Santosh Kumar Mohapatra
The Centre is on a privatization spree despite the hits the economy has taken in the context of the COVID-linked lockdown. The stress is on shaping a “more coherent” Public Sector Enterprises (CPSEs) Policy. It is a moot point whether the nation will benefit from this kind of a push.
Unbridled privatization of the public sector goes against the concept of mixed economy adopted by India after Independence, wherein both public sector and private sector played important roles, which were supplementary and complementary to each other. Now, however, the wind is blowing against the public sector, mainly on the ground that many of them are loss-making and causing a strain on the national economy.
Notably, a study by the Indian Institute of Management-Ahmedabad (IIM-A), titled, “Heightened uncertainty in product markets, business operations, and financing plans” of Indian firms during the COVID-19 crisis, argued that government-owned firms have outperformed the private sector in several respects. However, proponents of market economy and privatization keep arguing that the government has no business being in business and it should retreat from the interventionist policy. The government’s role is to facilitate a healthy business environment and maintain law and order. Criticism on this count is that the government is abdicating its responsibility of helping people in the vulnerable segments and, via its interventions, giving enormous concessions to the rich, corporate behemoths.
Crony capitalism is so pervasive in India all along since Independence that owners of private sectors are allowed to twist rules and regulations in their favour and extort various concessions unethically from the government. The public sector managementshave some limitations in these respects. The recent concessions worth `1.45 lakh crore, through corporate tax cuts, and systematic decimation ofthe Bharat Sanchar Nigam (BSNL), so as to pave the way for private telecom companies to step in and take control, are cited as examples of these.
The votaries of privatisation argue that private managementswilleffect significant improvementsin efficiency and output. There, they say, will be accountability leading to more transparency.But critics of privatization note that private ownership does not necessarily translate into improved efficiency. Some say there is no clear evidence the private sector is more efficient than the public sector. Fact remains that both have their strengths and weaknesses.It is often noted that the private sector, in its greed for more profits, lacks a human face while the public sector units often adopt a humanitarian attitude.
It must be admitted that a large number of private sector firms too are incurring losses. Even some such unitswere rescued by the public sector, like the Oriental Bank of Commerce, the Global Trust Banks etc.Private enterprise is also draining the national exchequer in the new situations of NPAs or bad loans, wherein businessmen take huge loans from public sector banks and scoot from the scene, as in the case of Nirav Modi. Private entities also use political influence to extort huge tax cuts and concessions as also gain more than required access to natural and mineral resources for use as raw materials in their factories and to even to export these. They manage to get these at cheaper prices.
The public sector is recording profit in several cases.The Public Enterprises Survey-2018-19 tabled in Parliament in February 2020 highlights the scenario vis-à-vis the total 348 CPSEs as on March-end. Of these, 249 were operational, while 86 were under construction and 13 under liquidation. Significantly, the numbers of profit-making and loss-making companies were lower during the fiscal under review, than of the previous fiscal. While 178 of these units have made profit in 2018-19 fiscal, 70 have incurred losses.
The net profit of operating central public sector enterprises (CPSEs) rose to 15.52 per cent a year to `1.43 lakh crore in 2018-19, whereas 70 loss making CPSEs reduced their overall losses by a meagre1.69 per cent in the same period — to `31,635 crore. These CPSEs employed over 15 lakh people and paid the government `3.69 lakh crore by way of levies in 2018-19 – which was higher by nearly `1,010 crore compared to the previous fiscal.
It is alleged by those opposing privatization that the real purpose of unfettered disinvestment and privatization is to raise resources to bridge the fiscal deficit. Instead, why not tax the rich, the corporates etc and also better check tax evasions, is a question. They also argue that this is tantamount to selling family silver to pay the grocers’ bill. Such privatization policy is getting support from corporate honchos and the media “they control” are backing the government policy. In the process, national assets are transferred to corporate, rich, wealthy people at throwaway prices, say those opposing privatisation.
Politicians and bureaucrats favour privatization because they are in the payrolls of the entrepreneurs.Private companies contribute hugely to the election funds of political parties and fill the pockets of politicians and bureaucrats, sacrificing moral and ethical values. This, the public sector cannot do.
By resorting to privatisation with frenzy, the government would lose the future stream of dividends and other revenues received from public sector.It is not only privatizing or disinvesting the public sector but also relinquishing its responsibility of providing public services like health and education, which are increasingly getting controlled by the private sector. As a result of this, health and education have become unaffordable for the ordinary families. On the other side, it is natural that a profit-seeking operation may not want to provide health care free or in subsidized form to the impoverished, or extend education to such sections.
It is argued that privatization of public sector can do away with unnecessary governmental intervention andthe bureaucratic shackles that affect performance of the public sector adversely. But, in the absence of effective and independent regulatory bodies, this will prove detrimental. Even the regulatory bodies are not independent. Their chairmen and other members are appointed by the government.
Uninhibited privatization will do more harm than good. Worse, attempt is also to create private sector monopoly in certain sectors. This is seen by many as more dangerous than public sector monopoly. Private firms become more predatory, exploitative and profit-mongering in the absence of fair competition.
The writer is an Odisha-based economist.