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A Left Hook For The UPA
Warning against "Free-market" Policies
Praful Bidwai
Frontline, 4 July 2005
Barely within a year, the Left parties’ honeymoon with the United Progressive Alliance has ended. That is the unmistakable message from the decision of the Communist Party of India, Communist Party of India (Marxist), Revolutionary Socialist Party and All-India Forward Block to suspend participation in the UPA-Left Coordination Committee (CC). The decision is neither impulsive nor tactical—meant to be reversed after securing a shoddy face-saving compromise, as so many recent resignations tend to do, witness the L.K. Advani-staged sordid four-day drama. The Left’s withdrawal is not some kind of "shadow-boxing." It has all the makings of a well-considered decision. At its centre are policy-level differences.
The Left’s walkout won’t threaten the UPA government’s survival in the short run—whatever happens to BHEL. The Left will continue to generally support the UPA although it won’t endorse all its policies, especially economic ones. It’s only too aware that the likely consequence of the UPA’s collapse, resulting in instability, will be extremely unpleasant. Political chaos could give the viciously communal and crisis-ridden Bharatiya Janata Party a fresh lease of life. The Left’s 61 MPs, their highest-ever number, will have to play a carefully fine-tuned role to guard against this, while remaining independent from the UPA.
It’s hard to fault the Left’s decision. It had sounded numerous warnings about the UPA’s economic priorities, which have increasingly strayed from the National Common Minimum Programme (NCMP), especially its progressive, pro-people measures such as the promised Employment Guarantee Act and greatly increased social expenditures. The Left had certain reservations about the NCMP. But it legitimately demanded that its progressive aspects be implemented, and the UPA must not "seriously violate" it. Yet, the UPA behaved as if the Left’s objections were frivolous. At times, it deceptively claimed that the Left had been consulted on controversial decisions!
The last straw was the UPA’s decision to divest 10 percent of the shares of Bharat Heavy Electricals Ltd., a Navaratna or star among public sector undertakings (PSUs), and arguably a well-managed world-class company with a strong technology base. The Left not only opposed the divestment. It also proposed alternative means of raising the same amount, indeed more. The UPA disdainfully ignored it.
The UPA’s insistence on BHEL divestment militates directly against the NCMP’s commitment "to a strong and effective public sector whose social objectives are met by its commercial functioning... The UPA will retain existing Navaratna companies in the public sector while these... raise resources from capital market." In fact, the move is gratuitous and profoundly irrational. BHEL isn’t just another PSU. It has 90,000 MW of generating capacity to its credit. BHEL’s turnover (a solid Rs 10,336 crores) has increased 2½ times over 10 years. It has proved itself competitive the world over against global giants of the electricity-generation equipment industry like Siemens, General Electric and Alsthom, as well as Chinese, Korean and Japanese firms. It has an impressive research and development unit.
Miraculously, BHEL has defended its excellence despite attempts by multinational rivals to lure away its engineers with offers of salaries that are six, ten, times higher! BHEL has managed to garner manufacturing orders equivalent to almost three years’ turnover. Its competitors don’t even have a year’s orders. This helps it optimise costs. It has also diversified its technology portfolio. Over the past decade, BHEL has contributed Rs 11,700 crores to the treasury in taxes. It routinely pays dividends of the order of 40 and 80 percent!
If anything, there is a case for launching BHEL as a truly global corporation, operating in scores of countries, much in the manner of ONGC, and for granting it autonomy to raise money from the market, fix salaries, choose technologies, strengthen marketing, etc. This would give the public a return running into tens of thousands of crores and produce spin-offs in other core-sector industries. Instead, the UPA would sell equity to raise a mere Rs 2,000 crores and weaken BHEL. The decision is not BHEL’s, but imposed on it by the government. So much for autonomy!
It’s ludicrous to claim that the government will still retain over 51 percent in BHEL, and hence, disinvestment won’t mean privatisation. As the Left says: "From 51 percent to 49 percent is just a small step. It is creeping privatisation." That’s what happened to IPCL.
Privatisation of Indian PSUs has been a sad, indeed shameful, story. As discussed in the Column six weeks ago, typically absent from it are an economic rationale, transparency, competition to ensure the highest price, and defence of employees’ interests. If the first case of outright PSU sale—namely, Modern Foods to Hindustan Lever—produced a disaster, the latest (Centaur) is no less a scandal. Such "robberisation" is even more odious when the PSU involved isn’t a loss-making or indifferently managed one, but highly competitive and of international standing like BHEL.
The UPA may well reverse its decision on BHEL. But the central issues goes beyond this. The UPA must engage in serious economic rethinking. Its government has been niggardly and tardy in implementing the NCMP’s pro-people, pro-poor measures. It has dragged its feet on the EGA, failed
to raise agricultural credit and investment in the rural infrastructure, and refused to raise paltry health spending or set up a "Prathamik Shiksha Kosh" with the Rs 13,000 crores already collected as primary education cess. It has done little to relieve acute agrarian distress, which is driving farmers deeper into debt—and to suicide. Millions have had to delay sowing and will experience great hardship.
The UPA either has no idea how serious the agrarian crisis is, or is not bothered. In contrast to this callousness, it has implemented pro-corporate measures with alacrity: raising the foreign investment cap in insurance and telecom, doling out concessions to domestic airlines, and further opening up sectors like mining to foreign capital. After the visit of Wal-Mart’s CEO, it is contemplating 100 percent foreign equity in retail trade. This will create a "Supermarket culture", with all its alienation, impersonal transactions, monopolies, wastefulness and high-energy inputs. Worse, it will threaten millions of livelihoods—small grocers, vegetable-sellers, pavement-stalls, redi-wallahs.
The UPA is guilty on yet another count. In WTO negotiations on services, it is trying to obtain more H-1-B visas from the United States for software engineers in return for indiscriminately opening up domestic services. This is a double whammy. First, multinational corporations will intrude into education, water and power supply. Second, more H-1-B visas will further denude India of second-order software talent. Already, half our software engineers are stationed abroad!
This policy trend is likely to accelerate with Prime Minister Singh’s forthcoming US visit. An even more important choice is likely to be made there. This concerns Washington’s support for India’s bid for a permanent seat on the UN Security Council, which our leaders desperately crave and have been lobbying for, both bilaterally and through the G-4, including Brazil, Germany and Japan. India has already dropped the demand for a veto because Washington opposes it.
After Under-Secretary Nicholas Burns’s recent India visit, two things are clear. First, the US wants only a limited expansion of permanent membership, by "two states or so". It has identified one, Japan, and says the decision on the other will be political. India and Brazil both meet its various "criteria"—including size of economy, size of population, military capacity, contribution to UN peacekeeping, commitment to democracy and human rights, and record on counter-terrorism and non-proliferation. Second, India’s bid will be endorsed only if it agrees to play second fiddle to Washington in the UN.
The choice is stark: get into the Council as a US ally/protégé/client, or remain on independent, non-aligned power in a multi-polar world. As far as the public interest goes, the sole rationale of a Security Council seat is that it will expand India’s room for independent policy-making in international affairs so that she can play a progressive role and promote universal values of peace, equity and justice. This will be the first casualty if India agrees to US endorsement on Washington’s terms.
That’s not all. The US has hinted (The Times of India, May 28) that India must agree to get the UN Charter amended to permit military force in "anticipatory self-defence". This connotes both pre-emptive and preventive wars and is impermissible under international law. This doctrine means a powerful state can wage war on a country if it suspects that an attack is possible, or it wants to permanently disable it. This is a recipe for international brigandage and chaos. India will contribute to undermining international security if it supports this amendment. A Council seat on such egregious terms makes no sense whatever.
The UPA must rethink beyond BHEL. The Congress has much to lose by breaking its alliance with the Left. The next round of Assembly elections will be testing for the Congress. It can ill-afford to get discredited in the public’s eyes. The voter punished the NDA heavily for claiming that "India is Shining". It will be a graver tragedy if the UPA draws public ire within just a year in office—for claiming everything is hunky-dory.
Copyright 2005 Frontline
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