The political–ideological mandate for the PSU’s disinvestments is to select big Indian companies and/or multinational corporations for taking over of their management to begin with, subsequently to be followed by transfer of full ownership as part of a privately negotiated deal or by ostensibly a public offer for the sale of the whole of the government equity via the stock market.

The step by step sale of Maruti-Suzuki, car-manufacturing company to the Japanese partners, initiated as a joint venture with minority holdings for the Japanese partners was so arranged. This was advertised as a great success. This marked indeed a big step towards crony capitalism in India.

The disinvestments of government equity in PSUs for raising financial resources for meeting demand for expenditure on priority areas such as education, health, public roads and so since this been shelved. The privatisation of PSUs is no longer saddled with any social obligation. The private business conglomerates are now be able to maximise profits from the properties acquired by them through minimal investment which enhance their competitive strength and monopoly positions in the market. Much of the investment on their development and expansion is collected from the public and public financial institutions. This scheme of disinvestments of PSUs is inspired fully and frankly by ideological preferences and not for considerations of either economic efficiency or social equity.

It is not surprising therefore, that antagonism of the working people and trade union movements to the privatisation of PSUs by the UPA-II government has become stronger and more emphatic than in the case of the policy of partial disinvestments to raise current revenue for the government. This is so just not on economic grounds but for ideological and political considerations as well. Sections within the UPA coalition and the main opposition party, which initiated the disinvestment process, have also raised reservations and objections to the privatisation of large profit-making PSUs. Distinction between the loss-making and profit-yielding PSUs is, however, misconceived.

The case in favour of public investment in general and development of large industrial, commercial and financial infrastructure in the public sector in particular is, in fact, sound and was indeed compelling when India embarked on the programme of industrialisation after gaining political independence. The return from public investment in some industrial and commercial undertakings may not be adequate. But this is no alibi for absolving the Indian State to divest itself of the responsibility to mobilise necessary resources, material, human and financial, for development and modernisation of the Indian economy. Even sensible Indian private business interests often clamour for a step up of public investment in heavy and intermediate industry for providing a reliable infrastructure to enable them to grow in the domestic market and spread to the global market.

In order to provide essential goods and services to the mass of the people, PSUs too have to be called upon occasionally to suffer loses which private business is unable and unwilling to accept. The PSUs have actually provided essential inputs on a large-scale at below their cost of production to private industry in the initial stage of its development in India. It is indeed necessary that large corporate as well as small-scale industries have to be assisted by public investment in a developing country like India.

The privatisation of PSUs can result and has resulted in the decades after winning political independence in a serious setback to machine-making and manufacturing industry as well as research and development in industry, agriculture and service sector.

The boastful claim of the privatisation lobby in and outside the government since early nineties is that after the withdrawal of public investment in industry, industrial growth can be left for private enterprise to undertake production of goods and services in response to market demand. It is also argued that the resource constraint on government for investment in social sectors and infrastructure for the supply of public goods, especially roads and power generation, transmission and the energy sector too can disappear. These claims are totally baseless and false. The revenue collected by the government from disinvestments has actually been recycled back wantonly to selected private business corporations through public financial institutions. The privatisation of PSUs has resulted in loss of revenue for the exchequer in net terms too. The government has so far received more revenue as dividend from the PSUs than from the sale of their equity. Side by side, the government directly and by public financial institutions have committed thousands of crores of rupees to bail out sick private industries. The loss due to tax concessions and incentives for private corporate industry and incomes and wealth of the rich individuals has been very heavy. The upshot is that fiscal deficit of the government has gone beyond manageable limits. It is not in a position to meet expenditure even for security and law and order. The social sector deterioration is appalling in the shift of state capitalism is crony capitalism.

The argument that benefits from disinvestments for the mass of the people will eventually find that privatisation and market-driven growth of Indian industry can not be acceptable and popular. It is now being facile and fanciful. The disinvestment and privatisation drive has only wantonly diverted public funds to selected private business corporations and laid the foundations not for the development of healthy, socially broad-based, competitive capitalism but is working for promotion of crony capitalism.

The privatisation, side-by-side, of trade in public goods, among them electricity and drinking water as well as commercialisation of education, health services, transport and communication has helped private corporations to exploit the vulnerable consumer. Essential goods and services under this dispensation are reserved only for those who can afford to pay for them. This has barred the access to goods and services produced by industry to the mass of the people who are without adequate incomes and purchasing power.

It is not at all surprising or fortuitous that rural electrification, rural telephony and even drinking water schemes have lost priority in investment planning. But generous concessions and special fiscal steps have been taken for the satisfaction of the consumerist urges of the upper and middle classes among them such as entertainment, leisure, travel and fashion. The tendency to ape the standards of living in the developed countries has been wantonly encouraged in upper classes and is indeed glorified by example by the increasingly ostentatious living style of ruling elite. The ministers in the government set the style of such living as a due in their exalted offices. Corruption has become rampant in the administration too. (IPA Service)