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A government that was on stand by as millions paid the price for its own fatal complacency in the battle against the pandemic, now is using the pretext of the virus to justify its policy of privatization and taking to fruition the 30 year old neoliberal agenda. And it has done so with innovative words like “monetization”, “unlocking of value” and “lease”. But is the National Monetization Pipeline any different from disinvestment in essence, or is it merely a change in appearance? What lies at the end of this pipeline for the common masses? Why should we be bothered?


Disinvestment entails the government selling an asset, in part or full. By the term “monetization” the government is claiming to retain ownership while offering the asset to private players for investment and operationalization. The NMP document says that sale would be envisaged only in such cases where there is disinvestment of stakes. This is a conceptual confusion as sale of minority stakes do not translate into change in managerial control. For example, even if the government sells 49% stakes of a PSU, the ownership would still stay with the government and not change hands. So the difference between “sale” and “lease” is unfounded and the government’s attempt to differentiate its monetization move from what disinvestment has generally meant, is only a hogwash. 

Though the government is not calling it a sale, it is effectively the same old PPP model that was promoted to build heavy infrastructural projects between 2003-2008 (roads, airports, power, etc) that ran into debts leading to huge NPAs. The Infrastructure Investment Trust (InVit) is being mooted as the alternative means of raising fund, but it is again the old wine served in a new bottle as this is exactly how it began in 1991 with the offloading of bundles of shares of PSUs till the process came to a grinding halt with the Harshad Mehta scam. 

Finally, with decades of “lease”, it is not even clear as to what would be the future of ownership and as such it seems only a step to usher in privatization and the difference seems merely technical more than qualitative.

Is there a legal framework for disinvestment? What is the process now?

The BALCO disinvestment that saw a 67-day strike by its employees elicited a Supreme Court judgment (2001) that sealed the writ of the government of the day in such matters as far as legality is concerned:

“In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the Court.” 

In terms of the due process, The Disinvestment Commission was set up in 1996 as an advisory body for disinvestment related concerns, while it was the Government that was to take the final decision on the companies to be disinvested. The proposals of the Disinvestment Commission are placed for consideration of the Cabinet Committee on Disinvestment. It is chaired by the PM and comprises the Deputy PM along with other cabinet ministers. The Ministry of Disinvestment, formerly called Department of Disinvestment, was set up in 1999 to act based on the recommendations of the Disinvestment Commission. The Ministry of Disinvestment is assisted in different stages of disinvestment by an Inter-Ministerial Group headed by the Secretary (Disinvestment) and comprising officers from the Ministry of Finance. 

So, there is no blanket legal or constitutional framework for disinvestment in the country. It has quite clearly been a writ of the executive. Even though disinvestments may have far-reaching consequences in terms of social security, constitutionally guaranteed rights, state responsibility within the welfare framework and accessibility/affordability of certain resources/services, there are no constitutional safeguards or provisions that can protect the social obligations of many of these PSUs. Instead, it is kept entirely at the mercy of the government of the day that can sell, monetize or lease these assets as per its whims and fancies.       

Why should the common masses be bothered? Taking Railways as an example.

As is evident, once monetized, there doesn’t seem to be any regulatory framework that checks either use or pricing of the asset. Whether a port would be used as a port or for other purposes; or whether the pricing (say in railways, or roads) would be done keeping public interest in mind are decisions completely at the mercy of the market.

For example, a component of the pipeline is the Railways wherein the government plans to monetize 400 stations, 40 trains, 21% of good sheds, 20% of DFC network and so on. Once the railways are in the hands of the market, and particularly given that we are promoting monopolies by handing these to a favoured few companies, the end of this tunnel looks quite bleak. From routes to fares, to freight charges, there are several aspects of the railways that have responded to public interest and public pressure. Once it is “leased” to a private monopoly, decisions would be guided solely by profit. This may translate into anything, ranging from reduction in sleeper classes, surge pricing, higher fares, reduction of trains running to less profitable or remote areas, revamp of concession policies and so on. 

If we are to learn from global experience, such moves have been disastrous in say the United Kingdom or Argentina with train fares overshooting the cost of flights and irrational decisions of companies adversely affecting the efficiency of trains. Again, Railtrack, a company in the UK in charge of signalling tracks and stations, for instance, did not always reinvest its profits in the railway infrastructure, leading to a deterioration of the tracks and accidents. Finally, public outcry compelled the government there to take over. Contradicting the hyperbole around private “efficiency”, the British rail network was plagued by crowded trains, cancelled services, and high fares till finally most of it was nationalised again in the middle of the pandemic when companies gave way owing to dwindling profits and the government had to run it to keep essential services afloat.

The so-called “efficiency” in such public services, comes at a price. And that often is enough to exclude marginal sections or to bleed the poor. A “Reliance Nagpur Rail Station” in the name of better services and for maintaining profitability may choose to cleanse the platforms off the same chaiwalas that our PM claims to have begun his career as. It may very well monetise the waiting rooms; double the platform ticket prices; allow only app cabs into the premises and whatever else adds to their profit margins. Adding to this is the uncertainty it poses to the railway employees. Railways so far has been one of the biggest employers, that assured a secure job and social protection to millions that almost certainly would face drastic cuts. This is just for the sake of demonstration. Now add to this a similar fate for roads, ports, power, telecom, housing, gas & petroleum pipeline and so on.

The flaw in the rationale of monetization:

When it comes to disinvestment, profitability is many a time systematically eroded to handover to private players with the pretext of “underutilization”. The best example say is BALCO. An asset that was sold off at a mere 500 crore, a valuation that was questioned even by the CAG. The same would happen with monetization, wherein assets would be sold off at a much lesser valuation. At a time, say because of the pandemic, because of faltering demand and grim market conditions, the valuation of an asset may be below par which is not reflective of its general profitability when the demand is high. Here we have tied ourselves to a strategy wherein the risk is “nationalized” or is with the government, but the gains are “privatized”.

Finally, the government still continues to find supply side solutions for demand side problems. The choice is clearly between providing more aid to the people (and thereby increase demand) versus focusing entirely on “ease of business” expecting that this shall increase profitability and add to investments. There is absolutely no logic in expecting higher investments owing to asset monetization. If the government is disinvesting 100 rupees and invests elsewhere, it does not add to net investments. Similarly, the private player going to invest in such assets would also be diverting its investment from elsewhere or would borrow from elsewhere. This shall only serve to create monopolies as favoured business corporations gain in the process, who will also get access to public sector bank loans. They in turn would cut employment and hike prices creating more inequalities and further hurting demand.

The pandemic demonstratively showed the benefits of enhancing state capabilities and that is what has been the learning globally as demands for nationalisation have gathered steam. Rather than giving away the public sector assets, we needed to enhance their efficiency and address the problems therein so that we could match up to the demands of any future crisis. But instead we have decided to use the pandemic as the pretext to go the exact opposite direction. 

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