All Newspaper editorials in one place – February 13, 2024





February 13, 2024

Pakistan in turmoil

Instability will follow any attempt to subvert the mandate for Imran Khan


Pakistan’s elections, on February 8, were not held on a level-playing field. Former Prime Minister Imran Khan, arguably the most popular politician, has been in jail since May 2023, facing multiple cases and serving convictions. His party, the Pakistan Tehreek-e-Insaf (PTI), was barred from using its symbol on the ballot paper, forcing it to field independent candidates. Many of its leaders were also in jail or on the run, while others were forced to quit politics or defect to another party. What Pakistan saw in the run-up to the elections was a systematic effort by powerful quarters to dismantle Mr. Khan’s political vehicle. Pakistan Muslim League-N (PML-N) leader Nawaz Sharif, once the nemesis of the army, who returned from exile in London, led his party’s campaign with the establishment’s blessings. But if the generals thought these measures would destroy the PTI’s political leverage and catapult their favourites to power, they were proven wrong by voters. Independents won 101 of the 265 seats (93 went to PTI-linked candidates), the PML-N secured 75 seats while the Pakistan People’s Party (PPP) won 54, and the Karachi-based Muttahida Qaumi Movement-Pakistan took 17. To form a government, 134 seats are needed.


This does not mean that the PTI, whose independent candidates form the largest bloc, would be able to form the next government. When it was evident that no bloc had an absolute majority, Nawaz Sharif called on every party, barring the PTI, to form a unity government. With Army Chief Gen. Asim Munir backing Mr. Sharif’s call, what followed was an in-principle agreement between the PML-N and the PPP “to work together for political stability”. All these developments point to political manoeuvring aimed at stitching together a unity government that will keep the PTI and Mr. Khan out of power. The independents could also come under pressure to switch to the coalition parties. The PTI, which has already alleged electoral irregularities, has called for street protests, triggering memories of the widespread clashes in May 2023 after Mr. Khan’s arrest. The military may have wanted to turn the page of Mr. Khan’s challenge and create a new political reality through the electoral process, but the results have underscored his popularity and public anger towards the establishment. For a long-term solution, the generals should make peace with Mr. Khan and allow the spirit of the results to prevail — an unlikely outcome. As political parties that finished second and third are moving ahead with their plans with blessings from the establishment, public discontent and distrust would remain the unresolved issues. With the PTI’s challenge from the streets, Pakistan could face another cycle of instability and chaos.






February 13, 2024

The real travesty

A Governor who profoundly disagrees with State govt. should not stay in office


The Governor’s customary address to the legislature at the first session of every year is being increasingly politicised. More often than not, those responsible for such unseemly controversies overshadowing the solemn occasion are the incumbents in Raj Bhavan. In the latest instance, Tamil Nadu Governor R.N. Ravi has expressed his inability to read out the address prepared by the DMK-run government, citing what he termed “misleading claims and facts” in numerous passages. Reading them out, he claimed, would have made the Governor’s address “a constitutional travesty”. Compounding this constitutional mischief with a partisan claim, he sought to make much of the fact that the national anthem is played only at the end of the address and not at the beginning also. Anyone who understands the Governor’s role in a parliamentary democracy will know that it is the one declining to read out the address prepared by an elected government who reduces the address to a travesty. Governments are run by parties that contest elections on a political platform, and it is only to be expected that they would seek to trumpet their achievements, real or exaggerated, in policy statements. It is the role of the political opposition and the people to judge the content of the address, and not that of the Governor.


A simple test to ascertain the tenability of Mr. Ravi’s claim that he declined to read out the customary address on factual and moral grounds is to raise the question whether either the President or a Governor in a Bharatiya Janata Party-ruled State would ever do so. He did not spell out what exactly the misleading or factually wrong points were, but it is not constitutionally sustainable to claim that the Governor’s address should contain no criticism of the Centre or make no policy pronouncements against the Centre’s policies. However, his point that the Speaker should not have launched a tirade against him after reading out the Tamil version of the Governor’s prepared speech is justified. Such conduct by constitutional functionaries detract from the Assembly’s dignity. The larger issue is still the propensity of Governors to act as political agents of the ruling party at the Centre. It is an unfortunate feature of India’s constitutional system that the country is never short of grey eminences eager to occupy gubernatorial office, but once appointed, they are equally eager to enter the political thicket. It is as if they believe that their duty is to obstruct and undermine State governments run by political adversaries. The real travesty is not in a formal address containing questionable claims, but in a Governor who disagrees profoundly with its policy while remaining in office.




February 13, 2024


Resolution of Indian navy veterans’ case in Qatar highlights Delhi’s quiet, patient diplomacy, deepening bilateral ties


From the moment Qatar’s Court of First Instance sentenced eight former Indian Navy personnel to death in October 2023, the challenge for India’s foreign policy establishment was clear: To bring citizens back home while ensuring that the growing economic and strategic ties between New Delhi and Doha are not derailed in the process. It is to New Delhi’s credit that it has risen to the challenge and the seven former officers and one seaman are to be reunited with their families at home. That this was achieved with quiet, patient diplomacy, supervised by the Prime Minister, despite the national and international media spotlight on the prisoners, makes it all the more impressive. The fact is that deep engagement with the monarchies of West Asia requires a different approach. The small ruling class in these countries is nearly all-powerful and runs international engagements directly — personal rapport of the sort PM Modi has with them can tip the scales.


The case against the Navy veterans was sensitive, and, to a large degree, opaque. All eight were employees of a Doha-based private company, Dahra Global, that provided training and support to Qatari armed forces. They were arrested in August 2022. While the charges against the Indian citizens were not made public, reports, including in the Financial Times, claimed that they were accused of spying for Israel. After the initial award of the death penalty, an appellate court commuted their sentences to prison terms in December. Throughout, New Delhi was careful in its tone and words. External Affairs Minister S Jaishankar told Parliament that the issue was “extremely sensitive” and his ministry did not jump the gun while assuring the families of the accused consular and legal support.


The episode — and, of course, its resolution — shows how deep and broad bilateral ties have become. There was a time when New Delhi viewed the Middle East only through the prism of Pakistan and to a lesser extent, Israel-Palestine. The strengthening of bilateral ties with willing partners in the Gulf has opened up the region for trade and provided more options for the country’s energy basket: Earlier this month, a multi-billion dollar deal between the two countries has done much to secure the import of LNG from Qatar. In addition, with over 8 lakh Indian workers in the country, there is much that ties the two countries together. Given the fraught geopolitics of the region, especially in the light of the Israel-Hamas conflict growing wider, Delhi has done well to stay above the fray. However, the relationship with Qatar, like most others, has some points of contention. These include the anti-India propaganda from Qatar-based media outlets and support for religious radicals in India. Given the breakthrough moment in ties at the current moment, PM Modi could begin to address these issues when he meets Qatar Emir Tamim bin Hamad Al Thani later this week.






February 13, 2024


Government’s White Paper focuses on mismanagement of economy by UPA, side-steps issues like jobs and wages


With the national elections drawing closer, the debate over the performance of the Indian economy has moved centerstage. Last week, Finance Minister Nirmala Sitharaman tabled a white paper in Parliament that compares how the Indian economy has fared under the BJP government (2014-15 to 2023-24) and the Congress-led UPA government (2004-05 to 2013-14). The tone of the document is overtly political — it’s an attempt to show how the economy was mismanaged by the UPA government. The white paper begins by saying that in 2014 the Indian economy was in a “fragile state”, public finances were in “bad shape”, and there was “widespread corruption”. It then credits the BJP government for turning around the country’s economic prospects after coming to power, and setting the economy on a “recovery and growth path”.


Some of the criticism levied against the UPA government is fair. Inflation had surged during the UPA’s term, banks were saddled with bad loans because of reckless lending, there was a high degree of policy uncertainty, the issue of retrospective taxation had dealt a blow to the country’s image as an investment destination, and numerous scams and corruption cases had come to light. At the same time, it is also true that the Indian economy grew at its fastest pace during the UPA government. The UPA government ushered in the MGNREGA and the NFSA which form the backbone of the country’s social security architecture today. On its part, the BJP government has ushered in far-reaching economic reforms such as IBC and GST. It has also utilised the JAM platform (Jan Dhan, Aadhaar and Mobile) to deliver goods and services more efficiently, leading to less leakages from the system. It has undertaken measures to increase the pace of formalisation. In recent years, it has also stepped up the budgetary allocation for capital expenditure. A greater share of the government’s borrowings is now being used to finance capital expenditure.


Even as it seems one-sided in its assessments, the white paper is also silent on several arguably contentious but critical issues facing the country. Take, for instance, the issue of jobs. Under both UPA and BJP governments, the Indian economy has been unable to adequately generate more productive employment opportunities for the millions entering the labour force and those looking to move out of agriculture — but jobs and unemployment find little mention in the report. Nor do the trends in poverty as conventionally measured through the consumption expenditure surveys. The issue of subdued wages also seems to have been side-stepped. At this critical juncture in India’s growth trajectory, the ruling party needs to break free of the game of one-upmanship and use its platform and opportunity to present a detailed and thought-through roadmap for India. That will be necessary to meet the goal of making the country a developed economy by 2047.






February 13, 2024

The artist’s nature

A Ramachandran’s vocabulary was rooted in India, borrowed from its diverse traditions, was inspired by nature


A Ramachandran never failed to captivate — whether it was urging his viewers to respond to socio-political despondence through his stark oeuvre in the ‘60s and ‘70s, or through more vibrant and joyous depictions inspired by nature that became his leitmotif from the ‘80s. The artist-pedagogue, who died on February 10, followed his heart. He was celebrated as one of India’s most politically-conscious artists, when he decided to radically alter his aesthetic.


Witnessing bloodshed on the streets of Delhi during the 1984 anti-Sikh riots might have been the immediate impetus, but Ramachandran also believed that the layers beneath a painted picture mattered as much as the foreground. Responding to criticism from within the art community, in an interview to The Indian Express in November 2023, he said, “The problem is we mix politics with art in an awkward manner. You can’t sing a protest song and become Bhimsen Joshi. If you want to be Bhimsen Joshi, then you have to sing classical music with its own rhythm and pattern… There is a distinction between propaganda and art and a painting does not become great because of its subject. Guernica (Pablo Picasso, 1937) is not a great painting because of its theme of war but because of how it has been painted.”


Unlike modernists of his generation, Ramachandran’s artistic vocabulary was rooted in India. It borrowed from diverse traditions, from the female figures of the Ajanta murals to the Harappan dancing girl, the Rajput miniatures and Kerala murals that had mesmerised him as a child. The ideals of free expression and the intimate study of nature advocated by teachers at Santiniketan were lifelong lessons. So when he altered his syntax, it reflected his sincere belief that man could be, and ought to be, one with nature. The Bhil tribes of Rajasthan and their lotus ponds that became an integral part of this work in the latter years were also metaphors and means to find beauty in both nature and humanity.





February 13, 2024

Escape From Doha

GOI’s quiet diplomacy & India’s economic heft in Qatar both contributed to ex-navymen’s release


That eight Indian ex-navymen, initially sentenced to death in Qatar, are now free is in no small part thanks to GOI’s behind-the-door talks. Procedurally, govt had appealed the case in Qatari courts. That had already led to death sentences being commuted to imprisonment of various durations. The heavyweight intervention came after Modi met Qatar’s Emir at COP28 summit in Dubai.


Murky case | The ex-navymen were tried and sentenced in near total secrecy. No details were available, but speculation swirled they were charged with espionage while working with a private firm involved in a Qatari naval project. Israel was speculated to be the beneficiary. But none of this was confirmed by New Delhi or Doha.


Influential player | What added to complications was Qatar’s growing role as a regional power broker. Recall that these ex-navymen were handed down death sentences just after hostilities broke out between Israel and Hamas. Since Qatar hosts some of Hamas’s political leadership and given India’s strategic relations with Israel, the case seemed fishy.


Bilateral connect | While Qatar certainly punches well above its weight, is a gas powerhouse and possesses a global opinion shaper in Al Jazeera, it also hosts 8 lakh Indian nationals with over 6,000 Indian companies operating there. Bilateral trade stood at $15.03 billion in 2021-22 and Qatar accounts for 40% of India’s LNG imports. So GOI is not without leverage. Coincidentally, last week India inked a $78 billion deal to extend LNG imports from Qatar till 2048 at substantially lower rates.


West Asia flex | With India’s growing geopolitical stature and increasing involvement in West Asia – platforms such as I2U2 (India, Israel, US, UAE) – New Delhi will have to navigate the region’s constantly changing dynamics. Qatar was under blockade by fellow GCC members only a few years ago. Thus, GOI needs to be nimble. It pushed right buttons with Doha this time – Modi is visiting soon. But it needs to be cleverer – it has to manage Emirs and other powerful Sheikhs, sup with the Arab street and keep Ayatollahs in Tehran in relative good humour.





February 13, 2024

No Law On Price

Legal guarantee of MSP is not workable. Farmers should give up on it. GOI should not budge


With Lok Sabha elections looming, some farm organisations decided this is a good time to try and see if GOI can be arm-twisted to give more goodies. Their list of demands can be broken up into impractical and doable.


Legal guarantee is a mirage | Farmers want a legal guarantee on minimum support price (MSP) for crops. This is the most important demand and one that keeps recurring. It’s also the most impractical. Any guarantee is just a promise on paper. Experience shows it can’t be implemented.


Show me the money | GOI announces MSP for 22 crops. For most of them, the support price remains on paper and farmers receive the price determined by demand and supply conditions. It’s mainly in two crops, paddy and wheat, that MSP works. For all practical purposes, MSP in food crops is a cereal show.


It’s all about procurement | It is procurement by govt that gives MSP meaning. Falter on procurement, MSP loses relevance. Let’s take govt price movements of paddy, wheat and bajra – and how they work out on ground. Between 2014-15 and 2023-24, MSP of paddy (common variety) increased by a compound annual growth rate of 5.4%. Wheat during the same period, increased by 5.1%. It’s bajra where MSP increased more substantially at a compound growth of 8% – because GOI is promoting bajra.


Farmers bet on real promises | Normally, a faster increase in MSP should have nudged farmers to switch to growing more bajra at the expense of paddy. Instead, the area under bajra declined by 24% between 2011-12 and 2021-22. For rice and wheat, area under cultivation recorded a modest increase. For all coarse cereals, area under cultivation fell during this period. It indicates that farmers are pragmatic. They respond to price signals when backed by procurement.


Remove irritants | The meetings between govt and farmers should focus on solving issues such as withdrawal of police cases from earlier protests and release of seized tractors. Govt had promised to do so and should implement it.


Legal guarantee of MSP is a bad idea and should be buried for good.






February 13, 2024

College Degree to Go Down a Few Degrees

AI to change college education supply, demand


The education industry finds itself at the forefront of AI-led social transformation, with a wide array of college degrees that lead to entry-level office jobs losing current gate-keeping functions. AI will change both supply of, and demand for, college education by impacting costs and wages. Machine-assisted education can improve supply and, thereby, lower the financial burden of acquiring it. On the other hand, skills attained will be priced differently, making the choice of attending college tougher for students who intend to pay for their education through future wages. Supplementary application of AI in work that does not require a college degree will also recalibrate wages. This would have a bearing on upfront costs of skilling.


AI’s productivity gains are to be derived economy-wide, from farming to biomedical research. This upends the market for education that mainly serves the same purpose through humans. The value of today’s college degree has an underlying lifelong revenue stream that will be less assured in future. Multiple degrees may offer livelihood security on a par with that provided currently by singular basic degrees. This should lead to a rewriting of curricula to equip humans with skills to complement machines. AI will make inroads into human creativity. But these incursions will not be accompanied by the emotional intelligence that makes it socially desirable.


The education industry will be an early adopter of AI to improve customisation and to impart complementary skills. The certification process will change, but the need for certificates will not. Evolving business needs will require machine intelligence augmented by humans, and bars will have to be reset for office jobs. New pathways will emerge to skill the blue-collar workforce in applying AI to specific human activity. These processes will have to originate lower down in the education pyramid for rapid tech diffusion. A college degree in the future may not be what it is now, but it’ll still matter.






February 13, 2024

Taj, Make More Room For Young Love


On Monday, Taj Hotels brought out an arresting full-page ad in this paper. With an image of a table set for a romantic candlelight dinner in elegant surroundings, the line said: ‘This Valentine’s Day, a romance like always.’ And below this image-text, the image of a young couple, swoon-sitting on the marble steps of a Taj property, had the tagline: ‘A romantic getaway like never before.’ In this composite messaging, the luxury chain was not only cajoling high-end guests to ‘experience Taj’ during the ‘season of love’, but it was also specifically targeting a group: youth. Or, as they say in Valentino-speak: the young and restless.

The desire of young couples — regardless of socially-approved conditions of marriage being met or not — to seek out privacy becomes stronger during the F&B hospitality sector-blessed ‘V-Day season’. What Taj has done is seek out this amorously-charged cohort and invite them specially into their parlour. In the process, associating its own brand with something youthful — youth. Which, by itself, is something the not-so-young (but usually ever-so-wealthier) clientele sees as a cue to follow.


Taj’s seductive gesture should be taken a step forward. Like any in-group, the young like ‘hanging’ among their own. This becomes amplified with the young in love, whichever way you want to look at that ‘emotion-activity’. Playing curator-host to this PDA-happy group, Taj (or any other chain) should not just provide them special stay offers so as to make for an attractive Taj ‘shopfront’, but also curate bespoke theme-stays for young couples to mingle with other young couples ‘experiencing Taj’. This, we hope, shouldn’t unduly worry our self-styled custodians of morality if they are on the same page on wealth creation and India becoming viksit.





February 13, 2024

Match fixing in Pakistan

Pakistani people register protest with the ballot


The just-concluded elections in Pakistan are a watershed moment. The people have openly defied the powerful military establishment to vote for Imran Khan even though he has been jailed, his party’s election symbol taken away and his candidates forced to contest as independents. Common people facing untold suffering with the prices of essential food items, power and cooking gas spiralling through the roof in a country where headline inflation is touching 30 per cent, have spoken against the all-pervasive military and its political co-conspirators.


Despite the fear and intimidation, people turned the elections into a moment of resistance to cast their vote for independents backed by Imran Khan’s Pakistan Tahreek-e-Insaf (PTI). They now form the largest bloc of 101 seats in Pakistan’s National Assembly. Nawaz Sharif’s PML-N could secure 75 seats while the Pakistan People’s Party (PPP) of the Bhutto-Zardari clan has won 54 seats. The Muttahida Qaumi Movement (MQM) has got 17 seats. It was, as the social media have termed it, a “century scored without a bat”, the reference being to Khan’s election symbol, the cricket bat, that was denied to its candidates. The election has started a popular discourse where even the pro-establishment media channels and outfits are openly discussing the military’s pernicious role in public life.


But such is the military’s stranglehold over the Pakistani State that despite the voters’ clear preference for Imran Khan’s candidates, they may end up being the only bloc that would be kept out of government formation. Emerging from the ignominy of exile and multiple corruption charges which the military helped him ward off, former Prime Minister Nawaz Sharif has called all parties, except the independent bloc, to come together to form a coalition government. Negotiations have begun with the PPP, which has apparently demanded the PM’s post for Bilawal Bhutto and major ministerial portfolios in exchange for their support. With the MQM, the PML-N already seems to have reached an “in-principle agreement” to work together in the future government. These efforts have the backing of the Army Chief General Asif Munir who has issued an open call supporting the formation of a “unified government of all democratic forces imbibed with national purpose”.


Simultaneously, attempts are afoot to scatter the independent bloc with Election Commission of Pakistan (ECP) allowing them three days’ time to join a party post issuance of a notification. The idea is that the lure of ministerial portfolios and other perks besides other pressures being brought on them would cause disarray in the largest block of independents. The wiser course for the ECP is to allow the PTI independents to hold internal elections and regain their symbol so that they can enter the Assembly as a unit. Subverting a popular mandate by blocking the largest elected bloc is hardly the way towards future political stability in a country wrecked by economic crisis.






February 13, 2024

Fiscal federalism

Concerns over distribution must not be allowed to fester


In what is becoming a regular ritual during the Budget season, the governments of some states in South India have objected to their share of taxes and thus to the Union government’s implementation of fiscal federalism in general. Their complaint is not new, but has taken on additional political implications in recent years. Naturally, non-National Democratic Alliance-ruled states are more likely to raise this complaint. It can be recalled that Gujarat also raised concerns about fiscal federalism during the years in which the United Progressive Alliance was in power in New Delhi. But there are concerns beyond pure politics that should be scrutinised in this case. The divisions between what is paid into the exchequer and what is received by some states are indeed reaching levels that will lead to unwelcome political attention.


The Union government must recognise that it cannot arrogate to itself the first call on the nation’s resources — especially when many developmental tasks have to be carried out primarily by state governments. One of the institutional mechanisms that has served India well is the respect given to the tax-division formula recommended by successive Finance Commissions. While it is up to the Union to accept or refuse this formula, the Commissions’ awards have always been honoured. However, on occasion, the Union government has breached the devolution formula in spirit, if not in the letter of the law. In recent years, the sharp growth of cesses and duties — which are not part of the divisible pool of taxes — has expanded the resources available to the Union at the expense of those that can be accessed by the states. Naturally, this will lead to a breakdown in trust between New Delhi and state capitals. It is a practice that should be sharply curtailed. The Union has also begun, reportedly, to attach conditions to transfers on account of developmental schemes.


The Union government cannot naturally address, given India’s current structure, the basic complaint of southern states that they are taxed too much compared to poorer and more populous states. That is a political question that must be addressed through skilful coalition building, as it has been in the past. But it can certainly observe this problem and act with caution. It should revisit the borrowing constraints placed on state investment funds, as Kerala has suggested. It should also reduce the degree to which it uses cesses and duties to expand its share of tax collections. There are also good reasons now to minimise the discretionary aspect of transfers to states under various developmental schemes. Some of these can be made automatic, alongside the digitisation of the government’s expenditure management system.


For other transfers, clear and non-discriminatory methods should be followed. Technocratic solutions to conditionalities are one way out. But the larger problem of stresses on fiscal federalism can be addressed only through political give and take. The Prime Minister, as a former chief minister who had expressed concerns about devolution and central control, is well placed to take the lead on this issue. Given India’s developmental needs, it is important that relations between the Centre and states are cordial. The bigger policy challenge, however, is to use fiscal resources effectively in states that have been left behind to increase growth and generate more revenue.






February 13, 2024

The AI opportunity

Threat to job creation should be addressed


Microsoft Chief Executive Officer Satya Nadella’s recent statement on skilling up two million Indians in the use of artificial intelligence (AI) signals the multinational corporation’s desire to shape the Indian AI ecosystem in a big way. Mr Nadella also noted AI could contribute around 10 per cent of India’s gross domestic product by the time the $5 trillion mark is achieved, and Indian firms should not sit on the sidelines. While Microsoft has a headstart in generative AI due to its ties with OpenAI, other big players such as Google and Nvidia are also looking to embed themselves in this field. In addition, there are multiple startups in this space and, paradoxically, a slowdown in hiring in information technology (IT) services could be a boon for AI-related outfits. The Indian IT services sector is estimated to have hired only around 80,000 engineers from campus in 2023-24 — the lowest fresh hiring in decades. However, many “surplus” engineers could now migrate to AI-related setups as investment in this space is expected to increase.


Apart from India’s famed expertise in software, it possesses several other advantages as a testing and training ground for AI. One is sheer diversity. There are eight to 10 Indian languages with over 50 million speakers each and a rich vernacular literature. Conceivably, that could lead to the development of many variations on ChatGPT set in various Indian languages. Another advantage for India is the sheer scale of data generation. Thanks to a combination of cheap data plans, high smartphone penetration, and a thrust towards providing services via the digital public infrastructure, India has the highest data consumption in the world. The rollout of 5G services and satellite broadband promises to generate even more data at an ever increasing pace. As 5G catches hold, it will also enable a host of internet of things-related use cases and other machine-to-machine enterprise applications that rely on high-speed and AI algorithms. The availability of data makes India an ideal training ground for AI.


Government policy also contemplates ramping up AI-related research and a significant increase in computing capacity. The policy also has a strong focus on building indigenous capacity in electronics hardware and semiconductor fabrication — India is already a leading hub for chip design. Several academic institutions such as IIT Madras already have testbeds and research labs focused on AI-related areas. Given a vibrant startup ecosystem, private-sector research on AI is expected to throw up investment opportunities as well. As AI catches hold, experts believe it could transform sectors like agriculture, logistics, energy, health care, and financial services. There are low-hanging fruit in these sectors in terms of inefficiencies that AI may help address. As Indian firms adopt AI in different functions over time, it is likely to improve efficiency and profitability. It is also likely to create jobs requiring sophisticated skills. However, it would replace the need for humans in various functions. In fact, even large Indian IT firms working with labour cost advantages may suffer. While the adoption of AI can increase efficiency domestically, and it is an opportunity for India to develop solutions for the world, it could potentially affect the level of job creation at the aggregate level and increase inequality. Such unintended consequences will need to be proactively addressed.






February 13, 2024

A strategic pause

Govt is right in avoiding hurried disinvestment, but privatisation as a policy must continue


Two recent statements from the government have encouraged the notion that it may be going slow on the privatisation agenda via “strategic sale” of companies owned by it. Speaking in Parliament last week, Prime Minister Narendra Modi waxed eloquent on PSUs (central public sector enterprises) gaining in strength and giving “record returns” to the stakeholders under his stewardship. Earlier, the interim Budget was markedly less ambitious on receipts from full or partial liquidation of government stakes in companies, and even dispensed with the practice of keeping a separate non-debt receipts head for “disinvestment,” effective FY24. Ever since 1992, India’s disinvestment policy has been on a rollercoaster ride.


The peak of disinvestment was during the period of the Vajpayee government (1999-2004), which saw the formation of a separate department of disinvestment, its elevation to a ministry, and the entry of the word “privatisation” into the official lexicon. That government presided over sale of a few PSUs—Videsh Sanchar Nigam, Hindustan Zinc, Balco, IPCL, Modern Food—as well as some ITDC hotels. It also heralded a process that culminated in the eventual exit of the government from Maruti Suzuki. While the UPA-I regime was guarded on disinvestment—it did not sell profit-making PSUs, scaled back the ministry concerned to a department, UPA-II was more willing to take the policy forward, but was again thwarted by adverse market conditions.


The Modi government created the department of investment and public asset management (Dipam) with a comprehensive mandate, including “privatisation,” and began setting ambitious disinvestment targets during its second term. Its privatisation resolve was in evidence as it sold loss-making national carrier Air India to the Tata Group in early 2022 for very little cash consideration, after several pragmatic tweaks to the bidding terms, including expunging of the airline’s Rs.61,000 crore-plus legacy debt. The Budget FY22 unveiled a new policy under which the government would have a “minimum presence” in the four broad “strategic sectors”.  While nearly half of the FY20 disinvestment target of Rs 1.05 trillion, was achieved, the later years saw significant under-achievement, leading to scaling down of the targets themselves, with the goal for FY25 being set at just Rs 35,000 crore, under a nebulous head.

The apparent rethink on the PSU policy must be seen in the changed global context, where the market has, at least transiently, ceased to be the sole mechanism for resource allocation. There is undoubtedly a pressing need to wind up perennially loss-making state-owned companies, via the insolvency code-based process or otherwise. The languishing physical assets with them, including the redeemable land parcels, could be efficiently monetised and deployed for more productive use. PSUs that have long enjoyed monopolistic market power with subpar efficiency like Coal India and PowerGrid are now being pitted against private players with lesser privileges, forcing them to shape up. It may be presumptuous to think that none of them would survive in an innovation and tech-driven market, as the recent underground mining ventures of Coal India would testify. All the past disinvestment deals haven’t been value-enhancing either. That said, there is still considerable scope for strategic sale of PSUs, including many profit-making ones, where privatisation might bring about synergies. A few larger ones like ONGC, NTPC, Coal India and SBI may be allowed to grow into global-sized firms, taking cue from a strategy China has used effectively—”grasp the big, release the small.”


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