These days privatization has become a new fashion. Open or backdoor. Some of the biggest privatization moves which already have been made include that of Indian Railways, 100% privatization efforts for Air India, and even oil and gas companies like Bharat Petroleum, besides SAIL, Shipping Corp of India (SCI), THDC India and NEEPCO and more. In a big step towards privatisation of many state-owned firms in its second term, the Narendra Modi government has identified 18 strategic sectors, including banking, insurance, steel, fertilizer, petroleum and defence equipment, where it will retain only a limited presence. According to the plan, in strategic sectors, there will be a maximum of four public sector units and a minimum of one unit operating. The govt plans to exit the rest.
In the mining and exploration segment, the areas where government will retain limited presence are coal, crude oil and gas, and minerals and metals.
Similarly, in manufacturing, processing and generation segment, the areas where the government will retain limited presence are defence equipment, steel, petroleum (refinery and marketing), fertilisers, power generation, atomic energy and ship building.
And, in the services sector, the areas identified are — power transmission, space development and operation of airports, ports, highways and warehouses and gas transportation and logistics (not including gas and petro-chemicals trading), contract and construction and technical consultancy services related to strategic sectors and subsectors, financial services for infrastructure, export credit guarantee, energy and housing sectors, telecommunications and IT, banking and insurance.
A Dangerous Situation
Assuming government machinery totally inefficient the recent governments in India have become more and more oriented to privatization.
But this is a dangerous situation. This is the failure of leadership to handle the things effectively. Leaders of all the parties have always been bent upon to infuse biases, nepotism and corruption in bureaucracy. They have to reap what they have sown but sufferers are the mainly the silent masses. Privatization is not a real solution.
Today, Russia is a dominant power due to government control and public sector whereas America is in fragile position. China and India were equal economies during forties but now China is having five times higher GDP due to the same government control and public sector. See the technical capability and Olympics performance of Russia and China.
Narrow Politicking in Decisions
Confused polity has been using economic modeling just as a fashion. In the late sixties, there emerged a fashion of nationalization. Banks, insurance, petroleum and coal companies were nationalized hurriedly mainly out of political compulsions. The case of 14 major banks has been quite interesting. On 22 January 1969, Banking Commission was appointed to consider the issue of nationalization or socialization as part of its comprehensive agenda within less than two years. Scheme of Social Control over Banks was put into force on 1st February, 1969 and it was only proper on the part of the government to allow sufficient time to show its effects. But Indira Government was in so much hurry that it declared nationalization of 14 major banks in the night of 19th June, 1969—just within five months. After stay order by the Supreme Court the Government again made an amended declaration on 25th July, 1969. It was an act committed merely to find some relief out of the then political challenges against Indira Gandhi within and outside the Congress Party after 1967 assembly election defeats in eight states. But in since 1991 the fashion changed. A feeling emerged that the public sector banks became highly inefficient with corruption, heavy NPAs and losses and these banks were directly or indirectly brought under social control and disinvestment upto 33 per cent shares—an experiment delayed by more than two decades by sheer politics. But such narrow politicking in decisions then and thereafter weakened the nation gradually.
In fact, small ventures should be left in private hands or self-help groups (SHGs). Mid-sized ventures should be reserved for coordinated cooperative sector whereas large or strategic enterprises under public sector or at least 51% government control. Here in these large industries, public private partnership (PPP), strategic alliances, BOT (build-operate-transfer), BOLT (build-operate-lease-transfer), etc. may be utilized particularly in new ventures as per need. Reservation of industries is not new for India. Two decades earlier hundreds of industries were reserved for public sector. Hundreds of activities were reserved for small industries. It is another issue that due to bureaucratic corruption, red-tapism and other inefficiencies and political interference such reservation proved counter-productive and led to license-quota-permit raj. But, it is necessary to reserve mid-sector for coordinated cooperatives.
Public undertakings have played very good role in this pandemic all over the world. All major enterprises should be run in public control as far as possible.
The new agricultural policy emphasizes contract or corporate farming and marketing. Instead the option of coordinated cooperative farming is suitable for at least small holdings. This will reduce the migration of workers, increase employment opportunities and create balance and prosperity in regional development. The burden and social distortions of metropolitan areas will also be reduced.
Coordinated Cooperatives for Middle Sector
All medium sized producers, farmworkers, labourers, consumer supplies and business units and agriculture supporting (agrico) and agro-industries must be run by coordinated cooperatives. So far, cooperatives have been running under the control of government departments in which ruling politicians and bureaucrats maintain their direct or indirect possession, whereas the common members go unheeded. The result is inefficiency, scams and losses. Such subordinate cooperative societies have been unsuccessful. Governments in cooperatives should be confined only to the indirect positive and promotional role of ‘friend, philosopher and guide’. The workers will also get dividend as shareholder in addition to salary/wages/remuneration from the cooperative society, in addition to interest and rent in proportion to capital/land. The option of coordinated cooperative farming instead of contract or corporate farming is at least appropriate for small holdings. This will reduce the migration of workers, increase employment opportunities and create balance and prosperity in regional development. The burden of metropolitan areas and social distortions will also decrease.
Most of the agricultural holdings have been quite small in size and hence inefficient. They should be pooled into coordinated cooperative farming. Each farmer pooling his land in such cooperative should be guaranteed individual ownership right for return of that land when the venture is closed or restructured. In case he goes out earlier the society may resort to four options depending upon consent of the two parties.
a) The society may continue giving him rent in cash or kind for use of his land.
b) The society may simply return his land if feasible.
c) The society may purchase the land from him by paying adequate compensation in cash or public bonds or both as the resources permit.
d) The state government may allot him equivalent land upto his satisfaction.
The central government has been announcing a plethora of schemes for small businesses and farmers. These can be taken advantage of properly through coordinated cooperatives. Governments should also announce a scheme for promotion of and also for giving priority to coordinated cooperatives and self help groups in support and lending. It is necessary to divert all incentives and subsidies of individual farmers and businesses to coordinated cooperatives and self help groups for the sake of efficiency and promotion of teamworking.
In order to ensure speedy use of local resources in the short run, the states and schemes should be restructured by bringing the local politico-economico-cultural voices and identities into effect at the earliest. Inclusion of these people in the operation of units through coordinated cooperatives in construction; industrial production; production, processing and marketing of agricultural produce, dairying, services etc. is one important way.
Now, the governments of Bihar, UP, Chhattisgarh, etc., are compelled to avail employment opportunities in their own state. But this is a long-term strategic process. The progressive socialism has been proposing that every sector should have more and more enterprises in accordance with local resources which should be run by coordinated cooperatives. Coordinated cooperative societies are truly far more people-oriented than the prevailing subordinated cooperatives.
The employment policy needs to be oriented in a way that the use of resources and the level of economic activities will have to be raised enough through proper decentralized planning to ensure maximum feasible employment in every sector. In any sector, for a balanced economy, 30-40% of total employment is required in agriculture, 20% in agro-based enterprises, 20% in agricultural support enterprises, 10-20% in non-agricultural industries, 10% in trade-commerce and 10% in white-collar activities. Here, blind copy of the employment pattern of low populated advanced countries need not be followed.
In the case of pricing of agricultural produce, it is advisable to look at it as an industry. Minimum price should be guaranteed with reasonable profit and risk premium on cost. The income gap between agriculture and non-agricultural sectors needs to be reduced. There is a need to diversify yields by providing agro-based industries at the local level.
With Covid-19 crisis and reverse migration of labor, the resurgence of the local economy has now become an immediate obligation. It can suggested that give top priority to labour-intensive techniques, projects and activities in the short run. In the long run, capital intensive techniques should be carried out through coordinated cooperatives in medium-sized enterprises and the large enterprises and projects under at least 51% public and government control.
Writer- Prof. R.P. Singh, Department of Commerce, Gorakhpur University