People's Democracy

 EDITORIAL

HPCL-BPCL: CPI(M) Stand Vindicated

THE Supreme Court has vindicated the stand taken by the CPI(M) on the  disinvestment of oil majors --- Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). The CPI(M), while opposing the overall policy of disinvestment and privatisation, which actually constitutes an unprecedented loot of India’s national assets, pointed out in this specific case of HPCL and BPCL that privatisation or disinvestment cannot be undertaken without the prior approval of the parliament. This was so because in 1974 the HPCL was created by an act of parliament when a foreign company, ESSO, was nationalised. In 1976, similarly, the BPCL was created when another foreign company, Burma Shell, was nationalised. We had then reported in these columns that the acts specifically state that this step was undertaken for the benefit of the Indian economy and the people. Both these acts specifically stated that the ownership and control of petroleum products, distributed and marketed in India, are vested in the state and thereby so distributed as to best subserve the common good.

If the present BJP-led government feels that these companies no longer subserve the common good, while they are welcome to take a position based on absurd logic, this would have to be endorsed by the parliament which, in the first place, created these companies. The Vajpayee government deliberately chose to remove the process of disinvestment from public discourse in order to facilitate the loot of India, on the one hand, and because of the enormous potential for sleaze and corruption, on the other. 

On this particular instance, the Supreme Court has not allowed this government to proceed in this manner. As far as we are concerned, the logic for this is based on a simple truth. The public sector in India is the collective property of the Indian people. The governments that come and go discharge the responsibilities of a manager of these public assets. Now, a manager cannot sell any property without the approval of the owner. In this case, the people’s ownership right is vested in their elected representatives in parliament. It is this fundamental fact that this Vajpayee government has sought to subvert. 

Predictably, the minister for disinvestment (increasingly becoming the minister for disinformation) is crying wolf. He is fuming that this decision of the Supreme Court will derail the entire process of disinvestment. If this does happen, it is better for the country and the people. The minister’s fulminations are the country’s relief. Hopefully, this should provoke a healthy discussion whereby the national assets created assiduously over the past half a century can be protected and made to deliver more benefits to the society, rather than be handed over to foreign and domestic private capital for a song. 

Secondly, Mr Shourie says that this judgement could have far reaching consequences on further disinvestment of all companies created by legislative acts. He in fact questions the merit of earlier disinvestment decisions of Maruti Udyog Ltd and BALCO in the light of this judgement. We can only hope that Mr Shourie will follow up this observation to actually review the earlier decisions that were, as in the case of BALCO and Modern Foods, a shameful sell-out. Though the Supreme Court has given its observations only on these two companies, Mr Shourie feels that this will impact on others as well. Once again, it is to the country’s relief if this were to happen and our nationalised assets are prevented from such unprecedented loot.

Finally, this ruling of the Supreme Court, we are told, will upset the fiscal management of this government. In this year’s budget, Rs 13,200 crore were to come through disinvestment. The sale of equity of these two companies was to handsomely contribute in achieving this target. With this not happening now, the government’s fiscal deficit cannot be kept under check. 

This is indeed a spurious argument. As we had repeatedly argued in the past, selling public assets to meet the daily expenditures of the government makes neither economic sense nor common sense. It is like a farmer selling his land to meet his daily expenditures. In the process, he ruins himself. Between 1991 and 2000, the disinvestment of national assets fetched the government Rs 26,148 crore. Not a single paisa of this has gone for any social or economic infrastructure development. All this money has gone to bridge the government's deficit!

Further, consider the fact that the turnover of BPCL over the past few years has been Rs 42,294 crore and the excise duty paid was Rs 10,513 crore. The turnover of HPCL has been Rs 45,286 crore, and the excise duty paid was Rs 11,246 crore. Thus, the total turnover and total excise duty paid by both the oil PSUs are Rs 87,580 crore and 21,759 crore respectively. As against this, take an example from the private sector. The total turnover of Reliance, Grasim, Bajaj Auto, Tata Steel, Sterlite, Colgate, Palmolive, L & T, Raymond and Glaxo for the corresponding period was Rs 88,157 crore (nearly the same as BPCL and HPCL put together) and the total amount of excise duty paid by these companies against this amount of turnover was only Rs 6,840 crore! 

Compare this paltry contribution to the government revenues by all these private corporates put together to the whopping Rs 21,759 crore contributed by just these two PSUs. And this contribution has been growing by the year. In 1991-92, for instance, the BPCL’s contribution through taxes to government revenue was only Rs 1,876 crore. Ten years later, in 2001-02, it contributed Rs 10,513 crore!

Thus, in terms of contributions to the government revenue, these blue-chip PSUs that were put up for disinvestment, constantly contributed much much larger amounts to government revenue. What the government may earn through the privatisation of these two public sector giants would only be a small fraction of the contributions these will make in the long run. 

The worst aspect of privatising these profit-making blue-chip public sector companies is the fact  that the HPCL is sought to be handed over to a private sector petroleum monopoly --- Reliance. One of the major bidders for the BPCL is the present-day variant of the same Burma Shell that was nationalised in 1976. Need one say more regarding this government’s commitment to national interest?

The ministry for disinvestment and this government will surely seek ways to subvert the restrictions being put on the process of privatisation in order to facilitate the loot of our national assets. It is the task of all patriots to subvert such a subversion that this government seeks.