Ports corporatisation is the latest setback
Transport minister Nitin Gadkari put a gloss on it when he said the government planned to change existing laws to make 12 major ports more efficient, but the real import of his statement was that the Modi government appears to have hit the labour wall that most governments in the past have succumbed to. After all, it was just a few months ago when, in his Budget speech, finance minister Arun Jaitleysaid that ports in the public sector needed to be able to attract investment and to leverage the huge land resources they had, and the way to help them to do this was to corporatise them. This plan, as Gadkari said, had to be abandoned as ‘the trade unions raised objections … (and) some political parties tried to (get) mileage’ from it—whether Gadkari’s new plan will help, of course, remains to be seen. Juxtapose this against the government changing its plans on privatising airports such as those in Chennai and Kolkata, or with the lack of progress in allowing commercial mining in the coal sector—when mining auctions began, the impression given was that commercial mining was just a matter of time—and it becomes clear the government is taking no chances on annoying organised labour unions. Not surprising since, in the case of the UPA, even the divestment of a small part of the government shareholdings in Coal India Ltd had to be put off after the unions protested.
The problem with this, however, is that the government can get a bad name—that it is scared to take tough decisions since it is already on the back foot having being labelled, in quick succession, pro-corporate and anti-farmer. Indeed, if the government agrees to the sharp hike in minimum wages being sought by unions, this will only cement this image of bowing to the labour lobby—apart from reducing India’s attractiveness as a manufacturing destination. The saving grace, as events of the last few weeks show, is the government is trying to fix the tax mess—MAT on FPIs has been fully resolved now, and Jaitley has promised early action on other legacy cases. Weary investors, however, will be waiting for signs of more concrete action and, at some point, labour reforms have to be part of this.