India is apparently scared of the word ‘privatisation’. The preference to cling to state-owned enterprises of the Nehruvian era is perhaps one of the few gaps that the 1991 economic reforms have not been able to correct. And if the pattern is to continue, forthcoming governments will also be fraught with constraints, which can be detrimental if ignored.
By most measures, the pattern continues even today. The BJP’s economic promises – that fetched them their whopping victory in 2014 – are not living up to their hype. Similar economic principles and practices are being applied to the same suffering companies and systems, hoping that old strategies will miraculously yield different results. Much like its predecessor that was decimated in Lok Sabha polls – primarily because of its grave economic mismanagement – the current government is failing to recognise the writing on the wall.
Despite what self-styled political gurus may say, economics was the reason UPA II lost in 2014. And if the BJP continues to function without changing its course on the economy, then it too is destined to face a similar fate.
Privatising Air India
This anti-privatisation argument is one of those old adopted strategies that continues to dominate central economic thinking. It may not just be the fear of privatising companies that the government owns, but the fear of losing bureaucratic benefits like free services that perhaps adds to the overall argument. Let’s take the simple case of Air India. Here is an aviation company with prime international routes, brand new aircrafts, low parking and maintenance fees across India, and yet has posted huge losses.
The analogy to make here is that if Air India was an individual, it would be living rent-free, with a high-package job, a company-provided new car, but bankrupt and demanding social security bailouts. As of December 2015, Air India’s debt was approximately Rs 50,000 crore. To put it in perspective, the GDP of the Central Asian nation of Kyrgyz Republic at $7.4 bn is approximately the same as Air India’s debt.
Critics argue that privatising Air India implies the loss of a national symbol. If a national symbol depicts India’s biggest failure, do we really want it to still represent the country? 50,000 crores of taxpayer money is going to fund an airline whose market share is now third behind Indigo and Jet Airways, and continues to fall. Other arguments suggest that the loss is so far gone that any recovery is near impossible, given the huge debt-servicing charges and pretty dismal staff morale and operating practices. Perhaps there is some merit to this argument.
However, it is useful to remember that if Air Asia, sold to Tony Fernandes in 2001 by the Malaysian government for less than $1 and USD 11 million in debt. can now be the largest airline in Malaysia and one of the most profitable companies in the world...there could be hope for Air India too.
Need for Strategic Privatisation
Another example of the government’s anti-privatisation attitude is the façade and role of a real-estate hoarder that it has adopted. The central government owns swathes of prime value land in various parts of the country, including the metros. The value of these lands, with circle rates in the lakhs for each square meter, can boost government coffers by enormous amounts. However, these precious assets continue to remain misused, mismanaged and market-less.
Why? Because it is more important to house senior, mid-level and even low-grade bureaucrats and contractual officers in houses with gardens, driveways and fencing than perhaps offer these areas on the market, incur large sums of revenue and work on creating public housing for those who are willing to live in boxes just to have a roof over their heads. How terribly inequitable and ironical for a prime minister who talks of being the representative of the poor masses.
While the current government has begun to disinvest from some of the central public sector units, it is still short of strategic privatisation. The 6 ITDC hotels up for privatisation is a small step in the right direction, but the larger fear continues to plague the system. The fear that privatisation is a bad word is almost reminiscent of how ‘globalisation’ was a bad word in the early 2000s. While the word globalisation is no longer spoken out loud, it is the basis of programs like ‘Make in India’ that invites foreign companies to produce here. Perhaps for privatisation to start in India, all it needs is a catchy new program title and a funky new mascot.
(The writer is an Associate Fellow at the Observer Research Foundation)
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