ONGC, the once-glittering and now struggling Maharatna, best exemplifies the fact that there is something sinister in the very approach of the outgoing Modi Government towards the public sector enterprises (PSUs). In May 2019, the cash reserves of ONGC, the richest PSU, had fallen in the last two years of Modi Government to a miserable ₹167 crore.
As it needs at least ₹100,000 crore including ₹5000 crore in cash to meet working capital requirements per annum including for paying salaries, ONGC executives are running to banks and executives of PSBs already saddled with NPAs are hesitant to infuse more loans in view of precarious financial position of the ONGC.
The warning issued by the ONGC’s Employees Mazdoor Sabha General Secretary AR Tadvi in October 2018 has proved to be prophetic. In a letter addressed to the Prime Minister Modi on 4 September 2018, Mr. Tadvi alleged that “Decisions taken over the past four-and-a-half years have broken the economic backbone of the company.
The employee’s union has given a notice period of three months to give ONGC a free hand to take its own decisions." This means the workers warned Modi of a direct action if his government’s policies leading to a disaster were not reversed but the disaster has now occurred.
The ONGC was arms-twisted by the government first to bail out the Gujarat State Petroleum Corporation (GSPC) with its reserves when it was forced to buy a barren gas block from GSPC at ₹8000 crore. Then it was forced to by a sick Hindustan Petroleum Corporation Ltd (HPCL) for ₹36,915 crore in an off-market deal.
Over and above this twin burden, ONGC was ordered to pay a dividend of ₹8470 crore in 2017–18 over and above ₹7764 it was forced to pay in 2016–17. To add to this load, ONGC was exhorted to do a share buyback at ₹4022 crore under which a percentage of government holdings were technically transferred to the company.
This comes over and above a masochistic hara-kiri of forcing ONGC to invest money in oil exploration, develop new fields and then sell those successful blocks to Indian and foreign private corporates at the diktats of the World Bank in 1991.
Answering a question on Lok Sabha, the Union Oil Minister Dharmendra Pradhan said that ONGC and Oil India Ltd (OIL) spent over ₹13,000 crore on 115 oil and gas discoveries. He said that these discoveries were taken away from them by the government for auctioning to private companies! Robbing PUS Peters to Pay Cairn-Vedanta-Ambani Pauls!
But then ONGC is no isolated case. Modi Government resorted to four routes to drain PSUs of cash—new PSU IPOs, disinvestment through an exchange-traded fund (mutual fund), and forcing the PSUs for share buyback and to pay higher dividend to the government.
During its first four and a half years in office, Modi Government sold away PSU stocks to the tune of more than ₹210,000 crore, 58% of all disinvestment since 1991. Mr. Jaitley announced that ₹85,000 crore was raised through disinvestment in 2018–19 and a target of ₹100,000 crore has been set for 2019–20.
To meet its ambitious disinvestment targets, Modi Government launched an exchange-traded fund (ETF) managed, of all entities, by Reliance Nippon, part of the Reliance Capital of Anil Ambani’s ADAG, which itself is now facing loan defaults and bankruptcy.
By March 2019, the government garnered ₹28,500 crore by selling its PSU shares through the CPSE ETF paying Reliance Nippon 7.1%, or ₹2023 crore, as commission. Blame it on Anil Ambani’s Reliance Nippon’s wisdom or not, the share prices of almost all CPSE ETF-traded stocks fell uniformly, hurting not only the government, but also hitting the workers below the belt in the process.
The EPFO was forced to invest workers’ money in CPSE ETF and got returns of a pathetic 1.89% and hence it is grudging to pay even 8.5% interest to the workers on their EPF savings. The trade unions rightly protested the EPFO’s decision well in advance. In all, using ETFs including that of Anil Ambani, Modi Government raised ₹48,325 crore though all ETFs.
The Department of Investment and Public Asset Management (DIPAM) Joint Secretary Venudhar Reddy Nukala revealed that in 2018–19, LIC and PSBs were asked to invest ₹25.000 crore in ETFs trading in PSU stocks. This was how Modi Government sucked the PSUs dry.
There were also new PSU IPOs launched in a such senseless manner that they flopped at the stock market where market price per share sunk far below the issue price leading to heavy losses creating favourable conditions and enough justification for private corporates to grab them for a song.
The forced share buybacks from 11 PSUs—Coal India, NTPC, NALCO, NMDC, NLC, BHEL, NHPC, NBCC, SJVN, KIOCL, and even from a cash-strapped HAL—fetched Modi Government another ₹1,03,000 crore.
The disinvestment disaster apart, in February 2019 the Modi Government finalised a list of 24 state-owned companies for outright strategic sale and they included Dredging Corporation of India, HLL Lifecare, Bharat Earth Movers Ltd, Units/JVs of ITDC, Bhadrawati, Salem and Durgapur units of SAIL, Nagarnar Steel Plant of NMDC, Central Electronics and Ferro Scrap Nigam.
This fire sale apart, similar to the ONGC-HPCL model, the government saddled the cash-rich profit-making PSUs with sick ones instead of recapitalising them directly from the budget and reviving them. This apart the government has finalised a plan to monetise the land and other assets of PSUs like Air India and BSNL and has appointed DIPAM as the executioner.
Even assuming that privatisation can at times be an integral part of an overall legitimate economic strategy, if we look at the record of the Modi Government, we see that it has made a mockery of the very idea of privatisation itself.
First demolishing to death the PSUs through various forms of attrition instead of bringing them back alive and making them viable and then handing over the carcass to the private corporates for a song—this is the crux of India’s disinvestment drama of the last five years and who else is the executioner but Modi in his new avatar as a PSU-killer!