Archive for April, 2018

In Defence of Our Public Sector

Thursday, April 19th, 2018

In Defence of Our Public Sector


Col (Retd) Bhaskar Sarkar VSM

The statement “A government’s job is to govern and not to run businesses” is repeatedly heard on different forums all around the world. Is there any merit in this slogan? Or is it the usual strategy of billionaire investors, multinational corporations and the private sector to do away with competition from public sector and exploit the common people. The BJP Governments, under Vajpayeeji and Modiji has be disinvesting the Public Sector Companies and trying to sell Air India. This article seeks to examine the utility and importance of the Public Sector in the Indian economy and whether BJP Governments actions to disinvest profitable Public Sector units make any sense.

Public Sector in Developed Countries

Public Sector played a vital role in the reconstruction of Europe after the devastation of the World War II. Public sector played an important role in UK and France till the early 80s when neo-liberal economic policies of President Regan and Premier Margaret Thatcher led to large scale privatization of the public sector companies in Europe. Public sector continued to play a significant role only in France and some Scandinavian countries. Public Sector plays an important role in Singapore.

Public Sector in India

There were 217 Central Public Sector Enterprises (CPSEs) in India in 2010. These are engaged in a variety of commercial activities like operating banks, public transport systems, oil exploration and refining, mining, producing metals like steel, aluminum and medicines, vaccines etc. These companies are not government departments but limited companies run by professionals in which the government is the majority share holder. CPSEs are also engaged in healthcare, insurance, infrastructure development, operating harbors etc.

In 2010, the CPSEs were divided into five categories. The Maharatna category have a 3 year average turnover of Rs 20,000 crores and a net annual profit ofRs 5000 crore. They enjoy autonomy to invest upto Rs 1000 crores without government approval. Next come the Navaratna category. These must have a 3 year average turnover of 20000 crores and a net worth of 10,000 crores. Next come two categories of “Miniratnas”. They must have made profit for 3 continuous years or a profit of Rs 30 crores in one of the three years. They have less financial autonomy. The last category consist of others. There are 8 Maharatnas, 16 Navaratna, 59 Miniratna 1 and 15 Miniratna 2 and 129 others.

The government has invested Rs 3,57,849 crores in basic heavy industries (power, steel, coal, fertilizers, etc.), Rs. 75,300 crore were invested in the power generation, followed by Rs. 34,860 crore in petroleum, Rs. 22,932 crore in coal and lignite, Rs. 13,710 crore in fertilizers, and Rs. 21,608 crore in telecommunication services. On the other hand, the Central Government has made very little investment in textiles and consumer goods. It is important to note that a good number of Private Sector sick industrial units belonging to textiles and consumer goods were taken over by the Central Government to protect jobs. Unfortunately, this government is not paying adequate attention to rehabilitating these units by infusion of capital and new technology. At the end of financial year 2010-11, a total of 2.9 crore workers were employed in the organized sector. Of these public sector had 1.75 crore employees and private sector had 1.15 crore.

Financial Performance of CPSEs

The latest complete data could be found for FY 2009-10. The total investment in the 217 CPSEs was Rs 5,72,790 crores. (In comparison, the Private Sector has a bad debt of over 8,00,000 crores. In other words, the Private Sector has stolen or destroyed ove Rs 8,00,000 crores of tax payers money and public savings kept in banks). The net profit of the profit-making CPSEs (158) stood at Rs. 1,08,434.68 crore in 2009-10. The net loss of the loss-making CPSEs (59), on the other hand, stood at Rs. 15,842 crore during the same period. (Nirav Modi alone defrauded Punjab National Bank of over 12,000 crores). This was in spite of large financial under-recoveries by public sector oil marketing companies as they had to keep prices on sale of petroleum products low in the domestic market. The PSEs paid Rs 33,223 crores as dividend, 1,19,529 crores as corporate tax, 35,720 as interest on loans. Thus their net contribution to the Central Exchequer was Rs 1,39,000 crores. The foreign exchange earnings of the CPSEs amounted to Rs. 77,745 crore during 2009-10. It will be seen that the overall performance of the CPSEs is not bad keeping in mind that many public sector enterprises give greater emphasis to achieving non-financial social objectives like employment generation and environmental protection. The profitability of CPSEs has greatly improved beginning from 1994-95.

Necessity of Public Sector Companies

The main usefulness of public sector companies to a country’s economy lies in investing in areas of the economy and under developed regions which do not interest the private sector. Numaligarh Refinery at Guwahati and Barauni Refinery, Bhillai and Rourekella Steel Plants are examples of extending industries to underdeveloped areas.

The only toilets usable by gentle ladies and foreigners on the national highways passing through Rajasthan, Punjab and Haryana were at State Tourism hotels and restaurants till about 2010. Many other states did not have such roadside toilet facilities till recently. Would Airtel, Vodaphone or Reliance Jio set up mobile towers or lay broadband cables in unprofitable rural or insurgency affected areas. Will private banks like ICICI or Axis bank set up branches in large villages?

Public Sector also prevents exploitation of consumers. For example; without GAIL and Public Sector oil companies, Reliance and Essar could have charged our public any price for petroleum products. Without BSNL, mobile service providers could have formed cartels and charged any amount for their services.

Filling the Gaps in Availability of Capital

This situation arose in India immediately after independence. India did have a budding but vibrant private sector with groups like Tatas, Birlas, Munjals, Bajajs, Mahindras etc. But their resources were not enough to finance the rapid industrialization of the entire country that was necessary. Thus public sector companies like steel plants at Bhillai, Rourkella, Durgapur, ONGC, Bharat Heavy Electricals, Coal India to name a few were created.

Generate Employment

Public sector companies have created millions of jobs. The public sector accounts for about two-thirds of the total employment in the organized industrial sector in India. By taking over many sick units, the public sector has protected the employment of millions. Public sector has also contributed a lot towards the improvement of working and living conditions of workers by serving as a model employer and preventing exploitation of labor by private corporations. In the United States, the bailing out of General Motors, Chrysler and AGI saved thousands of jobs. Nationalization of the Royal Bank of Scotland in UK also saved thousands of jobs which would have been lost if the bank had been allowed to fail. Stressed companies can turn profitable with injection of capital and technology as we have seen in the case of General Motors and the Royal Bank of Scotland. They can be subsequently privatized by sale of shares and the taxpayer’s money recovered.

Reduce Concentration of Economic Power in the Private Sector

A vibrant public sector would reduce concentration of economic power in the hands of foreign and Indian multinational companies and investors. This could help make the economy more people and environment oriented. For example, India, with its nationalized banks can ensure that these banks lend at low interest rates to poor farmers, small scale industries and small businesses which private banks with their profit orientation and risk aversion may not be willing to do. This is why Neo-liberal economists, large investors and multi national corporations are always lobbying for privatization of the CPSEs.

Limitations and Abuses by the Private Sector

The behavior and attitude of the some private sector units itself is an important reason for the expansion of the public sector in India. In many cases the private sector does not take up infrastructure or manufacturing projects because of doubtful profitability. Some Private Sector Units resort to many unethical practices like degrading environment, diluting safe practices at the workplace, defrauding banks and investors and exploiting labour. They promote profitable carcigenous pesticides which are banned in developed countries, adulterate foodstuff, cosmetics and medicines and evade taxes.

Enable Governments to Intervene in Economy and Boost Growth

During the 2008 global economic downturn, the Government of India was able through public sector banks to infuse capital into the economy in order to boost economic activity. These initiatives of the Government helped contain serious after effects of the global economic meltdown of 2008 while keeping a tab on inflation. In the absence of Public Sector banks, the American government was not in a position to directly assist the economically weaker sections of the society. The governments and central banks of the developed world could only bailout private banks and financial institutions whose greed and unethical or fraudulent actions created the financial meltdown in the first place. The bailout funds did not produce any economic activity or generate employment. They were invested in speculative activities in search of profits.

Limitations of Public Sector Companies

Despite their impressive role, Public sector companies, the world over, suffer from several problems and shortcomings. Investment decisions in many public enterprises are not always based upon proper evaluation of demand and supply, cost benefit analysis and technical feasibility. Many projects in the public sector have time and cost over runs. Manpower planning is not always effective and many public sector companies have excess manpower. In some cases productivity is low on account of poor materials management or ineffective inventory control. Sometimes there is lack of cost-consciousness, quality consciousness, and effective control on waste and efficiency. But the private sector is not perfect. Corporate greed and fraud also causes considerable turmoil in the economy of a country. The answer is to ensure competent professional management of Public Sector companies. Privatization is not the answer.


Public sector companies are anathema to neo-liberal economists, multinational corporations of the developed world, our neoliberal economists, BJP and armchair intelligentsia. Public Sector Companies do not cheat banks or evade taxes. Since profit is not their primary motive, they do not exploit employees, cheat investors and degrade the environment. Most importantly, they generate employment. There are only 217 CPSEs against over a thousand private companies listed on the stock exchanges. Yet, The CPSEs employ about 60 percent of the workforce in the organized sector.

Public sector companies are essential to promote rapid economic activity through creation and expansion of infrastructure; to promote redistribution of income and wealth; to create employment opportunities in backward regions; to encourage the development of small-scale and ancillary industries and to act as an important instrument of self-reliance and economic sovereignty.

Public sector companies engaged in commercial activities have played a very important role in the growth of developing countries like China and India which enjoy the highest growth rates in the world today. Indian youth need jobs and PSEs create them in large numbers. Indian government should not disinvest CPSEs. They should create new public sector companies to set up cold chains, purchase and distribute agricultural products like Delhi’s Mother Dairy and food processing units to support agriculture and horticulture in the North East and other backward states Like J&K, Himachal and Uttarakhand.

It also needs to be stressed that all private sector companies are not greedy cheats. Many of them, big and small, pay all their taxes, look after the welfare of their employees and have played a vital role in the growth of the Indian economy. I acknowledge and salute their contribution.

India is a vast nation. It has space for people of all religions and ethnic groups. It has also space for Public Sector, Private Sector and Public Private Participation to complement each other and thrive.



Should Air India be Sold?

Thursday, April 5th, 2018

Should Air India be Sold?


Col (Retd) Bhaskar Sarkar VSM

The Government of India has announced that it is ready to sell 76 percent stake in Air India and has called for “Expression of Interest” (EOI). The move has been welcomed by the neo-liberal economist lobby. Only Trina Mool Congress has protested the decision. Congress and the other opposition political parties seem to be sleeping on the issue. This article seeks to lay some facts regarding Air India before my learned readers so that they can decide for themselves if selling Air India is in the best interest of the country.

Some Facts about Air India

Air India is the flag carrier of India. It is owned by Air India Limited, a government-owned enterprise. It flies to 90 destinations including 60 international destinations all over the world. Air India is the largest Indian international carrier with about 18 percent market share. It is the third largest domestic airline in India in terms of passengers carried after Indigo and Jet Airways with a market share of about 14 percent as of July 2017. The airline became the 27th member of Star Alliance on 11 July 2014.

The airline was founded by the legendary Mr. JRD Tata as Tata Airlines in 1932. After World War II, it became a public limited company and was renamed as Air India. It was a profitable air line till 2006. Air India also operates flights to domestic and Asian destinations through its subsidiaries Alliance Air and Air India Express. Until 2007, Air India mainly operated on international long-haul routes while Indian Airlines operated on domestic and international short-haul routes. In 2007, Air India and Indian Airlines were merged under Air India Ltd.

The airline has 140 planes including 43 owned Airbus A320s and 15 owned Boeing 777s that can fly non-stop to the US and Europe. It also has nearly two dozen brand new Boeing 787 Dreamliner planes on favourable sale and lease-back terms. Air India and its subsidiaries have nearly 29,000 employees including about 2,000 pilots, 2000 engineers and 4000 cabin crew. Its $150 million aircraft maintenance and repair unit in Nagpur is the only such in the country. It’s the only airline in India that performs major aircraft checks including for rivals like Jet Airways Ltd. It has 33 hangars, compared with rival Jet Airways’ two. It is the only Indian Airline which has its own training facilities with Boeing 777 and 787 simulators.

Financial State and Assets

By March 2011, Air India had accumulated a debt of Rs 42,600 crores. As per report by the Comptroller and Auditor General of India, the decision to buy 111 new aircraft and the ill-timed merger with Indian Airlines was responsible for the poor financial situation. Neither decision was that of the Airline Management. They were taken by the ministry. The government gave Rs 32,000 crores to Air India in March 2012.

In March 2013, the airline posted its first positive EBITDA or operational surplus after almost six years. Its operating revenue grew 20% since the previous financial year. Air India Limited split its engineering and cargo businesses into two separate subsidiaries, Air India Engineering Services Limited (AIESL) and Air India Transport Services Limited (AITSL) in 2013. For financial year 2014–15, its revenue, operating loss and net loss were Rs 19,800 crores, Rs 2,170 crores and Rs 5,410 crores compared FY 2011–12, which were Rs 14,700 crores, Rs 5,138 crores and Rs 7,550 crores. It will be seen that the Airlines revenues are increasing and losses are decreasing.

Air India has lots of assets other than aircraft. It has four slots at Heath Row Airport, London. It sold one in 2014 for $75 million. Thus this asset is worth $ 300 million or Rs 2,100 crores. It has 8 percent share in Air Mauritius, and share in Orange, SITA travels, Cochin International Airport and Aeuronautical Communications of Thailand. It has two Centaur Hotels in Mumbai and Delhi. It has one of the largest collections of contemporary Indian modern art with paintings by M F Hussein and Anjolie Ela Menon. It has huge land holdings; 32 acres in Central Mumbai, a 30 acres housing colony in New Delhi’s Vasant Vihar, a headquarters valued at Rs 1600 crores and villas and apartments in London, Hong Kong, Tokyo and Mauritious.  (Authority Air India Annual Report 2014-15). Some of these assets can be sold to reduce its debt.


The first attempt at privatization was made in 2000-2001 by the BJP but failed. In 2012, a study commissioned by the Corporate Affairs Ministry recommended that Air India should be partly privatized. In 2013, the then-Civil Aviation Minister, Mr. Ajit Singh supported the move. However, the opposition led by the BJP and the CPI(M) opposed the move.

On 27 May 2017, finance minister Mr. Arun Jaitley said Air India, with a mere 14 percent market share, had debt of Rs50,000 crore. To run Air India Indian tax payers have invested Rs 50,000 crore which can be used for other purposes. So he has put a perfectly well run government enterprise for sale to make up for the present governments inefficient tax collection and fiscal management.

The decision to allow 76 percent foreign stake in it can lead to large scale retrenchment of its 29,000 employees. The fear of job losses has been one of the major reasons for various Air India unions to be opposed to the divestment plan. Even Centre of Indian Trade Unions (CITU) and RSS-affiliated Swadeshi Jagaran Manch have opposed the move.

Is Air India’s Debt Abnormal?

Air India’s accumulated debt that stands at about Rs 50,000 crores. Let us examine the debt record of our leading private sector business houses.

India’s largest debtor is Mukesh Ambani’s Reliance Industries (RIL), has a total debt of Rs 1,87,079 crore. It also has the best record of timely paying its interest. So banks are happy to offer RIL loans.

The Tata Group’s consolidated debt was $10.7 billion or about Rs 70,000 crores on September 30, 2015. They are not amongst defaulters.

The Anil Ambani led Reliance Group has a debt of Rs 1,21,000 crores and is a major defaulter. Reliance Communications (R Com), its flagship firm, has a debt of Rs 40,000 crore. It has posted a loss every year since FY 14-15. The company is valued at Rs 13,440 crore, less than a third of its total debt. Reliance Infrastructure (R-Infra) has Rs 25,000 crore of debt. Its market capitalisation is Rs 14,476 crore and is lower than its debt. Reliance Capital has debt of Rs 24,000 crore and in default. The group’s other firms like Reliance Infrastructure and Reliance Defence don’t earn enough to service the interest payment. The Essar group has gross debt of Rs 1,01,461 crore and in default. Its 10mtpa steel business that currently has a debt of Rs 40,000 crore is under the hammer. The Adani Group’s debt stands at Rs. 72,000 crore. Global lenders have backed out from funding the $10-billion coal mine development project in Australia. The Jaypee group’s debt is over Rs 75,000 crore. The group has defaulted on payment obligations worth $350 million and is on the verge of going bankrupt. The GMR group debt was at 47,738 crores at the end of FY 2014-15. The Lanco group has debts of Rs 47,102 crore. The Videocon group has a net debt of Rs 39,600 crore and in default. The GVK group has a debt of Rs 34,000 crore. Jindal Steel and Power Limited has a debts of Rs 46,000 crore. It will be seen that our great Private Sector is making merry with bank funds. Most do not have assets to cover their debts. So what is the problem if Air India has a Rs 50,000 crore debt? It is paying its creditors and cannot run away as Vijay Malaya did or Nirav Modi and thousands of others have done. Money in the banks in India whether equity, deposits or debt belongs mostly to Indians. If Private Sector can use this money with impunity for running their businesses and luxuries, why can public sector companies not do the same? What is the need for selling them?

Rs 11.5 lakh crores of Non Performing Assets (NPAs) are owed by the Private Sector companies to Indian banks. Rs 4.70 lakh crore worth of NPAs were due to loans extended to industry. The debt of Air India is normal for a company of its size. Why should a Public Sector Company be denied funds raised from the Indian public?


Vijay Mallaya loots banks of about Rs 7000 crores and makes merry in London. Diamond dealer Nirav Modi loots a bank of about Rs 12,000 crores and takes off to unknown location ruining thousands of employees and hundreds of franchise and investors.  Our government is not even blinking an eye. Every NPA of the public sector bank is tax payer’s money or money deposited or invested by the ordinary Indian public. Air India cannot run away abroad with its 140 aircraft and thousands of crores of immovable assets. Why target Air India? Why can the government not nationalize all defaulting industries without payment and sell them off and recover the money?

The flip flop by the BJP regarding Air India privatization is mysterious. It wanted it in 2000-01 but opposed it in 2013. It has again initiated it. The Government did not mind spending about Rs 72,000 crores on demonetization (Rs 36,000 crores on printing new notes and Rs 36,000 crores on reduced RBI dividend). Is the government out of money to spend and is desperately selling whatever it can? Or is the Government planning to gift it to a consortium of crony capitalists like Adani Group of Gujarat in return for generous political funding for the 2019 General Elections? Whatever be the reason behind the move, Air India belongs to the people of India and no government has the right to gift it away to a crony capitalist who will borrow from the same banks to finance the purchase and not return the money.

I rest my case. Oh Readers! Please decide whether Air India should be sold. If the answer is no, please do all you can to stop the sale.

Lastly, I would like to express my gratitude to Mrs. Mamta Bannerjee and Trina Mool Congress for opposing the move. I also request Mr. Rahul Gandhi and all other opposition leaders to oppose the proposal in and outside the Parliament. If Indian railways can have budgetary support, if state transport can have budgetary support, if “Gaushalas” for unproductive cows can have budgetary support, when BJP state governments can spend thousands of crores in preparing Unique Identity Cards for cows, bullocks and bulls, why should Air India not get budgetary support? Air India provides subsidized air travel to people of the North East, Andaman Nicobar and Lakhsha Deep Islands. It is available to the Indian Government for emergencies like evacuation of Indians from Kuwait and moving troops from one sector to another in time of war.

Air India is a national asset. It should be freed from political and bureaucratic interference and handed over to competent persons like Capt C D Gopinath. Then it will shine like the other “Navaratnas”.