The Narendra Modi government seems thoroughly confused about public and private sectors. On the one hand, there is dim-witted reluctance to privatize public sector undertakings (PSUs) and banks (PSUs), Modi’s earlier the-business-of-government-is-not-business rhetoric notwithstanding. On the other, there is a disastrous plan to privatize an important aspect of taxation by way of GST Network (GSTN), a private company. It’s all topsy-turvy.
The real solution to the perennial PSB problem is privatization. For bank nationalization was the biggest economic crime perpetrated in our country, much bigger than any scam unearthed so far and much more comprehensive in its virulence and ramifications than any other political misdemeanor. This one government decision brought astronomical amounts of money within the remit of politicians and bureaucrats, thus making the role of touts and crooks in New Delhi imperative for success in business and paving the path for the likes of Vijay Mallya.
Any patriotic government, as the present one vociferously claims to be, should have undone bank nationalization. But the problem is that it too is infected with the same affliction—socialism—that the earlier regimes were.
A subprime solution is the reduction of government shareholding to one-third, with a substantial part of the equity help by the public. A number of expert groups have recommended this, and this also found favor with Yashwant Sinha. But Swadeshi and socialist bigots of the Bharatiya Janata Party did not allow this to happen.
So, we have Finance Minister Arun Jaitley, the champion of incrementalism, reiterating his government’s policy that government equity in PSBs would not go down below 52 per cent. Speaking at the Economist India Summit in New Delhi, he said, I don’t think that public or political opinion has converged to the point where we can think of privatization in the banking sector.”
But, Mr. Minister, whose responsibility it is to mold public and political opinion in favor of privatization in particular and liberalization in general? Whose responsibility it is to discipline RSS dinosaurs so that they keep their mouths shut over issues they are incapable of comprehending? After all, the Modi government can tame the RSS when it wants to, as it recently happened with Goa’s RSS chief.
In the case of PSUs too, the government is mostly making plans. Niti Aayog keeps preparing lists of the state-run companies. “Niti Aayog has already recommended about 44 companies for strategic sale and that is going through a process. Dipam [the Department of Investment and Public Asset Management] is working on that, taking it forward. But for us, it’s an ongoing process, so we are looking at the second lot, the third lot, and we will come out with recommendations,” Aayog CEO Amitabh Kant told reporters on Wednesday.
The Aayog has also prepared a separate report on loss-making PSUs.
After every two or three weeks, the media carries stories about Niti Aayog coming up new lists of PSUs to be privatized, shut down, sick ones handed over to good PSUs, etc. The charade goes on and on, keeping the mandarins in the Aayog gainfully employed and reporters in good humor. But nothing more than that.
Meanwhile a perverse kind of privatization is taking place. As Ruchir Sharma recently said that “this is the worst case scenario for these public sector companies. Because this is privatization by malign neglect. All these public sector companies are losing market share whether it has got to do with telecom, airline, even the banking sector.”
While the Modi government seems to be fond of the public sector (a fondness that is killing PSUs), it relies on the private enterprise in an area which is a primary responsibility of the state—taxation. GSTN, a not-for-profit company under Section 25 of the Companies Act, 1956, is mandated to play a key role in the GST rollout. With an authorized and paid-up capital Rs 10 crore, the government of India owns a 24.5 per cent stake and state governments another 24.5 percent.
The 51 per cent equity will be held by private players, making it a private entity. What is more worrisome is the fact that some of the private stakeholders are themselves controlled by up to 75 per cent by foreign institutional investors. How on earth can a private company allowed to become instrumental in tax collection is beyond comprehension. GSTN should have either been a government department or a totally government-owned PSU.
It is curious that a government which loves the public sector ignores it in an area where its (the latter’s) role is mandatory. At the same time, the powers that be have no problems in running revenue-guzzling Air India and dying BSNL. Strange indeed are the ways of the Modi regime.