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|January 20, 2000
The Rediff Business Special/Gurudas Das Gupta
Liberalisation under the controlled coterie of bureaucracy
Is it true that the Disinvestment Commission that was appointed, had made a suggestion that divestment be delinked from the budget and a separate fund be created to foster national growth? The government does not look for favourable conditions for divestment? Yashwantji goes on shopping for mangoes in Delhi in the month of December. …I believe he has a taste for mangoes, but December is not the time….
I give you another example how the government divests in the most unfavourable situation. I have with me a piece of paper, quite vulnerable. This piece of paper says, "Hongkong and Shanghai Banking Company were ready to purchase the shares of GAIL on July 14, 1997, and they were ready to purchase shares at Rs 145. The government sold it at Rs 70/ in the GDR market."
They were ready to sell, the company was ready to purchase, and, at that time, the Bombay Stock Exchange quoted a price of Rs 4,322 and the Hongkong and Shanghai Bank was ready to pay a price of Rs 145. When was it sold? It was sold two years later when the Bombay Stock Exchange Sensex was higher at 4,400. Although the BSE Sensex was higher, the price of GAIL was lower, because of deliberate hammering. It was an artificial, manipulated decline. Was that the best time to sell the shares?
We are discussing divestment not as a matter of principle but as it is being implemented. You did not purchase the best mango. You had gone in for the GDR. You had gone in for the GDR which was half the price. Therefore, you had decided to pick up mangoes of the worst quality. And I refuse to purchase that quality because the Indian quality was the best. This is where the government fails today.
They do not go for favourable marketing conditions. Why is it done? The government owes an explanation to the nation. Why is there this tilt? Why was this offer rejected? Why was divestment done at a point of time when the price was so low? How much had the country lost? The country had lost Rs 12 billion.
Is the government ready to set up a separate permanent machinery for divestment? There should be a full-time machinery. To carry out the process of divestment, we want a full-time, independent, machinery. Is it not one of the suggestions that the last Disinvestment Commission had made? The Commission was set up whose recommendations were inconvenient for the government; therefore, that commission has been disbanded. In its place, a government department has been set up. It means that liberalisation is to take place under the controlled coterie of Indian bureaucracy. What a contradiction!
You speak of liberalisation, you speak of market forces, but you give the responsibility of carrying out a charge to bureaucratic control. This is where the paradox lies. It is your baby, your policy, your commitment, but you cannot keep the commitment because you are a prisoner of your own contradictory policy that is now being carried on.
Let me give you two examples. Let me speak of the IPCL. I hope the country knows what the IPCL is. It produces petro-chemical products. Its market-share is 30 per cent. The government has decided to go for a strategic sale. What was the recommendation of the Disinvestment Commission? The Disinvestment Commission had categorically recommended, let me quote: "Care should be taken, while pre-qualifying bidders, to ensure that strategic sale does not lead to market dominance by a single player." It is there in the recommendation. Who violated and ignored it? The department concerned and the nodal officer concerned had put up a note which was quietly approved by the Cabinet. Divestment as suggested with regard to the IPCL was carried out by the government at breakneck speed.
A government that faulters, a government that withholds its decisions, a government which does not know its mind, had taken the shortest possible time for divestment of the IPCL. For whom? It goes without saying that while speaking of market dominance, the Disinvestment Commission had in mind the Reliance Industries because the Reliance Industries were controlling 50 per cent of the market of petro-chemical products.
The government in its note, approved by the Cabinet, has said that through market mechanism, the question of domination of a single player can be prevented. The pre-qualification condition has been waived. A note, quietly approved by the Cabinet, has been put up by the nodal ministry saying that through market mechanism, the dominance of a particular player can be prevented.
What a tragedy! Law is being manipulated; law is being avoided, law is being changed, recommendations are being violated, to patronise a particular industrial house of the country. If Reliance Industries is allowed to take over the IPCL through divestment, what is going to happen? Eighty-five per cent of the petrochemical products will be controlled by a single business house.
As the petrochemical products are so important for the country, so vital for the economy, the country will be at its mercy. It will be allowed to control, monopolise the petro-chemical products, against the vital interests of the country. This is how divestment is being carried on in clear violation of all norms, all laws and national interest.
I would like to mention the Shipping Corporation of India. The SCI has not been given the mini-Navratna status still. It is for the government to say why that status has not been granted to it. It has been identified as a public sector unit where divestment is to take place. What is going to happen? The government's equity will be diluted beyond 50 per cent and, according to the norms, a company having assets worth of Rs 30 billion will be taken over by spending Rs 3 billion!
The policy of divestment was conceived by my friend, Manmohan Singh, as I understand it. But the concept has undergone a miscarriage absolutely and, today, it is an absolute plunder of national resources, plunder of our best assets, created by our predecessors. Therefore, the time has come for the country to take stock of the situation and understand the implications of the un-economic, unproductive, inimical effect of the way in which divestment is carried forward. The government should put a stop to the perilous manner in which divestment is being carried forward.
Gurudas Das Gupta is the leader of the Communist Party of India in the Rajya Sabha, the upper house of Parliament. The article is based on a short-duration discussion in the Upper House.
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