Rooting for the One Percent: Rebooting the Mixed Economy
Rijul Singh Uppal
1 February 2012
The Federation of Indian Chambers of Commerce and Industry (FICCI) has begun to lobby for the privatisation of Coal India, arguably one of India’s leading public sector units. The pretext given is that power producers have in recent months faced immense problems on account of coal shortage (actually a temporary glitch due to natural causes like bad weather and heavy rains).
The private power producers were also upset at Coal India Ltd’s plans to revise its pricing policy. This grievance may be legitimate, but privatisation has never translated to low prices; hence this argument is flawed. The real danger is that once the corporate lobby succeeds in privatising a national resource like coal, it will immediately start clamouring for FDI to ‘develop’ the mines, thus endangering the ownership and control of such a vital natural resource.
India has the largest coal reserves in the world. Privatising or – as also ‘suggested’ by FICCI – breaking up our largest coal PSU into smaller units that will be easier to dispose off to the private corporates in quiet deals, away from media limelight, would be the thin edge of the wedge. The endgame is globalisation of India’s sovereign resources, which belong to the people and not to the Government of the day, much less its crony capitalists.
There is also the very real issue of job security for the coal mine employees who are currently government employees and have pensions and medical benefits, not to forget the now highly attractive government salaries. They will certainly resent being shunted into the private sector overnight.
But even if, for argument’s sake, we admit the private sector into the coal sector, can we expect it to deliver on power generation? The record is to the contrary. Journalist Ramtanu Maitra points out that the private sector failed miserably during the Eighth and Ninth Five Year Plans (1992-2002) when it was given a chance to contribute to the national grid. 
At the start of the Eighth Five-Year Plan, power shortage stood at 85,000 MW. An expert committee of the Planning Commission decided that 31,000 MW would be generated during the Eighth Plan period and the then Finance Minister, Manmohan Singh, assigned roughly half – 14,000 MW – to the private sector. It dished out a paltry 1,423 MW!!! During the Ninth Plan period (1997-2002), the private sector produced 4,800-odd megawatts. It goes without saying that there is NO justification for privatising an important PSU like Coal India for non-performing corporate raiders.
The rise and rise of corporate greed has now become disturbing. The Vodafone-Hutch deal has caused a loss of approx. 11, 000cr to the exchequer. Hutch was liable to pay Capital Gains Tax on its Indian assets, but got off scot-free. Initially, the Bombay High Court found Vodafone liable to pay the tax as it was legally bound to deduct TDS from the payments it made to Hutch (as it did in its dealings with Essar). Many legal experts feel that the Supreme Court took a very narrow view of the letter of the law when it overturned the Bombay High Court judgement, and ruled that the deal took place outside the jurisdiction of the Indian IT Department.
The Income Tax Department has decided to abide by the verdict, so no more need be said on this particular case. The judgment does, however, raise crucial questions about the UPA Government’s hurry to open up various sectors of the economy to foreign investment without erecting an adequate tax collection regime.
If all foreign investors use the ‘foreign jurisdiction’ loophole to escape their tax liability to the Indian State, what is the remedy? Hot on the heels of the Vodafone-Hutch verdict, Essar announced it too would seek a tax refund of $880 million from the Income Tax Department.
The big honchos of Indian Industry have long rooted for FDI in multi-brand retail. Leading agricultural experts warned that what the UPA and Private Lobby called ‘rooting out middlemen’ and an inevitable fall in prices of food items to the benefit of the consumer, was actually a covert attempt at re-introducing contract farming and monopolizing of private profits.
The notion of letting private foreign investors control the nation’s food supply is actually dangerous. Opposition from a key ally ensured that FDI in multi-brand retail was stalled, so the regime quickly pushed through 100% FDI in Single Brand Retail to pacify the furious International Corporate Lobby. Recently at the World Economic Forum at Davos, the Indian Commerce and Industry Minister assured foreign retail giants that the government was not going to go back on the decision and “it will happen and the pause cannot be too long.”
Obviously, the USD 550 billion retail market in India – currently shared among the much maligned Indian middlemen and kirana store owners and their employees – is something the multinational retail chains are lusting after. This is the dimension of wealth that is to be extracted from India; anyone who dreams of cheaper prices and benefits to the Indian consumer is clearly smoking an illicit substance.
Last year, an airline whose top bosses are famous for their fabulous lifestyles, demanded a government bailout without any explanation why the airline venture failed. The airline’s parent company, also the country’s largest liquor company, could have easily extended it an in-house bailout. But the Super Rich are committed to the American Way of living out of the taxpayers’ pocket, and insisted on a government bailout. There followed a demand for FDI in Aviation if government couldn’t provide the bailout. Pat on cue, the newly appointed Aviation Minister began talking about opening up the Indian Aviation sector to Foreign Direct Investment.
Prior to this, another highly successful airline suddenly shut the doors on its new recruits on Diwali eve, claiming losses! Mercifully a media frenzy and public outrage forced the government to intervene and resolve the crisis. Immediately thereafter, the corporate lobby started demanding simpler labour laws for an easier hire-and-fire routine.
In Delhi, we have already experienced the nightmare of privatisation of power distribution, with steep hikes in power tariffs without any infrastructure improvement, or even curtailment of power thefts and distribution losses. The regulators who were to check the private discoms mostly slept on the job, or sympathised with the “plight” of the private power distributors.
Today’s globalized and much privatised world is increasingly being ruled for the sake of Big Capital. Be it Big-Oil, Big-Auto, Big-Pharmaceutical, Big-Retail, Big-Aviation, Big-Telecom or any other BIG’s you can think of, at the end of the day they are a highly organised pressure group that works the system to secure best returns for private capitalists - tax breaks, tax concession, subsidies, bailouts - all at the cost of the common man.
The Lobby concept originated in America to level the field for larger public good, and to articulate the genuine interests of different groups or sectors. But since the Era of Liberalisation, Privatisation, Globalisation [LPG] it has dug its tentacles deep into the Indian Economy, Polity, Bureaucracy, Media.... The accidental exposure of corporate lobbyist Niira Radia gave us a small but startling glimpse into the growing power of the Corporate Sector and its daring inroads into national decision making and power broking.
In other words, India is in danger of becoming the Brave New World of the One Percent vs. the Ninety Nine Percent. It is not as though previously Indian chambers of industry and business did not lobby for tax concessions, tax holidays, cheaper land, an easier hire and fire regime, and so on. But now they feel that one time concessions are not good enough, and that concessions must be on on-going business. In return, the growth they have given is ephemeral, and jobless. They have discovered contract labour, whatever the level of employment offered. These “at will employees” can be fired for anything, anytime, anyplace. In a fundamental sense, labour laws and labour ministry have become redundant.
Big Capital has come into its own under the UPA. It has given us the phenomenon of the 2G Spectrum Scam. The big corporates emerged as the major benefactors of the scam and their lobbyists even ensured the exclusion of private corporations from the purview of the now failed Lokpal Bill – though all corruption involving Government agencies invariably involves private corporations...
The growing Government-Private Sector jugalbandi stinks. And as they say, if it smells weird, don’t eat it. It is becoming clearer by the day that many of the problems being faced by PSU’s are contrived; a prelude for making a case to sell X or Y PSU to the private sector.
The author is a student