Disinvestment of Neyveli Lignite and NALCO Derailed

The Indian Prime Minister has put on hold all Disinvestment proposal pending further review. The immediate cause it seems is to placate the constituents of the coalition and prevent any precipitate withdrawl of support and consequent destabilizing of the Government at the center. At least that is what the press is saying.

Everyone appears to be taking hard positions on the matter. The pro-disinvestors can't understand why the allies and even some sections of the ruling party are making such a fuss about a ten percentage points equity off loading by the Government. The anti disinvestment camp says it is a matter of principle and therefore the percentage of equity should not be considered relevant to the debate.

The Government apologetically explains that they are just attempting to raise some funds for noble causes without losing any control over the entities concerned and at the same time also send signals to the International Community that the reform process is in place and this would therefore help in attracting Foreign Direct Investments.

Well, well, well.... what are all these folks arguing about. The total amount that would get raised through the now aborted disinvestment would be a paltry couple of thousand crores which is neither here nor there. Definitely not worth the risks of having the coalition collapse. The ten percent off loading of stock would make no material change in the control of the organizations concerned and therefore this whole affair looks like a managed round of good old shadow boxing.

Why then is this whole show being enacted. As usual we have to go much beneath the surface to unravel the real motivations of all the protagonists here. Who are the real beneficiaries of the status quo? Who has genuine reasons to fear a distubance of the cosy arrangements obtaining at present? There usually can be no smoke without fire and the threatened constituencies need to be smoked out from this chaotic sequence of events. Only then there would be a real practical chance of devising ways to address those fears and hopefully arrive at a win all solution for the leftists, rightists, fence sitters, workers, managers, tax payers and the biggest constituency of all the mal nourished, poverty stricken, slum dwelling, God foresaken, by-standers.

Judging by the reactions of the various sections, the most violent has been those of the workers who have immediately struck work and forced the hand of the State politicos. They must be losing out in some ominous way not readily understood by arm chair theoreticians and idealogues. This much needs to be granted. Once we accept this thesis, rest of the issues just melt away.

If we agree that Governments across the planet do not in their very nature have a clue to running commercial organizations, and if the total cost to society is objectively calculated, it would financially be infinitely more prudent to give away the equity for free (better still give some money in addition to sweeten the deal). The Employees of these organizations for reasons not understood by outsiders would go to any length to preserve Government Ownership and Management, the simple solution now begins to stare us in the face. Do not try to disinvest. Just give the company away for free to the employees and run for your life before they get wiser.

To be safer this needs to be done in one shot for a large number of Government companies both central and state. It needs to be positioned as giving the workers their due in recognition of their sacrifices and hard work. It would take some time for the employees to realise how harsh the environment is outside their cocoons, but they nevertheless would buy into the dreams of getting quick riches without the benefit of previous experience.

The morality of this lies in the fact that an impoverished society would stop subsidizing these employees' oases and get on with life's struggles without the shackles and millstones of having to finance any commercial entity being run by the Government. We must not get fooded by the arguments of profit making public enterprises. Such an animal never existed and in theory too cannot be created. They look profitable because they are given preferntial treatment right from inception to adulthood and now on crutches, through subsidized funding, purchase preferences, marketing monopolies, cost plus pricing and what not.

Why do the political leaders allow this charade to continue. Simple again. They benefit in some small ways that owners benefit by controlling commercial organizations. Contracts to favoured suppliers, nepotism in employment opportunities, sinecure appointments to boards and senior executive positions, commandeering company facities and infrastructure for private use and so on.

By giving away equity to employees, in the long run, we would be able to create a constituency in favour of private ownership. This remains a debilitating roadblock as was seen during the privatization of BALCO. The whole town including subsistence small time traders like street hawkers and flea market shop keepers observed a bandh for several days to protest against the Government move. Unlike the employees of BALCO these poeple had nothing to lose, but still were apprehensive enough to support the workers' cause.

The Private sector also needs to come forward and behave more inclusively. A good example is the reservation issue. For some reason reservations in India are applicable only to the Government and Public sector. Why the differentiation? To make matters worse, Captains of Industry, some of them well kown and widely respected came out strongly against the idea of extending reservations to the Private sector with arguments like merit ought not to be sacrificed thereby insinuating that merit is somehow a monopoly of the higher stratas of society

This was a golden opportunity for the Private sector to strike at the image of the life blood sapping Government sector as a friend of the under priviledged. Nobody seems to think so far ahead.