NEW’ DELHI, India, Jan. 31, Reuter: India wants to join the growing ranks of Asian nations selling off chunks of state Owned industries, but critics say there will be few takers for stakes in the massive, inefficient national enterprises.

India’s Gargangtuan public sector supplies all the country’s energy, three quarters of its steel, half its fertilizer, and accounts for more than a quarter of the gross domestic product.

Many Asian countries, including Malaysia, Thailand and Singapore, have sold off stakes in State owned concerns, especially airlines, to raise profits and improve efficiency. India is indicating it wants to follow their example; 30 years after its mammoth corporations were set up.

Economists say the 214 State enterprises are bedeviled by too much state control, bureaucracy, project delays, outdated technology and machinery, labor problems and lack of incentives. This is hindering overall economic growth.

Prime Minister Rajiv Gandhi, who inherited the headaches of the industries, started by his grandfather Jawaharlal Nehru, sharply criticized the public sector last month,

“Can we afford a socialism where the public sector, instead of generating wealth, is robbing and sucking up the wealth of the poor?” He asked during a political rally,

In an apparent about turn, he told a key public sector Chief’s meeting last week that total investment in the public sector would double to 66 billion dollars by the end of the seventh five year economic plan in 1990 from levels in 1985.

“Investment of these magnitudes reflects the scale of my commitment and the government’s commitment to building a strong public sector”, he said, calling the public sector the major weapon in the fight against poverty which grips half of India’s 800 million people.

Political analysts say while Gandhi is critical of the state enterprises’ performance, he has to continue showing public support at their expansion to avoid being accused of reneging on socialist principles he inherited from his mother.

Government officials announced at the meeting that successful state enterprises should be allowed to offload 25 per cent of their shares to employees and the public at market value.

They did not name any state enterprises or give a time for the privatization plan.

But Y.P. Srivastava, economist at the Federation of Indian Chambers of Commerce and Industry, said the enterprises likely to be privatized first were the telecommunications and airlines industries, with Air India and Indian Airplanes heading the list.

He said in a telephone interview that the government may take up to three years to implement the privatized. Process and even then, as little as five to 10 per cent of shares would be offloaded initially.

“It is a sensitive issue. The government wants to be in control still but it believes that some private representation in the public sector can improve performance”, he said,

Some economists say India’s public sector, which employs more than two million workers, is a key political tool for Gandhi because it provides a reliable vote bank for his ruling Congress (I).

The World Bank in a recent report on India’s steel industry said the political climate was “not yet ripe” for privatization of the country’s state owned steel plants.

It also said: “It is unlikely that any industrial group would want to embroil itself in a long-haul restructuring operation involving intractable labor problems as well as costly modernization requirements…”

Critics in the private sector say the public sector has spawned a “briefcase brigade” of bureaucrats who care neither concerned with profits nor the country’s economy but only in holding on to their positions.


Article extracted from this publication >> February 5, 1988