Privatisation: is Shourie to blame

Written by Subhash Agrawal | Updated: May 21 2005, 05:57am hrs
Privatisation: Is Shourie to Blame for the Impasse The earliest formation of the new UPA coalition government last year contained elements of high drama and its beginning was clumsy. Plus, many assumptions within the new ruling parties about the mandate from the 2004 elections were misplaced. And yet, a year later, Mr. Manmohan Singh has received high marks for his integrity and quiet decorum. But, as he himself said so with characteristic modesty, the overall score card of this government on economic management and governance is no better than 6 on 10. Perhaps the most visible slowdown has been in privatisation, where an intellectual speed-breaker of sorts has been erected, leading to the drying up of badly needed revenue and cost-cutting measures. The only sensible step has been to set up a National Investment Fund, in other words a dedicated corpus to channel disinvestment proceeds into the social sector.

One main reason why privatisation is now dead, quite aside from the influence of Left parties who see any scaling down of the public sphere as anathema, is because the UPA regime came into office with a revisionist approach towards almost all initiatives undertaken by its predecessor. It has not helped that the relationship between the ruling party and the opposition has been more vitriolic than at any other time in history, with the latter equally reflexive and unreasonable over the functioning of the parliament. The ruling coalition has used a recent report by the Comptroller and Auditor General to indict the previous disinvestment minister, Arun Shourie, over several uncomfortable questions on the controversial sale of the two state-owned Centaur hotels. How much is Shourie to blame for this whole mess Did he unwittingly jeopardise what he set out to promote with his overzealous attitude

If we go back in time to the NDA years, even during the heydays of the Vajpayee era, privatisation was always a contentious issue, with everyone having a unique and independent grouse. In the end, it often distilled down to the usual accusation of selling the family silver, a charge that made a routine entry in public debate, sometimes raised by senior Cabinet ministers like George Fernandes, Uma Bharati or even the sedate Ram Naik. Cabinet meetings were often reportedly very sterile or unfriendly, with both pro and anti-privatisation ministers afraid of press leaks. Once, two senior ministers got into a very public and heated argument that was widely reported by the press. But, while a growing BJP-RSS rift was often the political trigger, there were many editorials, commentators and thinkers who even then had criticised many slipshod agreements and blunders committed by the disinvestment ministry under Shourie. For instance, Videsh Sanchar Nigam Limited (VSNL), the countrys largest telecom firm, was partially privatised and handed over to the Tata group, but the absence of any caveat on further sale or transfer of assets allowed the Tata group to find a loophole to transfer almost $320 million of VSNL funds to another group company. Similarly, the Centaur hotel in Delhi was sold to a business group with known political connections, who then turned around after a few months and resold it for a profit of 35%. In both cases, there was no lock-in period on resale or a clause that any such profits would be shared with the government. In another case, Paradip Phosphates was sold to the Zuari group that acquired a 74% stake at below the reserve price, since there were no other bidders. But after disinvestment, it was discovered that Paradip was actually incurring losses greater than reflected in its accounts. Consequently, as per the terms of disinvestment agreement, the government had to pay a claim to Zuari to make good previously undiscovered losses. This was almost equal to its bid price, and in effect the buyer acquired the company virtually free. These and other instances have been documented in the press, debated in seminars and even presented to the previous government. The cause of privatisation is hardly questioned by most liberal or apolitical thinkers, but the valuation of assets and absence of legal caveats to protect asset-stripping in the whole privatisation exercise have been a matter of real concern among independent observers. In any opinion poll, Arun Shourie would be placed near the top of educated Indias most trusted and respected intellectuals, and deservedly so, but his single-minded enthusiasm and inability to admit a mistake have cost him dearly, and perhaps the country. His privatisation mantra and sense of self ownership of the process have even dismayed many committed supporters.

The bottom line is this: in reality, a battery of slick corporate advisors, lawyers and chartered accountants found all those loopholes for the above situations to occur, but they did all happen under Shouries charge. That is the simple reality.

As clean a person as he is, it is actually a smart man who admits a mistake and moves on to fight a bigger battle tomorrow.

The writer is editor of India Focus