HLL

 

To

Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

Over the last few months, I have addressed the government more than once, expressing my concern at the undue haste in which the government has resorted to privatising CPSEs and their valuable assets.

For ready reference, some of those letters may be accessed at the following web-links.

https://countercurrents.org/2022/03/lic-ipo-gross-injustice-to-the-smaller-lic-policy-holders-especially-those-belonging-to-the-scs-sts-obcs/

https://www.moneylife.in/article/lic-ipo-gross-underestimated-valuation-put-it-on-hold-says-eas-sarma/66146.html

https://countercurrents.org/2022/01/cpse-disinvestment-valuation-approach-flawed/

https://countercurrents.org/2022/07/privatisation-of-psu-banks-legal-and-other-implications/

I need not remind the government of the unsavoury outcomes of at least two CPSE disinvestment exercises in the recent past, one in the case of the Central Electronics Ltd (CEL) and the other, in the case of Pawan Hans, which have demonstrated beyond doubt, not only the futility of the CPSE disinvestment policy of the government but also how the procedures adopted are imprudent and detrimental to the public interest.

In this letter, I refer to recent news reports that the government will now fast-track privatisation of the Hindustan Latex Lifecare Ltd. (HLL).

In this connection, I refer to an earlier letter dated 24-1-2022 in which I had specifically cautioned the government not to privatise HLL (https://countercurrents.org/2022/01/cpse-disinvestment-valuation-approach-flawed/).

True to the reasons cited by the then government for setting it up in the sixties, HLL has been active in promoting self-reliance in manufacturing contraceptives needed for family planning and in providing other medical products at affordable prices for the majority of the people in need. HLL has invested in R&D effort that has enabled it to secure at least three international patents so far and in line for securing eight more, thus demonstrating its commitment to promoting self-reliance in the area of manufacturing speciality medical products.

From the point of view of its performance, HLL is a profit earning CPSE with a net worth of around Rs 300 Crores, having freehold land of more than 60 acres, valued today at more than Rs 500 Crores, in Kerala, Karnataka and Tamil Nadu. Those lands were transferred to HLL in the past, by the respective States, at nominal prices, the States at that time reposing trust in the Centre that the lands so handed over would remain with the CPSE and be of use for a genuine social purpose. HLL employs 1,441 personnel, highly skilled and talented, among whom there are 678 belonging to the SCs/STs/OBCs.

For more than five decades, the Union Ministry of Health & Family Welfare (MoHFW)  has deployed HLL as its instrumentality in carrying out multifarious activities in furtherance of the welfare mandate enjoined upon it under the Directive Principles.

In the initial years, as a part of the national family planning programme, HLL played a crucial role in promoting public awareness of the importance of family planning. The CPSE was not only involved in developing materials and technology for manufacturing contraceptives but also for setting up a network of outlets for distributing the same among the people.

HLL has also been the nodal agency for providing support to premier medical institutions like the All India Institutes of Medical Science (AIIMSs), PGIMER etc. in the matter of procurement of specialised medical equipment. More recently, at the height of the Covid crisis, HLL has played a pivotal role in procuring emergency medical supplies, including personal protective equipment kits consisting of coveralls (garments), N95 masks, goggles, nitrile gloves, face shields, triple layer surgical masks and other products like ventilators, hand sanitisers and so on.

The MoHFW has also entrusted HLL with the responsibility of implementing the special Central Sector Scheme, AMRIT Retail Pharmacy Stores (Affordable Medicines and Reliable Implants for Treatment) with the objective of providing affordable medicines for treatment of cancer, cardiovascular and other diseases, stents, implants, surgical disposables and other consumables, thereby reducing the out-of-pocket expenses for those who cannot afford high medical expenses.

In other words, as a CPSE set up in pursuance of Article 19(6)(ii) of the Constitution, HLL has functioned as an arm of the State (Article 12), effectively as an instrument of the State to fulfil the welfare mandate as spelt out in the Directive Principles. CPSEs such as HLL, either directly or indirectly, provide the much needed social security cover for the disadvantaged sections of the society.

Apparently, the present government at the Centre has, either deliberately or otherwise, chosen to ignore these legal obligations of the government and decided to dismantle such a valuable institution built by its predecessors over the last five decades.

There are other serious concerns that rise, which the government seems to have either overlooked or chosen to ignore. They are as follows.

 

  1. The proposal calling for Expression of Interest (EOI) seems to give an open choice to the successful bidder either to continue the existing employees in service or discontinue their services. Considering that they were originally recruited as employees of a CPSE, which has sovereign backing, it would not be legally permissible for the government to subject their services to uncertainty.
  2. In the specific case of the employees belonging to the SCs/STs/OBCs, they are governed by Article 16, which places an additional obligation on the State to give them protection. Reservations under Article 16 are not only intended to provide employment opportunities but also they create a sense of empowerment among them. The legal implications of not protecting their interests have apparently not been considered.
  3. Dismantling the CPSEs would also amount to closing the door for future reservations, a matter that ought to have been subject to a discussion in the Parliament and among the States.
  4. In HLL’s land assets of over 60 acres, the concerned States have a direct stake, as it was they who had originally acquired and handed them over to the CPSE. In view of this, the Centre ought not to have taken a unilateral decision to  privatise the lands along with the CPSE.
  5. If those lands were acquired for a “public purpose” under the erstwhile (1894) land acquisition legislation, Section 3(a)(f) of that legislation defined the term, “public purpose” as for a corporation “wholly controlled by the government”, in which case, the lands in question should revert to the State government once the CPSE becomes a private entity. The EOI makes no mention of this.
  6. As per the eligibility criteria indicated in the EOI, no CPSE is eligible to bid for HLL, which has the effect of severely limiting competition to the detriment of the public interest. Some States have in fact offered to take over HLL but the Centre, for reasons best known to it, has not agreed.
  7. There is no restriction on the credentials of a private company that can bid for HLL, which implies, as it was the case with another CPSE recently, a nondescript entity, incapable of running HLL, can buy it. Apparently, the government has not learnt lessons from the sordid way the CEL was about to be sold!
  8. A profit-driven private company that acquires control over HLL will have no interest in running the company either as an instrument of a welfare State or as an agency that promotes self-reliance in the manufacture of healthcare products. Apparently, the Centre has no clue whatsoever about how a privatised HLL should function!
  9. Finally, as pointed out by some of us again and again, privatisation of HLL would result in underselling it in a buyers’ market and bring no additional fiscal resources, as the successful bidder would raise the major portion of the funds from the same pool of savings in the economy that the Centre can access directly, on much more advantageous terms, without having to lose control over the CPSE.

I request you to get these concerns of mine examined carefully before going ahead with the privatisation of HLL.

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to Government of India

Visakhapatnam

 


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