[Marxistindia] stop privatisation of public sector

news from the cpi(m) marxistindia at cpim.org
Mon Sep 29 16:04:36 IST 2014


September 29, 2014

 

Press Release

 

STOP THIS PRIVATISATION OF PUBLIC SECTOR

 

Following is the correspondence between Sitaram Yechury and Minister of
State for Finance Smt. Nirmala Sitharaman on the issue of disinvestment in
the Public Sector.  We are releasing the text of the letters for
publication.

 

 

 

(Hari Singh Kang)

For CPI(M) Central Committee office

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1.     Minister's Letter to Sitaram Yechury, MP (dated September 4, 2014)

 

Kindly refer to the mention_made by you in the Rajya Sabha on 22.07.2014
during Zero Hour requesting the Government to stop disinvestment of Central
Public Sector=Enterprises (CPSEs), as it is not a prudent economic measure.
Specifically, you have pointed out that because of disinvestment, the
Government would be losing out on dividends from the CPSEs and that the
proceeds of disinvestment go towards consumption expenditure.

 

2. In this regard, I would like to point out the following:

 

(i)      In all cases of disinvestment, the Government would retain at least
51% equity and management control of the CPSEs. So, there would be
continuing inflow of dividends to the Government even after a part of the
CPSE stake is sold in the market through disinvestment.

 

(ii)      For management of disinvestment proceeds, the Government of India
constituted the National Investment Fund (NIF) on 3 November, 2005, into
which the proceeds from disinvestment of CPSEs were channelized. 75% of the
annual income of the NIF was to be used to finance selected social sector
schemes, which promote education, health and employment. The balance 25% of
the annual income of the NIF was to-be used to meet the capital investment
requirements of profitable and revivable CPSEs. The Government, in 2009, in
view of the difficult economic situation caused by global slowdown of
2008-09, granted one time exemption for utilization of disinvestment
proceeds in full deposited in the NIF over a period of three years till
March, 2012 (later extended by one more year) for capital expenditure in
specific social sector schemes decided by the Planning Commission and
Department of Expenditure. This period was further extended till March,
2013.

 

(iii)     The Government on 17 January, 2013 and 21 February, 2013 has
approved restructuring of the NIF and decided that the disinvestment
proceeds with effect from the fiscal year 2013-14 will be credited to the
existing 'Public Account' under the head NIF and they would remain there
until withdrawn/ invested for the approved purposes. The approved purposes
include recapitalization of public sector banks and insurance companies,
subscribing to shares issued by CPSEs, investment in Indian Railways towards
capital expenditure, etc. Specifically an amount of over Rs.15,000 crore
realized as disinvestment proceed during 2013-14 went towards meeting
capital expenditure of Ministry of Railways. Therefore, it is not correct to
suggest that the disinvestment proceeds have been used for consumption
expenditure.

 

(iv)     Disinvestment and listing of CPSEs in stock exchanges also improves
corporate governance and helps in the realization of the productive
potential of these enterprises through improved efficiency and
profitability. In view of this, the Securities and Exchange Board of India
(SEBI) has made it mandatory that already listed profitable CPSEs should
have minimum public shareholding of 25%.

 

2.     Reply given by Sitaram Yechury to MoS for Finance (dated 29 September
2014)

 

Thanks for the response to my zero-hour submission against disinvestment in
Rajya Sabha on 22-04-2014 vide your communication no 4/16/2014-Policy dated
4th September 2014. 

 

But, sorry to say, I am not in agreement with the explanation given by you
in support to your policy of disinvestment of shares in CPSEs, nor with your
arguments defending the prudence behind disinvestment. 

 

1.     I never pointed out about the total stoppage of flow of dividend from
the CPSEs to Govt. Fact remains that the government is losing the dividend
income more and more as it proceeds to off-load its share in the CPSEs in
the market in regular frequency. Dividend is a recurring flow to Government.
Foregoing a part of such recurring flow of income for one time
sales-proceeds does not speak about economic prudence. 

 

2.     Your own communication has conclusively shown that the very concept
of "National Investment Fund (NIF)" for parking the disinvestment proceeds
to be utilized for capital expenditure as well as social sector schemes is
yet to take-off fully even after eight years after its constitution.  And
disinvestment proceeds realized during this period have all gone to meet the
fiscal deficit and nowhere else.  Recapitalisation of public sector banks
and insurance companies and funding capital expenditure of the most crucial
public utility as well as infrastructure service like Railways are
essentially Governmental responsibility for which dilution of equity base of
CPSEs cannot be justified which will have other negative ramification on
governance of CPSEs. The Government could have pulled on the
resources/reserves of CPSEs without diluting their equity. I like to know
the details of funding on recapitalization of banks and insurance over years
and its linkage with receipt of disinvestment proceeds which may please be
sent to me. 

 

3.     I like to state also that the expenditure requirement on social
sector schemes on education, health etc is of recurring nature. And banking
upon disinvestment proceeds of CPSEs' shares which is supposed to be
one-time receipt for funding such recurring expenditure requirement cannot
be logical and prudent. Rather such an approach demonstrates a kind of
ad-hocism besides raising valid apprehension that the Government will not
stop at disinvesting CPSE shares upto 49% to ensure its holding at 51% in
CPSEs as committed in your letter. 

 

4.     The linkage to improvement of corporate governance with listing of
CPSEs in stock exchange is not at all understood. Improvement in governance
either of the CPSE or of the Government itself depends on different other
factors and ups and down in stock market has got little to contribute. Stock
market movements suffers from various kinds of manipulations too. How can
one explain a public sector company having same standard of profitability,
turnover etc is priced lower than a private sector company with almost same
or even lower parameters?   Therefore, I opine and urge upon you to consider
that listing in stock exchanges should not be made a condition for CPSEs for
retaining its Maharatna/Navaratna status nor the condition of minimum
disinvestment of 25% be made applicable to CPSEs.  

 

 

*******************

 

 

 

 

Central Committee

Communist Party of India (Marxist)

A.K. Gopalan Bhawan

27-29, Bhai Vir Singh Marg, Gole Market

New Delhi 110 001

 

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