on 18th January 1965 with the principal objective of achieving self sufficiency in cement production. The authorised and paid-up capital of the company as on 31.3.2003 was Rs. 700 crores and Rs. 428.28 crores respectively.
web site url : http://business.vsnl.com/cci/
Cental Coal Fields Ltd
The Mission of CCL is to produce and market the planned quantity of coal and coal products efficiently and economically with due regard to safety, conservation and quality.
web site url : http://ccl.cmpdi.co.in/
Centre For Railway Information Systems
Centre For Railway Information Systems is entrusted with the task of design, development and implementation of the Freight Operations Information Systems(FOIS), alongwith its associated communications infrastructure. The Centre started functioning from July,1987. It is a registered society having an autonomous status and headed by Managing Director . CRIS is mainly a project oriented organisation engaged in development of major computer systems on the Railways.
web site url : http://www.cris.org.in/
Coal India Ltd
The company is incorporated under the Companies Act, 1956 and is wholly owned by the Government of India (GOI). Company's objective is to promote the development and utilisation of the coal reserves in the country for meeting the present and likely future requirement of the nation with due regard to need for conservation of non-renewable resources and safety of mine workers.
web site url : http://coalindia.nic.in/
Engineers India Ltd
Engineers India Limited was established in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects.In addition to petroleum refineries, with which EIL started initially, it has diversified into and excelled in other fields such as pipelines, petrochemicals, oil and gas processing, offshore structures and platforms, fertilizers, metallurgy and power.
web site url : http://www.engineersindia.com/
Erstwhile Gas Authority of India Limited(GAIL)
GAIL (India) Ltd, (Erstwhile Gas Authority of India Limited) was set up by the Indian Government in August 1984 to create gas sector infrastructure for sustained development of the gas market in India. Primarily a natural gas company, it deals with all aspects of the gas-value chain, including exploration, production, transmission, extraction, processing, distribution and marketing of natural gas and its related process, products and services.
web site url : http://www.gailonline.com/
Food Corporation of India
The Food Corporation of India was setup under the Food Corporations Act 1964, in order to fulfil objectives of the Food policy. Effective price support operations for safeguarding the interests of the farmers. Distribution of foodgrains throughout the country for Public Distribution System; and Maintaining satisfactory level of operational and buffer stocks of foodgrains to ensure National Food Security.
web site url : http://fciweb.nic.in/
Heavy Water Board
Heavy Water Board (HWB), a constituent unit under Department of Atomic Energy, is primarily responsible for production of Heavy Water (D2O) which is used as a 'moderator' and 'Coolant' in the nuclear power as well as research reactors. HWB is successfully operating six Heavy Water Plants in the country.
web site url : http://www.heavywaterboard.org/
Hindustan Aircraft Limited
HAL's supplies / services are mainly to Indian Defence Services, Coast Guard and Border Security Force. Transport aircraft and Helicopters have also been supplied to Airlines as well as State Governments of India. The Company has also achieved a foothold in export in more than 30 countries, having demonstrated its quality and price competitiveness.
web site url : http://www.hal-india.com/
Hindustan Insecticides Limited (HIL)
HIL, a Government of India Enterprise under the Ministry of Chemicals and Fertilizers, Deptt. Of Chemicals & Petrochemicals, Government of India, was incorporated Programme launched by the Government of India. Subsequently the Company diversified into agro pesticides to meet the requirements of agriculture sector, and has grown manifold, with a turnover of 1148 million rupees in 2001-02. Company has also entered into the field of safe and eco-friendly botanical and bio-pesticides for public health and plant protection.
web site url : http://www.hil-india.com/
Hindusthan Aeronautics Ltd
The history of the Indian Aircraft Industry can be traced to the founding of Hindustan Aircraft Limited at Bangalore in December 1940 in association with the erstwhile princely State of Mysore and late Shri Seth Walchand Hirachand, an Industrialist of extra -ordinary vision. Govt. of India became one of its shareholders in March 1941 and took over the management in 1942. Hindustan Aircraft Limited was merged with Aeronautics India Limited and Aircraft Manufacturing Depot, Kanpur to form Hindustan Aeronautics Limited (HAL) on 01st October 1964.
web site url : http://www.hal-india.com/
Indian Oil Corporation
Indian Oil Corporation Limited (IndianOil) is the country's largest commercial enterprise, with a sales turnover of Rs. 1,30,203 crore.IndianOil is India's No.1 Company in Fortune's prestigious listing of the world's 500 largest corporations, ranked 189 for the year 2004 based on fiscal 2003 performance. It is also the 19th largest petroleum company in the world.
web site url : http://www.indianoilcorp.com/
India Trade Promotion Organisation (ITPO)
India Trade Promotion Organisation (ITPO)is the nodal agency of the Government of India for promoting the country's external trade. ITPO, during its existence of nearly three decades, in the form of Trade Fair Authority of India and Trade Development Authority, has played a proactive role in catalysing trade, investment and technology transfer processes. Its promotional tools include organizing of fairs and exhibitions in India and abroad, Buyer-Seller Meets, Contact Promotion Programmes, Product Promotion Programmes, Promotion through Overseas Department Stores, Market Surveys and Information Dissemination.
web site url : http://www.indiatradepromotion.org/
Kudremukh Iron Ore Company Limited
Kudremukh Iron Ore Company Limited, a wholly owned Government of India Enterprise, was established in 1976 to develop the mine and plant facilities to produce 7.5 million tonnes of concentrate per year. The mine and plant facilities were commissioned in 1980 and the first shipment of concentrate was made in October 1981. A pelletisation plant with a capacity of 3 million tonnes per year was commissioned in 1987 for production of high quality blast furnace and direct reduction grade pellets for export
web site url : http://www.kudremukhore.com/
National Fertilizers Ltd
NFL was incorporated on 23rd August, 1974 with two manufacturing Units at Bathinda and Panipat. Subsequently, on the reorganization of Fertilizer group of Companies in 1978, the Nangal Unit of Fertilizer Corporation of India came under the NFL fold. The Company expanded its installed capacity in 1984 by installing and commissioning of its Vijaipur gas based Plant in Madhya Pradesh.
web site url : http://www.nationalfertilizers.com/
National Scheduled Tribes Finance and Development Corporation (NSTFDC)
NSTFDC is the Apex organisation for providing financial assistance for scheme(s)/project(s) for the economic development of Scheduled Tribes. The objectives of NSTFDC are Identification of economic activities of importance to the Scheduled Tribes so as to generate employment and raise their level of income.Upgradation of skills and processes used by the Scheduled Tribes through providing both institutional and on the job training etc.
web site url : http://nstfdc.nic.in/
National Small Industries Corporation Ltd.
The National Small Industries Corporation Ltd., an ISO 9001:2000 Company, was established in 1955 by the Government of India with a view to promote, aid and foster the growth of Small Industries in the country. NSIC continues to remain at the forefront of industrial development throughout the country, with it's various programs and projects, to assist the small scale sector in the country.
web site url : http://www.nsicindia.com/
Neyveli Lignite Corporation
NLC Limited is an integrated project complex owned by Govt.of India. Liginite excavation and power generation are the core activities of NLC. It has three opencast liginite mines.
web site url : http://www.nlcindia.co.in
Nuclear Power Corporation of India Limited (NPCIL)
Nuclear Power Corporation of India Limited (NPCIL) is a wholly owned Enterprise of the Government of India under the administrative control of the Department of Atomic Energy (DAE), Government of India. It has been incorporated in September 1987 as a Public Limited Company under the Companies Act, 1956 with the objective of undertaking the design, construction, operation and maintenance of the atomic power stations for generation of electricity in pursuance of the schemes and programmes of the Government of India under the provision of the Atomic Energy Act, 1962.
web site url : http://www.npcil.org/
Oil and Natural Gas Corporation Limited (ONGC)
A modest entity in the serene Himalayan settings - Oil and Natural Gas Corporation Limited (ONGC) was set up as a Commission on August 14, 1956. The company became a corporate on June 23, 1993, which has now grown into a full-fledged horizontally integrated petroleum company. Today, ONGC is a flagship public sector enterprise and India's highest profit making corporate, achieving the record of being the first Indian corporate to register a five digit profit figure of Rs. 10,529 Crore in the year 2002-03.
web site url : http://www.ongcindia.com/
Shipping Corporation of India
The Shipping Corporation of India was established on 2nd October 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Starting out as a marginal Liner shipping company with just 19 vessels, the SCI today has metamorphosed into a giant conglomerate having 83 ships of 4.6 million DWT with substantial interests in 10 different segments of the shipping trade.
web site url : http://www.shipindia.com
Steel Authority of India Limited (SAIL)
Steel Authority of India Limited (SAIL) is the leading steel making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets.
web site url : http://www.sail.co.in
Steel Authority of India
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets.
web site url : http://www.sail.co.in/
The Nuclear Fuel Complex (NFC)
The Nuclear Fuel Complex (NFC), established in the year 1971 is a major industrial unit of Department of Atomic Energy, Government of India. The complex is responsible for the supply of nuclear fuel bundles and reactor core components for all the nuclear power reactors operating in India. It is a unique facility where natural and enriched uranium fuel, zirconium alloy cladding and reactor core components are manufactured under one roof starting from the raw materials.
web site url : http://www.nucfuel.gov.in/default.htm
Uranium Corporation Ltd
Incorporated on 4th October 1967, Uranium Corporation of India ltd, a public sector Enterprise under the Department of Atomic Energy, is at the forefront of the Nuclear Power Cycle. Fulfilling the requirement of Uranium for pressurised Heavy Water Reactors, UCIL plays a very siginificant role in India's Nuclear Power Generation Programme.
web site url : http://www.ucilindia.com/








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