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Disinvestment - The ultimate socialist dilemma

Updated: Feb 9, 2021

The term disinvestment is the most echoed word in recent times, especially after the presentation of Union Budget 2021 by Mrs. Nirmala Sitharaman. There is not much difference between disinvestment and privatisation. If the Government plans to hold the ownership and control of the entity by diluting a part of its ownership by sale or transfer and retain the rest, that can be called as "disinvestment". However, if the Government plans to offload its holding more than 51% or in full , that can be termed as "privatisation". Though the Union Budget uses the term disinvestment and privatisation interchangeably, the intention of the government is very clear. ie, privatisation.

India, as the preamble of Constitution states, is a sovereign, socialist, secular, democratic republic. Of the said basic features of our constitution, the term socialist is included on the influence of Mr Jawaharlal Nehru, the man with a socialist mindset. The socialism envisions ownership of key organizations by government or government-controlled entities for the benefit of the society. However, in contrast to communism, it is more moderate and receptive to the concept of private ownership. The socialism envisages worker-managed enterprises rather that owner-managed organisations. The philosophy of socialism encompasses, social, political and economic systems which can enable social ownership. The socialism argues for state capitalism in the place of pure capitalist ownership.

The socialism had failed all over the world due to the practical difficulties in its implementation. Greed and ability to take control are basic human features. When the Government is turning itself into a capitalist through socialism, the bureaucrats and ministers will show the character of a capitalist and start dictating the people. Another negative side of socialism that it will turn people into an inert stage as they are able to win the bread through the effort of others. Similarly, those who have enthusiasm and energy to work will lose it when they realize the fact that their efforts are being enjoyed by others who are lazy to work.

Mr.Gandhi had envisioned a self-reliant India. However, instead of making India self-reliant, our Governments, unfortunately, are making the people of India reliant on the Government systems. The soaps, concessions and subsidies are making the people inert and lazy, as they can get the bread by simply sitting at home. Similarly, the social welfare schemes like MGNREGA (Rural Employment Scheme) are truly counterproductive as the said scheme is not channelizing the immense manpower to any productive measures. The said scheme is only a money distribution scheme, which enables one to get a handful money by simply doing nothing.

In my opinion, which is formed over several years of thoughts and observations, the role of a government is to regulate the business and not to venture into any business. The Government should create facilities or facilitate the citizens of the country to do business. The role of government should be to create adequate infrastructure, provide free and quality education, provide basic necessities etc and thereby equip them to be skillful and dutybound.

As we are now conditioned to enjoy the freebies such as petrol subsidy, gas subsidy, MGNREGA(National Rural employment), subsidised food, etc etc, we are emotionally and mentally attached to the concept of “socialism”. A person who is travelling on a vehicle having cost of Rs. 10 lakhs to 2 Crores is still bothered about the petrol rate hikes and looking for more subsidized petrol. A household having all the modern facilities is still looking for subsidized gas. Is this not the bad side of socialism?

During the speech, while presenting the historical budget, Mrs. Nirmala Sitharaman had without any spec of ambiguity, boldly announced the disinvestment or strategic sale of Central Public Sector undertaking, including BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others which would be completed in 2021-22. Other than IDBI Bank, she proposed to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.

In the AtmaNirbhar Package, the Finance Minister had announced that the Government will come out with a policy of strategic disinvestment of public sector enterprises and the said policy had got approved by the legislature. The policy provides a clear roadmap for disinvestment in all nonstrategic and strategic sectors. The Government have kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatized. In the remaining sectors all CPSEs will be privatized. The concept behind disinvestment/privatisation is very clear. Idle assets will not contribute for the growth of the nation and its citizens. The budget proposes for monetisation of the non-core assets, either by direct sale or concessions or similar means, which largely consist of surplus land with government Ministries/Departments and Public Sector Enterprises and have estimated Rs. 1,75,000 crores as receipts from disinvestment in 2021-22.

The main objectives of disinvestment are as follows

  1. Minimising presence of Central Government Public Sector Enterprises including financial institutions and creating new investment space for private sector.

  2. Post disinvestment, economic growth of Central Public Sector Enterprises (CPSEs)/ financial institutions will be through infusion of private capital, technology and best management practices. Will contribute to economic growth and new jobs.

  3. Disinvestment proceeds to finance various social sector and developmental programmes of the government.

Policy features

  1. Policy covers existing CPSEs, Public Sector Banks and Public Sector Insurance Companies.

  2. Various sectors will be classified as strategic and non-strategic sectors.

  3. The strategic sectors classified are:

    1. Atomic energy, Space and Defence

    2. Transport and Telecommunications

    3. Power, Petroleum, Coal and other minerals

    4. Banking, Insurance and financial services

  4. In strategic sectors, there will be bare minimum presence of the public sector enterprises.

  5. The remaining CPSEs in the strategic sector will be privatised or merged or subsidiarized with other CPSEs or closed.

  6. In non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.

The message of the Government is loud and clear. There should not be any more nonproductive assets or non-income generating assets. The value of the said assets should be tapped to fuel the growth of the economy and thereby create adequate infrastructure to equip the people of India to earn their livelihood. In short, this budget is the one which teaches a man to fish to meet his ends, rather than serving the cooked fish on his table. So, in my humble opinion, India is no more a “socialist” nation and the said term may be removed from the preamble of the Constitution of India.


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