People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 27

July 03, 2005

Disinvestment - A Backdoor Privatisation

M K Pandhe


THE UPA government had given a solemn commitment in the Common Minimum Programme (CMP) to the people of India that the navaratna companies in public sector would be strengthened to make them world class undertakings. However, the recently announced decision of the central government to disinvest 10 per cent of its equity in BHEL is a blatant violation of this commitment. Despite opposition of the central trade unions and the Left parties, the government nonchalantly went ahead with the proposal and showed utter disregard to the fact the central government is surviving due to the solid support given by the Left parties on the assurance that it would adhere to the commitment given in the CMP.


Already 33 per cent of the BHEL equity was sold by the government to private parties by the BJP-led NDA government and two representatives of the foreign companies are on the Board of Directors of BHEL.  They have access to all secret information about BHEL which is now available to the competitors of BHEL. This puts BHEL in great disadvantage in a period of global competition. Further disinvestment of 10 per cent of equity will reduce the government’s share to 57 per cent from the current 67 per cent.




A statement of policy on public sector, prepared by the ministry of heavy industries and public enterprises has clearly noted, “The National Common Minimum Programme has brought the public sector policy to a defining moment where it has to articulate and roll out an implementable road map to emerge as a competitive, productive and efficient component of the national economy”.

The disinvestment decision about BHEL is a total violation of this commitment. By diluting the equity of the public sector, the government is only weakening the public sector and permitting penetration of the private capital in the public sector undertakings for its own selfish ends.   These valuable assets are being sold only to meet the budgetary deficit of the government. The so-called assurance that part of the sale proceeds of public sector equity will be utilised to revive the sick public sector undertakings is only a device to hoodwink the gullible.



BHEL has been earning good profits since its inception and its performance has been remarkable throughout the period of its existence. Its highly qualified officials and skilled manpower have greatly contributed in developing capacity of BHEL as a premier producer of power generation equipment – thermal, hydel and nuclear. It has recently developed a capacity to produce photovantic power generation equipment. In all parameters of management, BHEL has shown its superiority over managements of several private sector undertakings manufacturing power generation equipment. It has won a number of contracts in many foreign countries overcoming fierce global competition from major multinational corporations. It has its own research and development organisation resulting in continuous technological upgradation.  Disinvesting such a well-run and profitable undertaking is hitting at the interest of the national economy. BHEL had contributed to the government exchequer by way of dividends several times the amount invested by the government in it.



 The process of disinvestment of public sector fails to keep its character as a public sector undertaking. It is converted into a joint sector company when its equity is offered to the private sector companies. Private sector shareholders continuously pressurise the management of such joint sector undertakings to give up the policy of economic growth with social justice and only seek more and more profits so that they can get better yield on their investment. The representatives of private sector on Board of Directors in such disinvested companies have always opposed giving any concession to trade unions during any dispute after the commencement of process of disinvestment. Several trade unions have noted this experience and had to fight long drawn battles to overcome the opposition of such private sector representatives on the Board of Directors. These private sector tycoons quite often create obstacles in taking decisions about additional investments of such undertakings to suit the interests of their co-investors.

The Committee of Public Sector Undertakings (COPU) of parliament in its reports on disinvestment of shares of public undertakings has pointed out on several occasions that the central government lost thousands of crores of rupees by disinvesting without properly assessing the sale value of assets of pubic undertakings. The private investors who obtained these shares at much cheaper prices managed to make a quick buck by re-selling them at a higher value after some days. The disinvestment has thus been made a device by the government to help the private sector investors at the cost of public sector undertaking.


During  Arun Shorie’s regime, as a disinvestment minister of the NDA government, the process of disinvestment reached scandalous proportions. A thorough inquiry into the whole gamut will reveal the true character of the disinvestment policy. The UPA government is reluctant to have a thorough probe into these affairs since it would expose the true nature of the policy of disinvestment as a means to look the public sector assets for the benefit of the private sector investors.

Union finance minister P Chidambaram’s announcement to sell 49 per cent of the equity capital of the profit making undertakings is therefore a clear cut method to partially  privatise  the public sector undertakings. His contention that keeping 51 per cent of the equity capital in the hands of the government retains the character of the undertaking as public sector is totally unacceptable. At a later stage the government will require to sell only 2 per cent shares to make the undertaking a dominant private sector undertaking. The experience of Maruti Udyog clearly shows how the dominant shareholdings of government were gradually handed over to Suzuki company with a view to ensure the full control of a Japanese multi-national company over Maruti. The Maruti experience further shows how in spite of minority shareholdigs it could remain control over all technical aspects of working of the Joint Sector undertaking.



The disinvestment is thus nothing but slow poisoning of the public sector undertakings. It is a measure towards privatisation step by step with a view to pass on the control of the entire undertaking in the hands of the private sectors. This policy is in total conformity with the World Bank dictate that the government should gradually withdraw from economic activity and leave it entirely in the hands of private sector undertakings.

Chidambaram and other official spokesmen of the UPA government who are repeatedly claiming that disinvestment of shares of public sector upto 49 per cent is not privatisation is a crude attempt to cover up open violation of the commitment given in the National Common Minimum Programme.

The budget for 2005-06 provides raising of Rs 10,000 crore through the process of disinvestment. At times, finance minister goes to the extent of saying that he would require more than Rs 10,000 crore through disinvestment to meet the commitments given in the NCMP. It indicates that after BHEL, other navratna companies are likely to be affected by the policy of disinvestment.

The processes of disinvestment of navaratna and other profit making public sector undertakings must be stopped if the self-reliant development of national economy is to be ensured. The attempts of the UPA government to violate the NCMP must be halted if the process of globalisation is to be defeated on the soil of India.