The planned privatisation of Bharat Petroleum Corporation Limited (BPCL) will establish Narendra Modi as India’s most reformist Prime Minister. Thus far, only Narasimha Rao and Atal Bihari Vajpayee were given due recognition as reformers – the former for ending the licence-permit raj in 1991, and the latter for beginning the process of privatisation of public sector behemoths.
Modi has actually done more reforms than any previous prime minister – especially reforms not prompted by economic crisis – but the lack of genuine privatisation under his watch has been seen as an unwillingness to let go of the belief that the public sector is somehow the crown jewels. Now, Modi has himself busted this myth.
In 2003, the Supreme Court blocked Vajpayee’s privatisation moves on the ground that companies nationalised through an act of Parliament cannot be privatised without repealing those acts. This stymied his bid to privatise BPCL and Hindustan Petroleum, since any such move would have needed a parliamentary nod – which was not forthcoming.
Also read: Why Indian economic tiger became puppy with tail between legs & what markets want Modi to do
Given the usual political uproar that accompanies any effort to bring in denationalisation legislation, the privatisation of BPCL was always going to be a tough ask. But, almost unnoticed, the Modi government had quietly slipped in the repeal of the Burmah Shell nationalisation law by bundling it with a “Repealing and Amending Act of 2016” that had annulled “187 obsolete and redundant laws lying unnecessarily on the statue-book (sic)”, says a Mint report quoting a senior government official. These “obsolete and redundant laws” included the act that had nationalised Burmah Shell, the former avatar of BPCL before nationalisation.
This is reform by stealth. If the repeal act had been brought in as a separate piece of legislation, it would have caught the attention of the unions and political opponents of Modi. It could even have faced a Rajya Sabha blackball, as did the amendments proposed to the Land Acquisition Act in 2014.
Two things get established now.
One, it would be wrong to label Modi as someone who is basically against privatisation. If he could think of BPCL in 2016, it hardly seems fair to say he was ideologically opposed to privatisation – something this writer too has alluded too. Wrongly, it seems.
Two, the bold privatisation of BPCL, if followed up by the privatisation of Air India, will establish Modi as India’s biggest economic reformer, especially if we exclude Narasimha Rao’s crisis-driven liberalisation policies of 1991-92.
However, it would help if Modi were to now formally embrace reform as his credo, and start moving beyond reform by stealth. He needs to actively champion privatisation of non-strategic businesses like banks and public sector behemoths which no longer serve any public purpose (like Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited).
Also read: Modi won’t win in 2024, unless these nine economic follies are reversed
He should also bring in private sector expertise and management skills in public sector units that may never be privatised for strategic reasons – like the top five public sector banks in India, or IRCTC, which recently made a blockbuster IPO that was oversubscribed 112 times, or some defence units. The logical way to build strategic capabilities while retaining public control in critical sectors is to privatise management, but not shareholding.
The ultimate goal of public shareholdings should be the preservation of public wealth, and not frittering it away by running these enterprises into the ground and offering repeated bailouts.
This is Modi’s biggest task in his second tenure as PM.
This article was first published in Swarajya.
Jagannathan is Editorial Director, Swarajya. He tweets at @TheJaggi. Views are personal.
1. Reforms, whether they are fiscal, judicial, election law, administrative or educational, are important but objective of reforms should be enhancement of welfare of the public at large. I think almost all political leaders regard implementation of reforms as a toll for retaining power and that is why their decisions regarding reforms are dictated by considerations other than their core necessity for enhancement of public welfare. 2. Supporters of private sector who are critical of public sector must not overlook fact that in the fifties public sector had an important role to play and investments in public sector enterprises (PSEs) were definitely justifiable in the fifties and sixties. 3. It is also true that bureaucrats and their political masters used public sector to make money. Management of PSEs remained in hands of those who served the political class. This resulted in creation of an inefficient public sector and we must accept this fact too 4. Let us now consider prevailing situation. Conventional jobs are disappearing very fast; the gig economy is fast expanding. I think privatisation of PSEs won’t make them profitable; It would not also be possible to create new jobs opportunities in the private in the short term. 5. It is true that loss-making PSEs is a huge problem and that requires a different type of approach which will ensure that interests of all stakeholders of PSEs are taken care of. It is a huge task and without cooperation of all political parties, including those who are unlikely to be in power during next decade or so, is essential.
In planned privatization the government has to relinquish the control of the PSU. The mismanagement, corruption and nepotism is well known in PSUs of all Ratnas. Other than the legal issues the culture of robbing public money needs to be overcome, which has been practiced and protected over the last 70 years. It is unlikely that Modi will give any PSU on a platter to anyone. So knowledgeable people should suggest safe and practical ways of achieving this.
Two penny Socialist Modi doesn’t have the gall to privatize bpcl or anything
Modi is an extreme left wing Marxist. Soon Karats, Yechury, Raja et al and the entire cadre of CPI, CPI (M) etc. will be refreshing their Communism lessons with him.
The writer seems to suffer from heart burn merely because Burma Shell Oil Company Act was repealed along with other hundred plus Acts, without the usual uproar accompanying. Whether the Act is repealed casually with the flick of the wrist, or with fanfare, does it matter? PSUs have outlived their socialist objectives.
Mann ki Baat would be a wonderful forum for Prime Minister to talk to Indians about the economy, the way forward, the importance of reforms, how there is a need to break the mould that each newly elected – or reelected – government – finds comforting to settle into. No reason to feel diffident or to fear that Indians are not willing to be part of a brave new adventure that creates more opportunities for their children. 2. One of the myths of recent Indian politics is that PM PVNR and PM ABV lost because they embraced reform.
I agree with this comment.
Your Point 2 is bang on target. Regarding your first point, unfortunately present PM is no reformer in the mould of PVNR or ABV. At best he is a status quoist and at worst an extreme left wing Marxist who believes government should occupy the commanding heights in the nation’s economic, social and cultural spheres. If he was a genuine reformer we would have seen some evidence of that in last 5 years.
I could not agree more with Ashok on his suggestion to Modi to explain his ideas on fundamental restructuring required in the way we manage our economy. He should emphasis that his government is not going back on any of the social commitments and variety of schemes that he has launched but we need to energize the economy by drastically reducing taxes both direct and indirect and making our products competitive in the world but this will result in huge fiscal deficit which will have immediate consequence of inflation going up substantially. But to limit fiscal deficit to a reasonable amount, we must monetize our investment in public sector by selling its shares either partly or entirely and move ahead on a sustainable economic growth, employment creation etc. At no stage, government will flinch from its responsibility to the poor and disadvantaged section but government needs to boost economy and for this purpose, this is the way forward. He should also say that he would remove all subsidies and replace them with one DBT payment which would be like a family pension over a period of time. This could also cover compensation for a single rate GST introduced for items of mass consumption. He must ask people to come forward with ideas and generate discussion and prepare ground for a national level decision, rather than episodic decisions like one day reduce corporate tax and do nothing about personal taxes etc. There is nothing leftist and rightist in this approach but this is the way to forward for our economy. Everyone knows that Modi has good intentions and he is not corrupt though his decisions may always not turn out to be right. This will create positive atmosphere in the country.
Reasoning and Explaining require a degree of intelligence, a modicum of academic rigour, a pinch of patience and an inclination to be sincere. Unfortunately our PM lacks all of these qualities. He is superb in rhetoric that skims close to lying and therefore has all his great electoral victories. He is completely useless in the art of providing governance.
You seriously believe that it is possible to win elections simply based on rhetoric? I wish it was that easy.
Modi won because his schemes made an impact across India -an impact which was visible to the common man (but was “invisible” to the Indian Left for ideological reasons). And if Modi is able to maintain this level of efficiency in the implementation of his innovative schemes, he will win future elections too.
However, none of that would bother you because you believe that rhetoric alone is sufficient to win elections.
I would agree with Abhishek as Modi has taken many decisions during his first term and people benefited from his schemes. However, Modi has not outlined in a formal way how he would like to sequence his reforms and initiatives and the rationale for them. That leaves us with tactical reactions and face saving actions, rather than positive initiatives. Now that he is politically in an unassailable position and is likely to around till 2027, he must take the bull by horn. His lasting legacy will not be Art 370 or UCC or Ram Temple but how he is able to clean sweep the cobwebs of past economic mismanagement and build a new Indian economy over USD 5 trillion.
Hahaha. Nice try.
If it had been the “impact” of “reforms” it would have been much higher than 38% that would have voted for him. Idiotic measures like building toilets with no water supple or sanitatary connections or LPG cylinders with no replacement facilities are a cruel joke and not reforms.
It was the intoxication created by Balakot and communal fracture that got him his mandate- especially in states like Karnataka and West Bengal- other than the Hindi heartland.
This foolishness is seen in Haryana state elections where A 370 is the issue rather than unemployment.
I emp[Hasi seems that it was a combination of a clueless political opposition and a supine mainstream media along with the rhetoric of Moditwa that led to the mandate of May 2019. Not reform and not development.
Since Modi has no interest in genuine reforms, there is no reason for him to bring it up in Mann ki bath or explain anything to anyone.
Rightly said Seema. Indiraji used to win with more than 86.2 percent votes of total population. Modi got 38 percent of 60 percent who voted and not the whole population which makes it a very low number of around 15 percent of total population. He will win this round with A 370 and who knows next elections with A 371.