A time to think big
Paper: GS II
Topic: Important Aspects of Governance, Transparency and accountability, Government Policies and Interventions.
For Mains: Issues arising out of their Design and Implementation of Government.
In the News: Need for change in the country as the New Year has begun.
Issues that need to tackle in the coming years on the way to being the dominant global power
- Structural transformation: History suggests that fast economic growth is a period of structural transformation from rural to urban and agriculture to industry.
- As India got into a high growth phase since the Eighties of the last century, its non-food grain demands started rising at two-digit rates.
- This led to rural-urban migration and to what are called “census towns”. These are urban areas but not classified as such on account of the politics of remaining a panchayat.
- In rapidly urbanising as she/he moved to the nearby market towns to avail of its facilities. The stupidity of ignoring infrastructure in thousands of these growth centres. Sadly, even today, not doing enough and focusing on these centres through the smart cities project.
- The good news is that this neglect won’t last and many of the states are picking up the mantle. It will become the norm as the need becomes pressing.
- Women power:
- There real sources of growth that will garner is women power.
- Need to recognise that they hold up half the sky.
- The demographic dividend as she goes to college, marries late, the first baby comes later and the last earlier. Then people will stop saying they are “Devis” and accept them as fellow workers, and a great source of growth.
- Women are not the only ones discriminated against.
- Brahmanical leadership in thought will be changed to take advantage of the large Adivasi and Dalit population as another great asset for growth.
- The divisive laws are hurting our global reach and have serious economic consequences. 10% less in the labour force means almost 1% point lower growth than 8 % annually.
- On being a cultural super-power: India will be the first human society which will show that a large Islamic population and not-so-insignificant other minority groups will be an integral part of a cultural super-power, on its way to become a great economic power.
- Economic power: The generation must sacrifice and build the nation with its prospering market towns, girls in college and facilities to get over other deprivations. Then savings rate will stop falling. It will get back from 29 % to 40 % as in China and it is not difficult for good leadership in Gandhi’s India.
Conclusion
In our multi-party federal democracy, a Union of States, with different political parties of all hues calling the shots, there is much to look forward to with hope.
Weighing in on public sector privatisation debate
GS Paper III
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims:
Mains: strategic disinvestment
What’s the News?
- The Union Cabinet had last month approved the sale of the government’s entire 53.29 per cent stake in BPCL, arguing the resources unlocked by the strategic disinvestment would be used to finance social sector programmes benefiting the public.
About BPCL:
- BPCL is a Maharatna company and part of the Fortune 500 list of companies for 15 years. It has sound finances, efficient management, second-largest fuel retailer, pays more than Rs 17,000 crore as dividend to the central government.
- It has 6,000 acres of land across India, of which 750 acres is in Mumbai alone which is valued for crores of rupees.
- BPCL was nationalized in 1976 by an Act of Parliament after being set up in the 1920s as Burmah Shell, an alliance between Royal Dutch Shell and Burmah Oil Co and Asiatic Petroleum.
Strategic Disinvestment:
- Strategic disinvestment is transferring the ownership and control of a public sector entity to some other entity (mostly to a private sector entity).
- Unlike the simple disinvestment, strategic sale implies some sort of privatization.
- Strategic disinvestment in India has been guided by the basic economic principle that the government should not be in the business to engage itself in manufacturing/producing goods and services in sectors where competitive markets have come of age, and economic potential of such entities may be better discovered in the hands of the strategic investors due to various factors, e.g. infusion of capital, technology up-gradation and efficient management practices etc.
Pros of strategic disinvestment:
- The privatization of BPCL is expected to attract global energy majors given that India is the world’s fastest-growing major oil market.
- The proceeds from the sale will also be crucial for the government to contain its fiscal deficit amid lower-than-expected goods and services tax collections and a corporate tax cut that will cost the exchequer ₹1.45 trillion.
Cons of strategic disinvestment:
- Instead of selling such high performing PSUs, government should be selling the loss-making ones first. As the case of the BPCL and several other PSU ‘Navratnas’ show, they have given super normal returns to the public exchequer.
- Privatising BPCL would dent the government’s social commitment as the new owner is not likely to follow the policy of providing reservation to SC/ST, OBCs and economically weaker classes as also not service remote and not so profitable areas.
- Instead the government should empower the PSUs and give them level playing field to compete with the private sector.
On fiscal deficit:
- In spite of the huge one-time dividend from the Reserve Bank of India, we are far from meeting the deficit target.
- Nothing much will change in terms of the expenditure or revenues in the coming years. These strategic sales and dividends cannot be repeated every year. We will be back to the same levels of fiscal deficit.
- The real way of meeting this target is to cut out wasteful Government expenditure, most of which is on salaries and pensions, and ensuring that the bureaucracy delivers. Unfortunately, the cuts will be in the social sector.
On national security:
- Natural resources, especially oil, are a strategic national resource. India does have a target to substantially increase its crude oil reserves. However selling the state owned oil companies will make the foreign companies owners and it will give control in their hands.
China-example:
- While China sticks to state-owned national resources, we are moving in the opposite direction. National security also depends on the economic power that a Government has.
- China embraced free trade when it suited them and are now trying to embrace protectionism. China adopted a market system but does not allow this to cloud its thinking when it comes to strategic national issues; the control then remains with the Government. India too needs to re-think its strategy.
Conclusion:
- With the strategic disinvestments, we will lose Government control over both crude and refining.
- It is akin to “The goose that lays golden eggs is being killed to meet the government’s fiscal deficit target”.