Tata Does Not Mean Goodbye for India Inc.

Tata Does Not Mean Goodbye for India Inc.

The Economic Survey, the flagship annual document published by the Finance Ministry of Government of India, accurately predicts the upcoming moves by government, as much as it also highlights the lacunae in Indian economic policies. More than the Annual Budget, it is the Economic Survey that must catch the attention of the nation. In the recent past, the Economic Survey has clearly laid out the shift in the government’s policies by aggressively pushing for divestment of Central Public Sector Enterprises (CPSEs). Especially, in the Economic Survey of 2020, it was said that privatised entities have performed better than the public sector firms in terms of net worth, profit, return on equity and sales, among others.

The Survey in 2020 highlighted that there were about 264 CPSEs under 38 Ministries or departments. Which really puts out the question if government should be in the business of doing business?

The Government of India, as per the Economic Survey 2021, had set a target of Rs. 2.1 lakh crore to come in the form of divestment – majorly, from two entities, Air India and Bharat Petroleum Corporation Limited (BPCL). The recent sale of Air India, the country’s national carrier, to Tata Sons should not come as a shock to anybody following the company’s economic debacle in the past decade. Air India had been haemorrhaging a daily operational loss of Rs. 20 crores; with a debt of Rs. 6200 crores, it was lucky to even find a suitor in the Tatas.

<div class="paragraphs"><p>Ratan N. Tata</p></div>

Ratan N. Tata

The concept of CPSEs had come about in the 1950s when the then Prime Minister Jawaharlal Nehru had taken to the Societ model of socialism. At that point in time, it augured well for India, as the CPSE Steel Authority of India Limited (SAIL) ended up establishing plants all across India and giving a major boost to industrialisation. The socialist model probably made sense for a minerals/ heavy capital industry, at a time when India was just finding its legs on the economic front.

The mistake in the model was, however, its overreach in nationalising the Tata Airlines in 1953. The reasoning was that the airlines industry would support the industrialisation of India, by becoming the carrier for other CPSEs. Now, the wheel has come a full circle with Tata Sons buying out Air India at Rs. 18,000 crores including a Rs. 2,700 crore cash component and Rs. 15,300 crore debt components. Shamefully, though, leaders from the Opposition have commented as if Air India is the Government’s gift to the Tatas. Air India is no golden bird, let’s remember that!

Air India has around 12,085 employees, including 8,084 permanent employees. Its arm Air India Express, on the other hand, has 1,434 employees. The good news for them is that there will no sacking and the Tata Group has to retain all employees of Air India for one year. In the second year, if anyone is sacked, they will have to be paid VRS. This is the only responsible way-out during divestment of a public enterprise.

In the budget speech of 2021, Finance Minister Nirmala Sitharaman said four sectors -- Atomic energy, Space and Defence; Transport and Telecommunications; Power, Petroleum, Coal and other minerals; and Banking, Insurance and financial services -- would be strategic sectors for India’s divestment policy. In the same speech, it was added that the strategic disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Ltd, among others would be completed in 2021-22.

It is to be noted though, that the government would not be selling its all to the private sector. As per the ‘Atma Nirbhar’ policy, public sector organisations that are in development or regulatory capacity will not be divested. Similarly, CPSEs that provide support to vulnerable groups through financing of Scheduled Castes, Scheduled Tribes, Minorities, Backward Classes and Safai Karamcharis, and/or manufacturing aids and appliances for Persons with Disabilities, will be excluded. Departments of the Government such as Railways and Posts that undertake commercial operations with a development mandate would also remain out of scope for divestment.

Government should not be in the business of doing business, especially if it is eating into tax payer money. When data reveals that CPSEs perform better under private hands, it’s better to divest control of them. A case in point is how BPCL managed to raise Rs. 3300 crores through strategic divestment. Critics to the policy may suggest other methods to make these elephants move. But to keep them sitting pretty in India’s halls, without any utility, is surely an argument for economic failure. It is time that we also dissociate CPSEs from a political legacy so that we can truly put India first.

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Chinmaya Udghosh