TEMPLES OF DOOM
Globalization Hastens Death Of PSUS
According
to a recent press report, the Steel Authority of India Ltd. The largest steel
making company of India, incurred a lose of Rs. 367 crores in the first quarter
of the current financial year that ended on 30th June,. In other
words the company has registered a loss of Rs. 4.13 crores per day. During the
corresponding period of the previous fiscal year, the loss was Rs. 231 crores
and hence the years lose is 63 per cent higher. It should be mentioned here that
the company has mear while, received a financial package of Rs. 8400 crores from
the government during the previous financial year 2000 – 2001, to improve its
performance.
Sail
authorities have attributed the dismal performance to restrained production in a
depressed and recessionary market as well as a severe drop in prices of some of
its products. In fact, the company made a profit of Rs. 133 crores in 1997 –
98 and there after the lose began. The net lose made by the company in 1998 –
99 and 1999 – 2000 were Rs. 1574 and Rs 1720 crores.
It
is surprising that four months earlier, in April, sail authorities expressed
satisfaction over the present functioning of the company and announced a two per
cent increase in both production and sells over those of the previous year. A
company spokesman then told the press that the company has put its thrust on
cost reduction and has saved nearly Rs. 525 crores this through cost cutting
measures. He also said that sail had saved nearly Rs. 3000 crores since such
measures were adopted in 1997 – 98.
As
a matter of fact in 2000 – 01, the total production of salable steel in all
integrated plans of sail stood at 9.68 million tones, which was higher by two
per cent compared to the previous year. In the same year, the company exported
steel products valued at Rs. 600 crores and export to Saarc countries went up by
13 per cent over the previous year.
At
the end of 1998, SAIL reported a loss of Rs. 617 crores during the first half of
1998–99 owing to aligned dumping of hot rolled steel products by Russia,
Kzakhstan and Ukraine, the countries belonging to the common wealth independent
State and as a result the government imposed anti-dumping measures against
import of HR Steel products from the CIS countries. Before adopting such
measures, these countries were selling steel at a price of Rs. 7,650 a tonne.
After adding landed costs, which include import duty and other levies, the price
worked out to be about Rs. 11,500 a tonne, making it far cheaper then the
domestic steel which was priced at Rs. 13,000 a tonne.
Domestic
steel producers took full advantage of the anti-dumping measure and hiked the
price of their products by Rs. 500 to Rs. 800 a tonne. But despite this, Sail
incurred a huge loss. According to analysis the advantage of the anti-dumping
measures were neutralized by several factors – mainly due to a sluggish 1.5 to
two per cent growth domestic demand and cheap imports from other reason hit
countries as a result of globalization. Moreover Sail is severely heat by large
capacity additions and at least a 13 per cent growth in domestic market is
necessary is to match the new added capacities.
With
an wage bill of Rs. 2,735 crores of its 1.6 lakh work force, Sail has emerged as
the costliest steel making company in the world. In 1999 – 2000, only two of
its nine units Bhilai, Bokaro, Rourkela and Durgapur, the Rourkela and Durgapur
plants accounted for nearly 77 per cent of the total loss or Rs. 1,200 crores.
The
other endemically sick and loss making units like Alloy Steel Plant at Durgapur,
Salem Steel Plant in Tamil Nadu and Visvesvaraya Iron and Steel Plant in
Karnataka have made Sail the worst loss maker among the PSUs. In 1998 – 99 and
1999 – 2000, it suffered and aggregate loss of Rs. 3,294 crores.
Hindustan
Fertilizers Corporation, with an investment of Rs. 4,952 crores and 8,043
employees is bleeding with an accumulated loss of Rs. 3,628 crores and getting
ready to wind up. The Board of Industrial Financial and Reconstruction has
recommended an outright Sail of all its units except one at Namrup, Assam. The
company was formed in 1978, by splitting the original Fertilizer Corporation of
India with all its four units in the east --
Namrup, Barauni, Durgapur and Haldia. Today only out of three plants at Namrup
are working while other units have been shut down.
The
Haldia plant, with its 1,450 employees, is unique position today. The plant, set
up to produce urea, has not so far produce an ounce of ureca. It had to commence
production in 1983, but the government of West Bengal took three long years to
provide power connection. Finally in 1986, on the day of commissioning, the
oxygen compressor unit exploded after a few hours run, bringing the entire plant
into a halt. Since then the plan has been laid ideal. But the employees are
enjoying company paid cheap housing free transport and subsidized schooling for
their children, not to speak of the regular salary check. The wastage brings
tears to once eyes. Production has also stopped at the Barauni and Durgapur
units since 1998 due to frequent plant break down and growing unprofitability.
Many blame the Italian firm Montecatani, the technology provider, for this sorry
state of affairs. Montecatani was the predecessor of famous Snamprogetti, which
has, since 1980, being in the midst of a controversy for the style for
functioning of its India representative Ottavio Quatroccld, a close friend of
the Gandhi family.
According
to the Department of Public Enterprise, India’s PSUs in 1998 – 99 produce
97.8 per cent of coal, 95.9 per cent of petroleum and other fuel, 37.5 per cent
of finished steel, 56.7 per cent of aluminum and 31.7 per cent of chemical
fertilizers. Those data reflect the importance of PSUs in India economy. The
massive integrated steel plants and heavy engineering factories, which came up
in the first 20 years of independence, are a testimony to the grand scale of the
industrial planning that took place during Nehru era. In fact Nehru borrowed the
idea of the so-called five-year plan and setting up industrial enterprises under
the public sector from Stalin’s Russia.
When
Nehru described these PSUs as the temples of modern India of 1960s, he had no
idea that he would one day become a drain on national exchequer. Over the years,
these units has become temples of doom with over Rs. 2,30,000 crores of public
money frozen as investment. The present era of globalization and stiff
competition has hastened their death.
Today,
there are nearly 236 centrally run PSUs and another 900 plus are being run by
the state government according to the report of the BIFR, about 104 units of
central PSUs and almost all the 900 units of state run PSUs are either loss
making or sick.
TEMPLES
OF DOOM – II
Militant
Trade Unions Add To Woes
At present, the top 10 profit making PSUs are Oil and Natural Gas Commission,
National Thermal Power Corporation, Indian Oil Corporation, Mahanagar Telephone
Nigam, Hindustan Petroleum Corporation, Bharat Heavy Electrical, Gas Authority
of India, Videsh Sanchar Nigam, Northern Coalfields and Bharat Petroleum
Corporation. Similarly, the top 10 loss making units are Fertilizer corporation
of India, Hindustan Fertilizer Corporation, Eastern Coalfields, Bharat Coaking
Coal, Air India, Rastriya Ispat Nigam, Indian Iron and Steel, Cement Corporation
of India, Indian Drug Pharmaceuticals and Hindustan Shipyard.
Though the disinvestments process of loss making PSUs beginning as early
in 1991, little progress has been made so far the disinvestments ministry
initiates the process and refers the case of a particular PSU to BIFR to prepare
& report of its functioning during the previous five years. When BIFR
recommends disinvestments, the matter is return to the disinvestments ministry.
ADVISER
The next step is to appoint a global adviser to assess the market
potentiality of the products and to appoint a value to assess the value of its
fixed assets. This is followed by the preparation of a shareholders’ agreement
and the final bidding and signing of the documents.
It is not difficult to imagine how much time the government takes to
complete this complex process. In many case the government suffered dearly due
to this unusual delay. For example, Maruti Udyog could have been sold at Rs.
9,000 crores in 1996. But at present, it may not fetch even half that amount.
This is the reason why the government fails to achieve the target. The
budget of the current financial year (2001 – 02) assumed a disinvestments
receipt of Rs. 12,000 crores, but expert believe that it would be difficult for
the government to achieve the target. Between 1991 – 92 and 1999 – 2000, the
government hope to realize Rs. 44,300 crores for disinvestments, but only 40 per
cent of the largest target could be achieved. But the encouraging news is that
the investment minister Mr. Arun Shourie has told the press that 13 more
companies will be disinvested with in the current financial year.
One of the major hurdles in the process of disinvestments or
privatization of PSUs is hostility of trade unions mostly controlled by
Marxists. They raise a hue and cry saying it is against the interests of
workers. They also says that the present government in Delhi is being run by the
stooges of the American imperialism who are planning large-scale privatization
to sell out national assets to foreigners following secret instructions from the
World Bank and the IMF. It is needless to say that they are indulging in false
propaganda to confuse people and gain political mileage.
According to Marx, private ownership of mills and factories is the root
of all evils. Factory owners or the capitalists utilize the means of production
to exploit workers. Marx has said that the workers alone infuse value into
finished products by adding their labour into raw materials and hence the
benefits a capitalist earns by selling his commodities should go entirely to
workers. Capitalists without doing any labour enjoy the fruits.
So the fundamental proposition of Marxian socialism is the abolition of
the institution of private property and handing over the ownership of the means
of production to the state. This, according to Marxism, serves two purposes.
Firstly, the capitalists are eliminated as a class and secondly, the society
becomes free of exploitation.
INCENTIVE
But one question remains unanswered. In a capitalist society people work
for earning money. More work means more money and hence money inspires them to
work. In a socialistic society, people work according to their ability and
receive according to their needs. So, from where will people in a socialistic
society derive their incentive to work? In reply, Marx said that in such a
situation, workers would voluntarily start working to their fullest extent as a
service to society. In other words, they would begin a competition to do more
for society.
But we know that modern man has come into being through a process of
evolution and evil qualities like envy, selfishness and greed continue to
motivate the human mind. So it is futile to expert that all the evil intentions
will suddenly disappear with the emergence of socialism and at the tick of a
clock man will become overwhelmed by fellow-feeling and start toiling themselves
to remove the miseries of others. In Russian PSUs, workers soon lost their
appetite for work. As a result, there arose a serious shortfall. In particular
farm output declined to such an extent that people had to stand in long queues
for long hours for long hours for a loaf of broad.
Deng Xiaoping, taking a lesson from Russia, initiated large-scale
privatization of Chinese PSUs in 1980s. Still nearly 300.000 PSUs survived in
1997. When the 16th party congress of the Chinese Communist Party was
in session in September 1997, President Jiang Zemin submitted a bill, popularly
known as “Jiang’s Plan” that called for wholesale privatization of all the
PSUs barring 1,000, which were of strategic importance. Mr. Qiao Shi, chief
opponent of President Jiang, was opposing the bill and it was then accepted
unanimously.
LOST
JOBS
At present the implementation of Jiang’s Plan is in progress and
millions of Chinese workers are becoming jobless every year. But it is really
surprising that our Marxist leaders, who relentlessly shed tears for the working
class around the world, are sum on such large-scale sacking of workers in China.
Amusingly, these people, whose sole task is to oppose each and every move of the
central government including privatization of PSUs, are now planning wholesale
privatization of the PSUs run by the government of West Bengal and to sell off
87 units to private owners.
Every sensible person and patriotic person would opt for privatization of
sick and loss making PSUs, to stop colossal wastage. But for the Marxists, the
approach is quite different. They understand the politics of elections to remain
in power – nothing else matters. They are little concerned little about the
long-term benefit. Their sole purpose to gather votes.
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