Don't make privatisation a religion ... PDF Print E-mail
Friday, 25 April 2014 02:37
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Though Arun Shourie is widely associated with privatisation in Atal Bihari Vajpayee’s government, it seems apparent—for now, at least—that were a Narendra Modi to form the government, privatisation is not going to be on his agenda. Don’t reduce the debate to theology, Shourie cautions, argue the merits of the case, explain why a bailout to an MTNL is a waste of money. While outlining what he thinks will be a Modi strategy, and the way the PM-CM team will work, Shourie tells Sunil Jain that Modi should first look at those changes which can be made without going to Parliament—and there are many, he adds.

You have been known for your successful privatisation. This is now off the agenda. How do you bring it back?

I have yet to see, after all these years, a consolidated statement of the amount of financial assistance that has been given to PSUs, what were the targets that they agreed to, and what happened as a result, before the next bailout was given. You take Air India. I can bet my life that nobody in the finance ministry, civil aviation or Air India will be able to tell you, Mr Jain, that this is the amount we got. Despite that, bailouts keep coming. Let the government start by making a consolidated statement, presented to Parliament, about the relief and waivers that were given, steps for turnaround that were promised, and what happened as a result.

Take Scooters India Ltd, for example, which hasn’t made a scooter since God knows when. It has 200 acres of land in Lucknow. Recently, because of Sonia Gandhi, Chidambaram announced R200 crore more to Scooters India. What has Scooters India said it will do in return? Instead of making this a theological issue, we should reduce it to specifics.

MTNL’s wages-to-turnover is 103%, compared to 5% for private firms. You don’t have enough Indians, or even Chinese, to raise MTNL’s revenues 20 times! Is allowing spectrum trading a solution? This will give MTNL top line growth and the sector a lot of spectrum.

These are intermediate solutions. But the actual thing to do is get the facts. Both proponents and opponents should get the facts. Only then a debate can take place. Otherwise it is a religious argument—you are for God, I am against it. Or I have one God, you have another.

Modi can professionalise a Coal India, but he can still open up the coal sector. Ravi Shankar Prasad brought in a Bill in the Rajya Sabha to do this. But the BJP has now changed tack. It now only wants captive users like Tata Steel, not big mining companies like BHP. Can a Modi change this?

Certainly the coal sector should be opened up. We have to separate the coal mafia from a worker. Whenever a sector is opened up, the wages in that sector shoot up astronomically. In the coal sector, we have to do something keeping in mind the interests of the country and of the worker, and not allow the discourse to be hijacked by mafia that controls the transportation, the labour and the mining of coal.

Can a Modi change the BJP’s thinking?

Even a strong PM cannot disregard the clamour of the party, but eventually he has to break through that barrier. And show results.

Hasn’t the BJP tied itself in knots? It supported the Food Security Act, it supported the Land Act …

The only solution is making CMs of various states genuine partners in governing India. Most CMs will be facing the same problems. The PM should have quarterly meetings with CMs. And the CM shouldn’t come with just complaints and demands. They should discuss problems and specific solutions. For example, labour laws, bankruptcy law, APMC Act, Apprentices Act. There are problems, but the solutions lie in letting champions emerge—for every problem, from labour laws to land acquisition, one state or the other has made great progress.

How does a state change its labour laws for instance? These are on the Concurrent List, so need the Central Act to be changed first…

You’re all reading Section 1 of Article 254 which says Central laws will prevail over state laws if there is ‘repugnancy’ between them. But Section 2 allows state laws to prevail, provided the President of India approves this—that means, even if Modi’s government can’t change a central law in Parliament, it can ask the President to approve a change in Andhra’s labour law. This can be Modi’s way of promoting states that wish to reform.

Another example of how the BJP has tied itself in knots is Aadhaar. You can’t afford the current subsidy regime—subsidies were 1.5% of GDP in the Vajpayee years, they are up to 2.5% now and can go up to 3.5% if the Food Security Act is rolled out. Why the opposition to Aadhaar?

I am not sure what the grounds for objection to Aadhaar are. It is not a Congress programme, it is a national programme.

One of the arguments, completely flawed, is that illegal immigrants, say Bangladeshis, could come and get this card…

Just reaffirm this again and again that the Aadhaar is not a proof of citizenship. The National Population Register is the place to fix the Bangladeshi problem, not the Aadhaar. But I don’t know Modi’s views on this.

The BJP makes much of not having retrospective amendments to taxation. But now that Parliament has passed it, isn’t going back on FDI in retail a bad idea? It may not be a solution to India’s problems, but some states do want it.

I can’t speak for the BJP. I have two opinions. One, those looking at the reforms process in India should not make it a litmus test. If disinvestment is not taking place, if insurance sector is not open, or if retail FDI is not being allowed, then no reforms are taking place. Look at the overall thing. Two, in many of these matters, just leave it to the states.

What are the low-hanging fruits for a Modi?

First is the selection of the team. There must be people of manifest competence and unquestioned integrity. Take the example of E Sreedharan. No one doubted his integrity, nor questioned his decisions—very tough decisions need to be taken, so this is paramount. This also takes care of what you call L1-itis, that PSUs have to select the lowest bidder each time—you have the L1-rule because no one respects the integrity of decision-makers.

Second, 30 secretaries must be appointed by the PM himself after all diligent enquiries and personal assessment. And in a sense you must run the government through principal secretary and the cabinet secretary and those 30 secretaries. This is one of the principle abdications by Manmohan Singh. He allowed the ministers to choose their secretaries. Those secretaries became beholden to the ministers. Once these secretaries are in place, the PM should discuss directly with them all the issues and review them, say, after monthly periods. Tell them to come up with what things can be resolved without needing to go to Parliament.

A Modi will work on coordination between ministries which, under the UPA, had become governments in themselves. The Railways need to build 140 km of rail to get coal out, but haven’t done so … this will get fixed under a Modi. Modi will tweak schemes, he will be imaginative—let us use MGNREGA to allow farmers to build check dams, and satellite imagery will tell us where to build the check dams.

And the fiscal situation?

People are not exactly aware of the seriousness of the situation. The deferred bills, on petroleum/fertiliser/food add up to more than R1 lakh crore. Our interest payments are going to soar even more because of the huge debt build up during the Pranab Mukherjee years. I don’t think people realise that of the revenue receipts, 58% goes into interest and principal payments. Then you add salaries, and pensions. And after that if you take these unpaid bills being rolled over to April, you will see the constraints.

There are two other things that should be done swiftly. One is GST. States who are complaining of revenues falling under GST would have gained more by now if they had implemented GST. The Direct Taxes Code Bill, in its current form, is hardly an improvement and needs to be reworked. Then there are the announcements. We will not impose retrospective taxation. We will not allow impediments to come after clearances have been given—Vedanta, Posco, etc. The government is the biggest litigant and it should say that, in economic matters, we will go up to the high court, and no more.

You said tough decisions need to be taken. Increasing gas prices is one such, extending the licence period for a Cairn is another … how does Modi take these decisions, absolutely critical ones, without being accused of being a crony capitalist?


In the natural course, for Cairn’s lease extension, it is the Rajasthan government that should be the one agitating the most for it because it stands to gain from it. It is the one that needs to be mobilised. The problem is the winners are not lobbying for the gains they stand to make. A Modi can get state governments to lobby with their MPs, after all the states benefit from growth.


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