Shri K Chandrasekhar Rao
Dear Shri Chandrasekhar Rao garu,
I welcome your statement expressing Telangana government’s opposition to the Centre’s move to privatise Singareni Collieries. It has certainly set the tone for a wider coalition being formed among the States to protect federalism.
The NDA government has gone berserk by adopting a sweeping policy to disinvest the Central PSEs (CPSEs), as evident from the guidelines issued vide DPE/3(1)/2021-DD dated 13-12-2021 (https://dpe.gov.in/sites/default/files/DPE_OM_DTD_13.12.21_Guidelines_on_New_PSE_Policy_0.pdf), proposing to dismantle almost the entire edifice of the public sector within a couple of years, without caring to understand the role played by the CPSEs over the last several decades, in building India’s self-reliance in many strategic areas such as coal, oil, minerals and so on.These guidelines also ignore the States’ role in setting up the CPSEs.
The State PSEs and the CPSEs which are a part of the government under Article 12 of the Constitution act as an instrument of the welfare State, as envisaged in the Directive Principles. In the CPSEs disinvested so far, the Centre has sold them at prices far lower than their potential value, mostly to companies which cannot, by any stretch of imagination, have either the capacity or an inclination to carry on the kind of R&D and technology development effort put in by those CPSEs.
To cite one specific but sordid example of a recent case of CPSE disinvestment, the Centre has sold the Central Electronics Ltd (CEL), a pioneer in solar photovoltaics and a frontrunner in indigenising the innovative technologies developed by the CSIR laboratories, to a nondescript company, indirectly controlled by a furniture firm, for a paltry amount of Rs 210 crores, whereas the market value of its Sahibabad land near Delhi alone exceeds Rs 600 Crores, not to mention its valuable plant and machinery, its enormous R&D capital and the technical competence of its excellent personnel. As a result of intense civil society pressure, the Centre has been forced to put the final disinvestment decision on the CEL on hold, a clear pointer to the patent improprieties that characterise most cases of disinvestment.
The People’s Commission (of which I am a Member), a civil society forum for critically looking at the Centre’s disinvestment policy, has issued a detailed statement on CEL’s sale, which can be readily accessed at https://reclaimtherepublic.co/2022/01/10/statement-on-cel-sale/.
I would request your government to access the series of People’s Commission’s reports/ statements on a wide range of the Centre’s sweeping moves to sell the public assets, especially the far reaching statutory implications of indiscriminate disinvestment, the faulty valuation approach that inevitably results in undervaluation of the public assets, the bias shown to the large business houses, and, in particular, the disastrous move to disinvest the LIC, which will in effect start the process in one go of dismantling the vast social security cover it provides and which will endanger the interests of its crores of policyholders with whose help and contribution, the LIC has grown to its present status of an insurance behemoth. Soon, LIC’s character and role will be dictated by a handful of affluent, speculative, stock market investors, including foreign investors.
The following are the links to the reports/ statements issued so far by the People’s Commission on the sale of the CPSEs and the public assets/ services.
The ostensible justification put forward by the Centre for disinvesting the CPSEs is that it will bring additional fiscal resources, an argument that is clearly facile, as those that buy government’s equity access the same pool of savings in the economy as the government does, the only difference being that the government by virtue of its sovereign strength, borrowing directly from that pool, can raise the resources on much better terms. Moreover, by adopting the disinvestment route, the government would lose its ownership and control over the CPSEs. Compounding this is the fact that the Centre would be underselling its assets in disinvestment.
Apparently, the arguments put forward by the Centre to justify its indiscriminate public asset disinvestment tend to mislead the public and one cannot but draw the inevitable inference that there are reasons hidden from the public that have motivated the Centre to resort to such wholesale and mindless disinvestment of the CPSEs. So far, the Centre has adopted highly non-transparent procedures for disinvesting the CPSEs.
Coming to the imminent likelihood of privatisation of the Singareni Collieries, having worked in the Telangana region in different capacities, especially in the esastern parts of the Adilabad district where Singareni company operates, also as a former Principal Adviser (Energy) in the Planning Commission and as the former Union Power Secretary, I am well aware of the heritage value of Singareni Collieries for Telangana people and its critical role in meeting the coal requirements of Telangana and the other southern States.
It was in 1871 that coal was first discovered by the GSI near Yellandu in Telangana. Singareni Collieries were incorporated as a company more than a century ago, on 23-12-1920. The erstwhile Hyderabad State (present Telangana) acquired majority shareholding in the coal company during 1945-49. Singareni coal mines were mostly developed, well before the Centre stepped in as a joint shareholder in 1960, on the clear understanding that the Centre and the State would consult each other and jointly develop the coal mines for the common good of the people, without compromising the interests of Telangana.
Considering the manner in which the Centre has embarked on an ill-advised exercise of public sector disinvestment, including its bizarre idea of “monetisation of assets”, one should not be surprised if the Centre takes a unilateral, precipitate decision to privatise Singareni in its anxiety to hand over its assets to a chosen business house, as it seems to have little respect for honouring the spirit of federalism that lies at the core of our Constitution.
To cite one recent example, the Centre is presently rushing ahead at a breakneck speed to sell Neelachal Ispat Nigam Ltd (NINM), a steel company with precious iron ore resources, jointly owned by it with the Odisha government, at a price that is several orders of magnitude lower than its potential value. Once a profit-driven private company takes over such a CPSE, it may not care for the all round well being of the people and the long-term value of precious natural resources, as a CPSE would have done. (https://countercurrents.org/2022/02/cpse-disinvestment-imprudent-to-ignore-rd-effort-in-cpses-at-the-cost-of-self-reliance/)
In the case of auctioning mineral resources such as coal, located largely in the tribal areas of the States, notified under the Fifth Schedule to the Constitution, the well being of which lies within the domain of the concerned States, the Centre has not cared to respect the need to consult the States and, more important, consult the tribal Gram Sabhas which have a special status under the PESA and FRA Acts. One does not wish to witness a similar unfortunate situation in the case of Singareni.
In the case of central investments in the power sector, such as NTPC’s investments in the Ramagundam Super Thermal Power Station, the need for the Centre to share the benefits among the States has been well recognised and the power capacity from the power plant is allocated among the southern States with due weightage to the home State, in accordance partly with the Gadgil Formula and partly in line with each State’s electricity needs. In my view, a similar formula should be adopted for all Central investments including the CPSEs. Private companies taking over the CPSEs will care more for their profits than for the welfare of the people.
There are 79 CPSEs operating in Telangana with a capital outlay of Rs 36,414 Crores, which employ 21,693 persons, subject to reservations for the SCs/STs/OBCs. Many CPSEs have employed ex-servicemen. Disinvestment of such CPSEs will result in uncertainty being introduced in the lives of all those employees, as the Centre has not cared to impose any protection, as a part of disinvestment, for the security of the employees’ services. Also, disinvestment will put an end to future reservations, as the private sector is not bound by the need to provide reservations. This is a matter that should cause a serious concern to your government, as well as the other States.
Considering that it was the States that invoked their powers under the erstwhile land acquisition law of 1894 to acquire lands at nominal prices for most of these CPSEs, they have a claim on the disinvestment proceeds. In fact, the Tamil Nadu Finance Minister has demanded compensation on that basis at a recent Finance Ministers’ meeting in Delhi (https://www.thehindu.com/news/national/tamil-nadu/compensate-us-for-land-given-to-psus-in-case-of-privatisation/article38074714.ece). Perhaps, the other States should likewise press their claims, as otherwise the Centre may ignore the States, while handing over its CPSEs to corporate houses.
Against this background, I appeal to you to take the lead in articulating the States’ point of view in stopping the Centre’s orchestrated moves to shrink the federal domain of the States. Perhaps, Telangana should join hands with the rest of the States, especially, Tamil Nadu, Kerala, West Bengal and the others in forming a States’ forum to protect federalism and the relevant provisions of the Constitution.
Considering the vast diversity of our country, we cannot afford to allow concentration of authority at the Centre, at the cost of the States, in violation of the federal structure that the Constitution has provided. Matters such as CPSE disinvestment, which have wide ranging public interest implications, need to be subject to discussion among the State legislatures and in the Parliament, in addition to wider public discussion.
I am marking a copy of this letter to the Chief Ministers of the other States to facilitate a meeting of the minds on the subject.
E A S Sarma
Former Secretary to Government of India