Sell-Off Government: Disinvestment Policy of Modi 2.0 Government

Compared to other big Defence PSUs like Hindustan Aeronautics Limited, Bharat Electronics Limited or Bharat Dynamics Limited, Ordnance Factory Board's (OFB) has one of the least dependence on imports which points to high degree of indigenisation that it has achieved or maintained.

Couple of years back, the Standing Committee on Defence expressed concern over the import content of equipments produced and developed by Defence Research and Development Organisation, Ordnance Factories and Defence Public Sector Undertakings because of the dependence it creates for military hardware on foreign suppliers.

The Ordnance Factory Board's (OFB) import content in 2016-17 was 11.79%, down from 15.15% in 2013-14. Compared to other big Defence PSUs like Hindustan Aeronautics Limited, Bharat Electronics Limited or Bharat Dynamics Limited, OFB has one of the least dependence on imports which points to high degree of indigenisation that it has achieved or maintained.

The Ordnance Factories (OFs) have stood the Indian government in good stead during wars in 1947, 1965 and 1999 with Pakistan and in 1962 with China. OFs sought Rs. 50.58 crores out of a total of Rs. 2,01,901.76 crore in 2019-10, as they are able to take care of most of their costs by generating revenues from supplying items and equipments to Army, Navy and Air Force.

Former Chief of the Army Staff General V.P. Malik has also publicly praised OFB for timely supply of ammunition and equipments during Kargil war but highlighted the problems faced in procuring items through import at short notice.

Unveiling the plans for first 100 days of Modi Government, NITI Aayog Vice-Chairman Rajiv Kumar mentioned that high pace disinvestment of PSUs will take place and organisations untouched so far like Ordnance Factories will be corporatised. He doesn't hide the fact that foreign companies will have smooth access to excess unutilised government land.

OFs are required to maintain an idle capacity to take care of up to three times demand surge during impending wars. A profit-making venture will not be able to do this. Instead, to sustain these ventures, government may have to place orders for things not required or will have to bear the expenses of these PSUs or may have to create artificial war-like situations to boost demand, none of which is in national interest.

The report of Comptroller and Auditor General (CAG) on Operation Vijay in Kargil reveals that out of the total orders placed with domestic and foreign private companies, supplies valued at Rs. 2150 cr., were received after the end of hostilities in July 1999, of which, supplies worth Rs. 1762.21 cr. were received six months after the end of hostilities.

Relaxation of rules and procedures in the face of emergency cost the government Rs. 44.21 crore. Supplies of Rs. 260.55 cr. did not meet quality standards, shelf life of ammunition worth Rs. 91.86 cr. had expired. Purchase in excess of authorisation of requirement was worth Rs. 107.97 cr. and ammunition worth Rs. 342.37 cr. was imported whereas it was available indigenously with OFs. This is enough proof of the famed quality and efficiency of private sector.

In addition, it points to privatisation opening up new possibilities of corruption. The Central Bureau of Investigation (CBI) has booked London-based Rolls Royce and its Indian subsidiary for allegedly engaging services of an agent in India to get contacts from the Hindustan Aeronautics Limited (HAL). It is alleged that Rolls Royce engaged the services of Ashok Patni as an agent in spite of signing an integrity pact which bars such arrangements.

The asset monetisation, an euphemism for asset sale, is supervised by Department of Investment and Public Asset Management, which too has been named to mislead. Once the assets are sold there will be nothing left really to manage. First, 'demonetisation' in 2016 created panic among people and now there is asset 'monetisation.' Both moves were essentially planned to help the moneyed. The land acquired from farmers, sometimes without paying any compensation - except may be for the standing crop, in the distant past is now going to be handed over to foreign companies in the name of disinvestment.

Earlier this year two payouts in the form of dividends and buyback, totaling Rs. 2,423 cr. forced HAL to borrow to pay salaries to its employees, first time in its history. Life Insurance Corporation, which holds two thirds of India's life insurance market share, is now going to be publicly listed so that its shares will be up for trading, was forced by the government during 2014-18 to spend Rs. 48,000 cr. to help it reach its disinvestment target.

In 2018-19 the government raised Rs. 84,972.16 cr. exceeding its target of Rs. 80,000 crore This year the disinvestment target is Rs. 90,000 cr. LIC was also forced to buy the most debt ridden public sector bank Industrial Development Bank of India wholesale, which had 28% bad loans. It is clear that when private investment is not forthcoming the government is fleecing its own entities.

Narendra Modi has claimed more than once that as a Gujarati he knows how to manage the money. While he was Chief Minister, Gujarat State Petroleum Corporation was created with a loan of Rs. 20,000 cr. When he became the Prime Minister, a Central PSU Oil and Natural Gas Commission bought it for Rs. 8,000 cr. and is now responsible for its debt servicing.

The government proposes to create an autonomous holding company which will subsume all state owned firms and will not be answerable to bureaucracy when it'll come to selling assets. This will culminate the process of sell-off of public assets.

- Written by Sandeep Pandey, Vice President, Socialist Party (India). This is an opinion piece and the views expressed above are the author’s own. ETV Bharat neither endorses nor is responsible for the same.