Budget 2021 sets stage for fresh showdown between Centre and unions

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Updated: Feb 02, 2021 4:14 PM

Despite protests on farm laws, the Centre has gone ahead and proposed in the budget presented yesterday to sell some PSUs, one insurance company and two PSBs.

Budget 2021-22, Union Budget 2021While the primary focus was on urban infrastructure spending, an increased allocation of Rs 40,000 crores to the Rural Infrastructure Development fund will have a significant impact on the agritech players.

Prime Minister Narendra Modi is determined to undertake structural reforms despite serious pushbacks from the Opposition on Farm Acts. But some of the proposed reforms, although advisable and necessary, may pit him against a different set of unions and same opposition parties — much like what is happening now over farm laws. His government is struggling to get out of a crisis which it never did anticipate for doing what many — economists and opposition leaders— had been propagating and promising for years to unshackle the farm sector. However, what is favourable in the eyes of economists and experts may not necessarily be viewed similarly by some on the ground.

New farm reforms for which Centre is being battered right, left and centre were recommended by top agricultural economists and were promised by Congress in its manifesto for Lok Sabha polls in 2019. But now, that same party has changed its stance and is demanding repeal of all three laws. Not only parties but economists — Raghuram Rajan, Kaushik Basu, Abhijit Banerjee — too have expressed their apprehensions and questioned the Centre on the way reforms were introduced. All three had at some point batted for some kind of farm reforms that have been undertaken now.

Despite all this, the Centre has gone ahead and proposed in the budget presented yesterday to sell some PSUs, one insurance company and two PSBs. It has also proposed to transfer some assets of railways and few airports for operations to private players. Now, these ideas have been supported in the past by economists and as well as opposition parties to bring efficiency in the management of the economy. But again, what may be good economically may not be good politically. The government’s proposal to privatise some PSUs met with stiff opposition by Rahul Gandhi and Mamata Banerjee.

Hours after the proposal, Gandhi said that the government was planning to handover India’s assets to PM’s ‘crony capitalist friends’. For years, economists have been in favour of the government cutting down its stake in state-run enterprises. However, the Opposition has opposed this move saying the Centre is selling the national assets of select few corporates.

During her Budget speech, FM Sitharaman said the divestment process of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22. Other than IDBI Bank, she said, the government has proposed to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.

Now, the fear is that the Centre may have to brace for another round of face-off with bank unions and political parties that have already expressed their objection to proposed privatisation of some PSUs and PSBs. Apart from PSUs, the Centre has proposed to roll out some core infrastructure assets under the asset monetization programme. They are: NHAI Operational Toll Roads, Transmission Assets of PGCIL, Oil and Gas Pipelines of GAIL, IOCL and HPCL, AAI Airports in Tier II and III cities, Railway Infrastructure Assets, Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED, and Sports Stadiums.

While opposition says the Centre should divest stake or sell only dead PSUs, the experts and economists argue that even the profit-making PSUs will go belly up if they are not sold in time. They say the government would fetch good value if strong PSUs are sold in time and if they are held little longer, their worth will decline. The Centre has experienced this with IDBI Bank and Air India. Air India’s privatisation was approved in 2017 but it is yet to see any buyer.

Economic arguments aside, the Centre will now have to fight the perception that it is against the poor, middle class and farmers. Now, this has to be done on the ground and in Parliament, where political parties would try to stall any proposal involving interest of masses. Considering the nature of proposals in the budget, a fresh showdown is likely between the Centre and Opposition in the House. However, despite farmers’ protests, the government may not see as determined a protest by banks or PSU unions for two reasons. Their numbers don’t match that of farmers’ and they may be offered favourable terms under VRS.

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