To
Shri H D Kumaraswamy
Hon’ble Union Minister for Steel & Heavy Industries
Dear Hon’ble Minister,
Let me wish you all the best on the occasion of your assuming charge of two important portfolios, namely, steel and heavy industries, which play a significant role in promoting economic self-reliance.
There are very few members of the Union Cabinet today who have dealt with grass-root problems in the States and have a good appreciation of them. With your erstwhile experience as the Chief Minister of Karnataka, you are in an eminent position, not only to provide useful inputs on the States’ concerns to the NDA government, but also to safeguard the interests of the States and uphold the spirit of federalism that has come under a serious threat.
HMT:
At the outset, in view of the stellar role played by the HMT in the past and the sense of pride it has given to Bengaluru and the nation, I welcome your direction to the concerned officials to revive the CPSE for it to be able to make a greater contribution to the economy (https://www.deccanherald.com/india/karnataka/kumaraswamy-directs-officials-to-revive-hmt-and-make-it-atmanirbhar-3077050)
HMT’s “citizen” watch, within the reach of low-income households across the country, was a household word in the past. The Machine Tools wing of the CPSE has designed and developed several import substitution machines to provide flexible, accurate and cost-effective solutions to various strategic sectors. Those machines are developed at almost half the price of imported machines paving the way to promoting self reliance.
Such CPSEs, which have a strategic role in the economy, need to be fully supported and empowered to play their expected role, rather than indiscriminately resorting to their privatisation. The real value of an excellent CPSE like HMT is so high, with its domestic and overseas operations, having invaluable land assets in and around Bengaluru at prime locations, and with its state-of-the-art machinery and highly talented personnel, that no private agency can take it over, without falling back on loans from PSU financial institutions. In the nation’s interest, such CPSEs need to be nurtured carefully.
BEML:
You are no doubt aware that the NDA government recently initiated disinvestment of BEML, headquartered in Bengaluru, with its operations spread over Karnataka and beyond, ignoring the fact that BEML supplies strategic products and services for defence, engaged in manufacturing crucial items for high mobility vehicles, mining equipment and items for railways and so on. In all those activities, BEML has achieved high levels of indigenisation, earning patents for numerous designs, copyrights and trademarks. As in the case of HMT, BEML’s value is enormous and selling it to any private agency would result in a serious loss to the public exchequer and to the national interest.
One highly questionable component of the NDA government’s disinvestment policy is that the land assets of CPSEs are also being sold by the Centre, ignoring the legality of it, as it was the States that invoked their authority in the past under the erstwhile land acquisition law to acquire those lands and hand them over to the CPSEs. Under that legislation, lands were acquired on the premise that they were required for a “public purpose“, a term defined to imply land being acquired for a company wholly owned by the government. Handing over such CPSE lands to a private agency would therefore be prima facie illegal. More importantly, the Centre cannot sell such lands without consulting the States and sharing the proceeds with them. It violates the spirit of federalism.
You may be aware that the Centre, despite advice to the contrary by many knowledgeable experts, has set up the “National Asset Monetisation Corporation (NAMC)” for selling CPSEs’ “non-core” land assets and, in the specific case of the Bengaluru-based BEML, a subsidiary known as BEML Land Assets Ltd. has been set up for hiving off BEML’s highly valuable assets to private parties, without the consent of Karnataka and other concerned States.
A person with your experience may have to advise the NDA government on the legal infirmities of such decisions and their running counter to the spirit of federalism.
RINL:
The indiscriminate manner in which the NDA government has proceeded so far to privatise CPSEs is best illustrated by the hasty, mindless way in which it has announced the 100% disinvestment of RINL (Visakhapatnam Steel Plant), which falls within your charge.
RINL, with its highly valuable land assets stretching over 18,000 acres as on date, with its state-of-the-art items of machinery, a highly skilled workforce of more than 15,000, and its past track record of major contributions to indigenisation of the steel industry, would have worked profitably and competed with the other domestic and overseas steel manufacturing units, had the Ministries of Steel/ Mines allotted it captive blocks of iron ore mine of its own and provided it financial and logistic support. While the Ministry of Mines had no hesitation whatsoever to allot 13 iron ore blocks to one private company, and multiple blocks to others, it has deliberately chosen not to allot captive ore to RINL. to weaken that CPSE and pave the way for handing it over to a private company for a song,
It is ironic that the Steel Ministry should allow good quality iron ore to be exported largely to China, without caring to allow RINL to mine its own iron ore, making a mockery of the National Steel Policy that assures grooming steel CPSEs as global champions.
RINL could have been supported financially from the Central budget to revive one of its blast furnaces but, instead, the Centre forced it to outsource it to a private company, though the same NDA government has had no hesitation whatsoever in announcing a massive subsidy of Rs 2,00,000 crores over five years to profit-earning private companies in the guise of the so-called PLI scheme, as a part of which it recently agreed to provide more than Rs 13,000 crores subsidy to a US company, Micron, to set up a semiconductor unit in Gujarat! While CPSEs like BEML and RINL have created vast employment opportunities and promoted self-reliance, the PLI scheme is an open-ended one without any requirement of the beneficiary companies generating employment and net domestic value addition.
Is it not ironic that the Centre should sell highly strategic CPSEs cheaply, divert scarce budgetary resources to profit-earning private, including foreign, companies, correspondingly reducing allocations for such nation-building welfare schemes as NREGA, PDS and so on?
The Visakhapatnam Steel Plant has a long history. There was widespread public agitation for it during the late sixties and early seventies, when several people gave away their lives in the agitation. Almost all people’s representatives from north AP offered to resign from the Parliament in support of the demand. It was only then that the Centre agreed to set up the plant. By taking a unilateral decision on privatising such a plant now, without any public discussion, without involving the State, would amount to belittling the sentiments of the people of north AP.
In this connection, I may mention that the present Gangavaram Port on the seafront of the land where RINL is located was originally allotted 1,800 acres of RINL’s land cheaply, which gave a 11% equity share to AP in that port. When the Adani Group recently acquired Gangavaram, it was rumoured that the AP government under pressure from the Centre sold its equity cheaply to that group, giving the impression that it was yet another move by the Centre to hand over RINL on a silver platter to its chosen private party. Strangely, the disinvestment format adopted by the Ministry of Finance precluded other CPSEs from bidding for RINL, perhaps paving the way for the plant to be sold away cheaply.
Many of us in this part of AP strongly feel that the Centre should shelve its proposal to disinvest RINL and instead, allot it enough good quality iron ore blocks and extend financial assistance, by curtailing the PLI subsidies. A revived RINL can contribute immensely to nation building.
Disinvestment of CPSEs like RINL and BEML- Social costs:
To justify CPSE disinvestment on the ground that it will generate additional fiscal resources is fallacious, as private parties who bid for CPSEs’ assets tap the same common pool of savings from which the government borrows on much better terms. Disinvestment thus results in under-selling the ownership of valuable public assets without any fiscal advantage.
Privatising CPSEs not only creates uncertainty in the future of their employees but also closes the door permanently to SC/ST/OBC reservations.
I am sure that the States on their own will oppose the disinvestment of CPSEs located in their respective areas.
However, with your close understanding of the States’ point of view, may I appeal to you to persuade the NDA government to drop proposals to privatise RINL and BEML and also other strategic CPSEs?
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to the Government of India
Visakhapatnam
