Vol. XLI No. 31 July 30, 2017

Fight Privatisation! Save Public Sector


ONE of the major components of neoliberal policies, popularly known as ‘LPG (liberalisation, privatisation and globalisation) policies’ is privatisation – privatisation of public enterprises, public resources and public services etc. Privatisation process in our country was initiated under the Congress regime in 1991 when the neoliberal policies were officially introduced. Attempts to privatise the public sector undertakings, hand over control and management of public resources to private players, cut down government expenditure on public services like health, education etc, leaving people at the mercy of private players have been going on since then. However this has gained momentum since the BJP came to power at the centre with its own majority in 2014.

In his election campaign before the last parliament elections, Modi promised to end the ‘policy paralysis’ of the Manmohan Singh led Congress regime. His government is putting this into practice by fast tracking privatisation and dismantling the public sector.


In his budget speech for 2017-18 Arun Jaitley announced that the government intends to raise Rs 72,500 crore through disinvestment of PSUs in this financial year. Out of this Rs 46,500 is to be raised through disinvestment, Rs 15,000 crores through strategic sale and Rs 11,000 crores through disinvestment of the general insurance companies. The government has appointed Reliance Mutual Fund Managers to provide consultancy and execute its project of quick selling of 10 CPSUs strategic to our national economy including ONGC, GAIL, Oil India Limited, Indian Oil Corporation, Coal India Limited, BHEL, Bharat Electronics Limited, etc through the Exchange Traded Fund (ETF).

Almost all the profit making public sector companies most of them in the strategic and core sectors of the economy are targeted for privatisation by the government. At the same time, the government has targeted several sick and loss making PSUs with huge assets for outright sale or complete closure if it does not get any buyer. Many of these were in fact deliberately made to become sick by the successive governments. Even today these can be made profitable by infusing the necessary capital. The huge assets that they have can be utilised for this purpose. But the government is not willing to do that.

The former BJP government led by Atal Behari Vajpayee introduced the concept of strategic sale of public sector and privatised premier public sector units like Modern Food, Hindustan Zinc, BALCO, Indian Petrochemicals Corporation (IPCL), VSNL, Paradip Phosphates, CMC, HTL, Jessop, Centaur Hotel etc at throw away prices. The present BJP led government dismantled the Planning Commission and set up the NITI Ayog soon after coming to power. One of the major tasks assigned to the NITI Ayog is privatisation of the public sector. It has already identified 74 CPSUs including 26 for downright closure and 10 for strategic disinvestment.  In the last three years, the government has stripped most of the profit making PSUs of all their reserves and surpluses. This was done deliberately to lower their market value for the benefit of the prospective buyers from the private corporate sector.

CPSUs in various sectors including defence, steel, power, general insurance, drugs and pharmaceuticals, aviation, heavy engineering and construction etc are targeted for privatisation.

Defence production units like the Bharat Earth Movers Limited (BEML) and the special steel plants of Steel Authority of India (SAIL) – Alloy Steel Plant in Durgapur, Visweswaraiah Iron and Steel Plant in Bhardavati and the Salem Steel Plant, are among those identified for strategic sale.

The defence ministry has also ordered to immediately list other defence PSUs viz., BDL and MIDHANI in the stock market to facilitate disinvestment of at least 25 per cent shares. Bridge & Roof Company Ltd, a premier Miniratna PSU in strategic heavy engineering cum construction sector is also being processed for outright privatisation. The government has decided to sell Air India and is looking for buyers. The Indian Drugs and Pharmaceuticals Limited (IDPL) and Rajasthan Drugs and Pharmaceuticals Limited (RDPL) would be closed. Hindustan Antibiotics Limited (HAL) and Bengal Chemical and Pharmaceuticals Limited (BCPL) will be privatised, if buyers are available; otherwise they will also be closed down.   

The aggressive privatisation drives in the defence sector and in the railways are of serious concern. (See box)

In the recent period, every day the corporate media has been running stories about the huge burden that Air India has become to the national exchequer. Editorials are written on why it should be got rid of. The finance minister himself has taken the initiative to argue for its outright sale. The fact is that the huge accumulated loss of Air India, which was a profit making company till 2007, was the result of the bungling and misgovernance by the successive governments at the centre. Now, when Air India got operating profit covering up over Rs 2,636 crore of operating loss previous year, the government has decided to hand it over to the private sector by offering to write off debt of Rs 30,000 crore. Had the same magnanimity been shown to the public sector carrier, it could have eliminated its accumulated losses substantially. This clearly shows that privatisation of Air India is not to save public money as is being claimed by the BJP government. It is nothing but frittering away national assets for the benefit of private airlines, domestic and foreign. This is another example of the BJP’s brand on ‘nationalism’.

Life Insurance Companies and the Banks

The general life insurance companies and the banks were nationalised to protect the interests as well as savings of the people from the loot of private establishments. The financial resources at their disposal were used for national development and to serve the common people, particularly the poor people in the remote rural areas. No private bank or insurance company will be interested to serve these areas.  The LIC has been contributing for infrastructure development, drinking water projects etc. The role of our public sector financial institutions in protecting our economy during the 2008 global financial meltdown is now well acknowledged.

Now, the government wants to dismantle our public sector banks and insurance companies by privatising them, not for the benefit of the common people, but to benefit the big national and international finance companies. It has decided that 25 per cent shares in all the five public sector general insurance companies will be sold to private companies, both Indian and foreign. The public sector banks today have loan defaults amounting to several lakh crores rupees.  88.4 per cent of the banks’ NPA are from large corporate borrowers; out of this 12 per cent NPA are from 12 large corporates. Instead of taking stringent measures to recover these loans, the government is leading them towards closure under the garb of insolvency and bankruptcy code 2016. This is deliberately done to pave the way for their privatisation.

Public sector in our country was instrumental in creating the industrial base of the country after independence. It was the public sector enterprises that built the major industrial infrastructure of the country like power, transport including railways, roads etc when the private sector did not have the capacity or was not willing to take the risk of investing the necessary huge amounts of capital in these sectors which do not provide immediate profits. Thermal, hydro and nuclear power projects, transport and communication, production of steel, defence equipment, ship building, oil, coal etc were set up in the public sector. The research and development taken up by the PSUs had a huge contribution in our technological and industrial advance. It also played an important role in developing balanced regional growth.

The townships constructed in the areas where the PSUs were located, many in remote underdeveloped rural areas, not only provided housing and other facilities for the workers like schools, hospitals, dispensaries, community centres, shopping complexes etc but also led to overall development of the entire area. Thousands of people in the surrounding villages benefited indirectly by getting employment and income opportunities by providing different services to the people in these townships. By implementing the reservations for SC/ST sections, PSUs provided employment and opportunities for development of these sections. In essence, the public sector has helped in industrialisation, contributed to economic growth including growth of private sector in the surrounding areas, contributed, despite limitations to social justice.

Privatisation of PSUs is not merely an onslaught against public sector workers. Dismantling public sector means handing over our national assets, our national wealth to the corporates, domestic and foreign, on a silver platter. It is an attack on the basic fabric of our national economy; it is an attack on our self reliance, our country’s manufacturing capability. It is an instrument of transferring huge national assets to private hands, domestic and foreign. It is an attack on the entire people, an onslaught on SC/STs right to reservation in jobs. It is an attack on the entire society. Hence struggle against privatisation cannot be considered the responsibility of public sector workers only and left to them alone. All sections of people have to be involved in this struggle against privatisation and to save the public sector. 


·         182 products out of the total 273 products being produced by the public sector ordinance factories are being taken away from them to be produced in the private sector. The government has already started issuing licences to the private players. Thus the public sector ordinance factories are being deliberately pushed into low capacity utilisation and inevitable closure. 7 out of the 41 ordinance factories will have no work now and 14 more will become redundant by around 50 per cent of their capacity. Jobs of around 50,000 of the total 1.10 lakh workers will be under threat. Besides, the small arms manufacturing public sector ordinance factories are being directed to enter into public private partnership (PPP) arrangements that will allow the chosen private players to utilise the infrastructure of the ordinance factories set up with public funds. What is significant here is the public sector ordinance factories never failed to deliver the requirements of our army, navy and air force and have always been strictly complying with the quality requirements. The government tried this experiment of outsourcing the production of items like uniforms, mosquito nets, shoes etc to private players and found that they were neither able to deliver the products on time nor were they able to ensure quality. As a result the production of these items had to be brought back to the public sector ordinance factories. But the government does not want to learn any lessons from this in its eagerness to serve its corporate masters.

·         Not only the small armaments. High value products like combat aircraft, helicopters, submarines and other critical equipment, which were all produced by the defence PSUs, are now being offered to private corporate sector by the BJP government on nomination basis. Reliance Infrastructure has entered into partnership with Dassault Aviation of France to supply Rafale fighter jets. Tata and Lockheed of USA will partly produce F 16 fighter jets. The public sector Hindustan Aeronautics will be pushed to die a natural death. Thus the entire defence production infrastructure, built up by the country during the last over six and half decades is set to be dismantled in favour of the private corporate sector who have neither the exposure nor competence and expertise to produce these items. The foreign armament and equipment industry would ultimately dominate the defence production scenario of our country. Our security preparedness will be totally dependent on these foreign armament industries. The BJP government wants to hide such anti-nationalist acts behind its chanting of nationalistic slogans and its false sympathy for our soldiers guarding our borders.  

·         Railways, the cheapest public transport in the country is utilised by crores of people every day, particularly the poor. The government has constituted a Railway Development Authority (RDA) through an executive order. This RDA will provide access of the existent railway tracks to private train operators in both passenger and goods transport segments. It will decide fares and freight charges on the basis of cost. At present passenger fares comprise 53 per cent of the cost with 47 per cent subsidy. Now this subsidy will be given a go by. The concept of subsidising traffic of essential commodities will also be removed.  Private operators will be allowed access to all existing infrastructure like yards, sheds and workshops for maintenance of their coaches, wagons, and engines etc.


·         On the pretext of converting A1 and A category railway stations in the country into ‘world class’ ones, a road map to hand them over to corporates has been prepared. Already tenders have been floated for 23 railway stations including Howrah, Mumbai, Chennai, Bangalore and Secunderabad etc. Habibganj station near Bhopal has become the first station handed over for redevelopment to the Bansal group, which is mainly in the education sector. The private contractors who will manage the station will be Station Facilitation Managers (SFM). The contract will be given to SFM in lieu of lease premium and lease will be for 45 years. They will be responsible for station development and also commercial development in the stations and the land attached to it. To start with activities like train operations ticketing passenger and goods movement overhead tractions, signal and telecommunication, track related work will remain with the railway authority. The SFM will employ its own employees and existing railway employees in the station and related jobs will be transferred elsewhere.

·         The public sector locomotive and coach production units are being made redundant by keeping them idle while importing coaches and other products which can be manufactured here. This is the real face of ‘Make in India’.