<b>XIII LOK SABHA DEBATES, <i> Session II (Winter Session) </i> </b>
XIII LOK SABHA DEBATES, Session II (Winter Session) Thursday, December 16, 1999/Agrahayana 25, 1921 (Saka )

Title: Discussion regarding disinvestment policy of government. (Not concluded).

15.58 hrs.

MR. CHAIRMAN: Now, we will take up discussion under Rule 193 regarding disinvestment policy of the Government. Shri Indrajit Gupta.

SHRI PRIYA RANJAN DASMUNSI (RAIGANJ): Sir, either the hon. Finance Minister or the Minister Incharge should be present in the House while we discuss this issue... (Interruptions)

MR. CHAIRMAN: A Cabinet Minister is here. They will also be coming.

... (Interruptions)

SHRI BASU DEB ACHARIA (BANKURA): Sir, now there is a Minister Incharge of this. He is not present in the House... (Interruptions)

MR. CHAIRMAN: He will come soon.

16.00 hours (Hon. Speaker in the Chair)

SHRI PRIYA RANJAN DASMUNSI : Either the Finance Minister or the new Minister in-charge of disinvestment should be there. None of them is present here. How will the discussion begin? (Interruptions)

SHRI ANIL BASU (ARAMBAGH): He is in the lobby. I find the particular Minister who is in-charge of disinvestment is in the lobby.

SHRI PRIYA RANJAN DASMUNSI : We are not discussing the issue of animal husbandry or anything like that but we are discussing disinvestment policy.

SHRI INDRAJIT GUPTA (MIDNAPORE): Actually, we do not know...(Interruptions)

MR. SPEAKER: In the meanwhile, some Minister can note down.

SHRI PRIYA RANJAN DASMUNSI : Mr. Speaker, Sir, you have to give some direction. This is not the way to treat the House, the discussion and the issue. If that is the direction, we can raise any matter, and any member of the Cabinet can note down. Is this the way of showing seriousness?

MR. SPEAKER: They will note down. In the meanwhile, the Minister will come.

SHRI BASU DEB ACHARIA : Now, he has come. He was in the lobby.

1601 hours

SHRI INDRAJIT GUPTA : I am seeking to raise a discussion on the question of the Government's disinvestment policy and the functioning of the Disinvestment Commission. I gather that Shri Arun Jaitley has very recently been empowered by the Minister of Finance to pay special attention to this question of disinvestment. The possible reason for it may be that Government is now anxious for this disinvestment process to be extended not only to Public Sector Undertakings but to joint ventures also. Up to now, disinvestment of shares in Public Sector Undertakings was proceeding at quite a fast pace but it appears that the Government is not satisfied. They want the whole process to be further expedited. Not only expedited but also they wanted it to encompass a much broader field of activity.

As I mentioned just now, the reports are that Shri Arun Jaitley is entrusted with the job of seeing that not only the Public Sector Undertakings but also joint ventures in which the Public Sector is a partner along with the private sector should also be brought within the compass of this disinvestment.

For example, there are companies like Maruti. There is Indian Airlines. There is Steel Authority of India. There are so many other joint ventures. All these, up to now, have been kept out of the area of disinvestment. But I apprehend now that after so many years of working, the Government is eager to step up the pace of disinvestment and to see that more and more Public Sector Undertakings including joint ventures are brought within this compass of disinvestment. I would not name the paper. One newspaper which is very kindly disposed towards the private sector has also approvingly commented that Shri Jaitley is just the right person for this job.

Sir, the Disinvestment Commission was set up in 1991, that is, eight years ago, a pretty long time. I should just point out that Government's announced strategy in disinvestment is something which the Finance Minister has spelt out a number of times in both the Houses and outside the Parliament also.

As far as we have understood it, the Government's intention -though we do not agree with it at all - was that fairly large sums of money which are locked up or tied up in the capital holdings of public sector enterprises should be made available. For what?

Firstly, they should be made available in order to help them to see that the Government's own funds are further strengthened and replenished by diverting this money from the public sector units to strengthen the Government Budget.

Secondly, they said that there are some non-strategic Public Sector Undertakings which are running at losses should be strengthened. We wish to use this money for the purpose of strengthening of those units, and we will see that this money is used in order to bring out some viable plans and schemes for strengthening these weaker units and give them a better chance to function properly and efficiently.

Shri Yashwant Sinha was speaking on the 13th of December, in the other House on the same subject. He has stated:

"That the Government has decided that in the generality of the cases, the Government's shareholding in public sector enterprises will be brought down to 26 per cent, (which means the minority shareholding and the majority share holding will not be any longer held by the Government.)"

The second point which I made was that this is contradictory. In the cases of public sector enterprises inviting speedy consideration, the Government will continue to retain the majority of shareholding. Just before this, he has said that in the case of these Government enterprises, the share holding should be brought down to 26 per cent. He says just after that:

"In the cases of public sector enterprises inviting speedy consideration, the Government will continue to retain the majority of shareholding."

I think, this question should be clarified by the hon. Minister when he replies as to what exactly the Minister of Finance meant by this.

I am still quoting Shri Yashwant Sinha. The third point he made was that the interests of the workers will be protected in all cases. Of course, the actual practice that is going on is very contrary to this. Numerous cases are being raised in the House during Question Hour, during Zero Hour, and through Matters under Matters Rule 377. The hon. Members are citing instances of so many of these public sector enterprises where the workers' interests far from being protected - are being very much sacrificed. They are being subjected even to non-payment of wages for several months. The Government's strategy towards public sector enterprises will continue to encompass a judicious mix of strengthening these strategic units and privatising the non-strategic units. Privatising non-strategic units through gradual disinvestment and all strategic sales and devising a viable rehabilitation strategy for weaker units are the scheme.

This is what the Finance Minister has said. He has mentioned later on:

"Strategic sale means sale of some strategic units to strategic parties who are willing to buy them. The difference between disinvestment and strategic sale is that when we undertake a strategic sale, we hand over the management to the strategic partners."

So, this is a plan which includes general selling of shares to the public. It also includes selling out of joint ventures. It also includes strategic sale, meaning that not only sale of the equity but even transfer of the management may be made to the strategic partners who are willing to persist this sale. So, it is a very broad compass and under these different heads, we would like to know from the Government how many different undertakings they have tried to dispose of under these various heads.

We are, of course, completely opposed to this policy because this is another name for dismantling and demolishing the whole structure of the public sector which has been built up over so many years, costing thousands of crores of the people's money. The public sector in the industrial field has played a very vital and strategic part in strengthening our whole industrial infrastructure and in providing this country's economic sinews that much of the strength which it was lacking until the public sector came into play. Disinvestment may be a polite word, but actually what it amounts to is demolishing the private sector and taking out one by one important public sector units and transferring them to the private sector. But the Government does not say like that. They are not frank enough to admit what the whole game is behind this policy. We are totally opposed to this and I wish to emphasise the fact that earlier on when this Disinvestment policy first started, it was stated that only part of the money which would be received from the sale of the shares, would go into what was called the Disinvestment Fund. That was one of the main recommendations which had been made. It was said that ten per cent of the proceeds realised from the sale of shares would be put into this Disinvestment Fund. The first Report of the Disinvestment Commission which was submitted in February, 1977, in fact, said that this Disinvestment Fund could be utilised by the Government to replace the budgetary support which is supposed to come from the budget to various units. Often it is not given on the plea that there are no budgetary resources with which to help these individual units. The Disinvestment Commission had proposed that the Disinvestment Fund created within the sale proceeds of the companies' shares and transferred to the private sector, should be used for the purpose of giving budgetary support to units which were urgently in need of that.

As far as I am aware, there are no examples of the budgetary support being given to public sector units out of this Disinvestment Fund because as far as I know, this Disinvestment Fund has existed only on paper; this has not come into actual operation.

Then, the tenure of this Disinvestment Fund itself has ended on the 30th of November this year.

It was working upto 30th November, 1999. But, after that the Government had disinvested the Disinvestment Commission. The Disinvestment Commission no longer exists. It has been allowed to lapse as it were. Before it lapsed, it had submitted some 12 Reports to the Government. We do not know the fate of those Reports. In many of them, the Disinvestment Commission had suggested that instead of large scale selling of shares, what should be done was to work out some viable schemes for strengthening the weaker units for giving them the possibility of restructuring, for improving their technology, improving their management and thereby reducing the budgetary deficits from which they suffer.

Also, the hon. Minister of Finance himself had claimed that a part of these proceeds from the sale of public sector shares would be used by the Government for what he has called the social sector. In fact, in one case he had stated that this money would be used for construction of houses, construction of roads, supply of water to rural areas and so on and for this kind of social purposes would also be one of the objectives of this budgetary exercise. However, I believe that due to inter-Ministerial difficulties and inter-Ministerial rivalries, there being a number of Ministries which are supposed to look after this disinvestment sector, there are difficulties. Technically, of course, the Finance Ministry is the boss, as it were. But other Ministries are also involved - either those which are directly concerned with the particular industry with which that enterprise is concerned or which are concerned with export and import. They were being looked after by different Ministries. This has led to a number of differences among them which have prevented effective action being taken.

As far as I am aware, disinvestment has actually been carried out in 39 public sector enterprises and from 1991-92 to 1999-2000, the amount which has been received by the Government through disinvestment of Central Public Sector Undertakings is Rs. 18,288 crore, nearly Rupees two hundred thousand crore. This is what they have received. How has this money been used? Except by saying that it has been credited to the Consolidated Fund of India, there is no further information available as to the breakup of this expenditure. Everything goes to the Consolidated Fund of India. That we know. But what about the breakup of this money? How much of it was spent on reviving the sick or weak units by improving their management, giving them better technology and other methods? How much of it was used for paying off for workers who were supposed to take the so-called voluntary retirement and leave their service and go? That is also included in this. How much was spent on what are called the social benefits or bringing about social improvements in the social sector?

These things have not been either spelt out or told to the country or the House. I would like to know from the hon. Minister about these details.

Then Sir, there is a seeming contradiction. The Finance Minister's statement in the other House that the Government's shareholding would be reduced to 26 per cent does not make any sense. That means the Government wants, in all these holdings, in all these public sector enterprises, to become a minority shareholder. What is the meaning of it? I am not able to follow. If it is so, it is a very serious matter. It means that the Government is actually liquidating its holdings in the public sector and demitting the whole thing to the private sector because he has said elsewhere, as I have quoted a little bit earlier, that the Centre would also be holding a majority of shares in what are called the strategic units. There is a difference between what they say are losing units, the units which have been making financial losses for a long period--these can be sold, but there will be nobody to buy them--and those units which have been running in profits. These units may command a good share price in the market, but why should they be sold since they are showing a good performance and getting high profit?

The rehabilitation of weaker units, non-strategic units, is one of the declared aims. I suggest that it has not been done at all. If anything has been done, we would like to know some instances, some examples from the Minister. What are the units where they have gone in for this kind of a viable rehabilitation of the weaker units? I would like to know whether sale of units in sectors like oil, petroleum, power and so on, which are strategic certainly by any means, include the question of handing over the management of these units to the strategic partners assuming that the people who are willing to buy shares in these sectors are also not domestic purchasers, but international purchasers, which means foreign companies. They have not procured it. They are also included as bidders for the purchase of shares and if they buy a sizeable quantity of shares, the Government's policy is to allow them to also become partners in the management. That is a very far-reaching step, the Government is intending to take.

There was a discussion the other day, Sir, and I think, the Power Minister was involved about a reported move of the National Thermal Power Corporation (NTPC) to take over all the shares of the NHPC. Both are public sector enterprises and both of them are operating in this very strategic sector of power. We know that the power requirements in this country are also growing all the time and they are not able to meet the requirements at present by their installed capacity. So, the Government is very much interested in seeing that the capacity to generate more power is increased substantially, but the method for doing this, which appears to be under consideration, is for one of them to buy up all shares of the other. This is a curious method. Of course, it was denied here by the Power Minister who said that no such decision had been taken yet. He did not deny whether it was under consideration or not.

He said that the matter was still being considered, but no final decision had been taken. This is one of the options, and his option is this one. Just recently, although the Finance Minister, on the floor of the House, very strenuously denied that it amounted to privatisation, we have had the example of the two insurance corporations, the LIC and the GIC, into which entry of the private sector has now been permitted by a Bill which has been introduced recently in Parliament. Though the Bill has not been passed yet, the idea is that in these two very old, very traditional, very well established and very well performing public sector corporations in the field of insurance, which cannot possibly be accused of either being inefficient or running in losses, they are going to allow the private sector to come in. Even though it is argued that since their total holding capacity of shares will be limited and they will not be able to hold more than the ceiling, but anyway, this is a very very important step that they are taking which is, in our opinion, a signal to the foreign investors abroad, and it was meant to be that they should be encouraged to come and invest in our country because these were two sectors where the foreign insurance companies were very very anxious and eager to be able to enter for the sake of making higher profits. This was being strenuously objected and opposed by different sections of public opinion in this country, not only by trade unions. There is a wrong impression sought to be created that on this insurance question, this was a dispute between the workers' unions and the company management. That is not so. The point is that in the case of the insurance companies, allowing foreign capital to come into these two sectors would change the whole balance of capital holding in this country, and would lead to a very massive fall, I should say, in public sector performance and investments.

Then, Sir, another example I would like to just briefly mention is the Gas Authority of India. The Gas Authority of India is one of the so-called Navratnas. It is competent according to the Government's own reports which I was looking at. They say that it is professionally managed, very efficiently managed; it is a competent company and it has made a net profit this year of Rs. 1,060 crore. The Disinvestment Commission to whom this Gas Authority of India was referred -- I do not know as to why it was referred -- recommended that Rs. 21,000 crore worth of shares of the Gas Authority of India may be placed in the domestic and the international markets for purchasers who might be interested in buying, mainly they would be international purchasers. So, after that, this has happened very recently, we would like to know as to what is the strategic move that the Government has undertaken by putting both these very flourishing and efficient public sector companies on to the bargaining table of the Disinvestment Commission.