Having one’s bread, and eating it too

Public sector units are going for a song and the country is poorer for itI couldn't agree more with the article, `Hands in the cookie jar'...

Public sector units are going for a song and the country is poorer for itI couldn’t agree more with the article, `Hands in the cookie jar’ by Arvind N. Das (March 29). It is quite clear that transparency was not there in the selling of Modern Bread, a profitable government company.

Today, liberalisation and globalisation in India has become synonymous with disinvestment, aka privatisation. Vested interests keep parroting the mantra that the government has no business to be in business and they want every profitable government unit to be sold to the private sector for a song. Modern Bread has already fallen victim to this trend, with more units soon to be brought under the `on sale’ banner.

It has been reported that the estate and other assets of Modern Bread is above Rs 1,000 crore, including its offices and plants throughout India. While we talk of openness, globalisation and competition, the same values seem to be denied to public sector units (PSUs) by vested interests. Modern Bread, like other PSUs, must have faced government restrictions and had to accommodate the aspirations of politicians. In the process, its resources would have been misused by the politician-bureaucrat nexus. MFL could have been allowed to take decisions on its own, like the pruning of staff, which it must have recruited in the first place to fulfill its obligations to politicians.

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HLL, which has bought this unit, has assured jobs to its employees for only one year. Besides, HLL had stated that the “real estate price” was never considered in the takeover. But now that it has got a Rs 1,000-crore company for a mere Rs 100 crore, it can make whatever use it wishes of the real estate and the infrastructure that came with it — this can be rented out, used as storage facilities or sold at the market price.

In February, ICICI sold its Ballard Estate office in Mumbai to BPCL for around Rs 30 crore, indicating that the real estate price does matter between companies. But tomorrow, if politicians decide to sell BPCL to an MNC, then the real estate price will not be considered in the transaction, although BPCL has actually incurred this cost.

PSUs have invested a great deal in developing areas and infrastructure. They have even established complete townships all over the country. Surely, then, when these units are sold, the price paid to develop an enterprise of similar proportions in today’s monetary terms should surely be taken into account and its replacement costs calculated. The private sector is careful to do this. HLL recently refused to part with one of its business units when it did not get the right price for it.

Privatisation should not be the core of liberalisation. If the private sector is so efficient, then why do private sector units all over the world go bankrupt? We do need government in business to control the cartels of the private sector. Government presence will keep a check on prices. Just the other day, “thermocol MNCs”, operating as a cartel, unilaterally raised the price of their products exorbitantly. But it seems that they cannot be stopped.