Andhra Pradesh (Private) Ltd.

 - Dasu Krishnamoorty

The public wealth of Andhra Pradesh is slowly passing into the hands of the captains of the corporate world, thanks to economic reform. According to finance minister Yenamala Ramakrishnudu, the cabinet has just approved the second phase of privatisation to transfer assets of 68 state-level companies, with the exception of giants like the Singareni Collieries and the State Road Transport Corporation, into the lap of profit-seeking private sector. The Chandrababu Naidu government has plans to improve administrative efficiency, financial health and expenditure management of the two companies, ultimately, to pave the way for a voluntary retirement scheme (VRS). They may, in the end, be delivered to the private sector after they become attractive properties. These decisions are linked to the conditionalities the State has accepted to receive a loan of Rs. 1,200 crores from the World Bank, ostensibly to hasten the programme of economic and structural reform already underway. The Bank claims that the loan is aimed at accelerating growth and reducing poverty.

However, the main target is to reduce the burden of power reforms on the budget and implement the VRS. It is certain that the State government has yielded too much political space to the Bank to get the loan. It has undertaken to cut jobs every year, close down loss-making government units and reduce the salary bill. Ramakrishnudu’s reference to transparency did not include the guarantees government has given to private power companies. Yet the government has assured the Bank that the revenue deficit will be brought down to 1.7% of the gross state domestic product (GSDP) by the end of the year.

There is not much doubt that the government is fast going back on its commitments to the people and handing over economic power to the private sector. It is reducing and, in some cases, cancelling subsidies to vulnerable sections of the people. The reduction or withdrawal of subsidies is accompanied by introduction of user-charges in crucial areas in public utilities. In three years, the annual power subsidy of Rs.1,600 crores for domestic and farm sectors will disappear. On the other hand, the A.P. Power Transmission Corporation will continue to receive subsidies of Rs.1,800 crores for at least another three years. Despite this subsidy, Transco runs an annual loss equal to the amount of subsidy. The idea is to strengthen the company with public funds and then hand it over to the private sector and throw the weaker sections of the public to the mercy of the profit-first power companies. The government reduced its own expenditure on rice subsidies by scrapping N.T. Rama Rao’s two rupees-a-kilo scheme and selling it at Rs. 5.20 through the public distribution system.

The so-called efficiency of the private sector is closely linked to government charity in the form of guarantees, insurance on machinery, income-tax reliefs and incentives on efficiency. If the terms of the power purchase agreements are revealed to the public, more concessions given away to the private sector will surface. Privatisation is a politicians’ arrangement to share public wealth with private patrons, who finance their campaigning and junkets. The Communist Party of India, in a resolution, has indicated how the losses of AP Transco could be reduced. The resolution says, “If AP Genco, in collaboration with BHEL and the Singareni Collieries Company Limited, had set up its own production units, the investment costs could come down drastically. The Transco could overcome its losses if it could reduce transmission and distribution losses up to 10%. Besides, the waived bad debts should be collected to recoup the losses.”

The Assembly saw uproarious scenes when the government rejected opposition demand to appoint a house committee to investigate the sale of textile and sugar mills in the co-operative sector to private parties. But the question was not so much about privatisation as it was about transparency and accountability in these transactions. The charges against the government included the sale of Hanuman junction co-operative sugar factory for Rs. 11 crores when it was assessed at Rs. 20 crores and the sale of the Chagallu distillery unit for only Rs. 9 crores when it was earning an annual profit of Rs. 2 crores. Also, the government had sold the light loss-making units first instead of selling heavy loss-making units. Many members complained that after buying these units, private parties, instead of running them on efficient lines, sold them as real estate. The government had not even paid the arrears due to sugarcane growers after the Hanuman Junction factory was sold.

Even as the government claims that the loans from the World Bank were aimed at creating assets, it is underselling public assets acquired earlier with the tax-payers’ money. Though the government has been borrowing from the World Bank for years now, nothing has improved in the state. The fiscal situation is grimmer than ever. The finance minister talks of a tomorrow knowing that it will never arrive. By 2005, he says, Andhra Pradesh will become a surplus state by strengthening its revenues position and reducing non-plan expenditure. According to him, the government has undertaken exercises to reduce the fiscal deficit in relation to GSDP. There has been not a scrap of evidence in the last five years to show that the government had ever thought of reining in expenditure. The state’s debt as a percentage of GSDP increased from 19 to 26.1. The per capita debt is threatening to overtake the per capita income very soon. For the last four years, the government has been implementing a Rs.358.75-crore World Bank project for afforestation without a single acre added to the current area under forests. Actually, the area has shrunk from 62.45 lakh acres to 61.99 lakh acres in the project period of four years. Nobody has an idea of where the money is going.

The media have failed in their duty to inform the public about the implications of privatisation because they are owned by firms, which will be the direct beneficiaries of government’s withdrawal from the public sector. The privatisation drive in the state is not part of a government policy but a response to the demands of the Bank, which has now gained upper hand in determining the course of economic construction in the state. At several seminars, experts have pointed out to the hazards of implementing Bank programmes and their effect on employment and development. One has only to look at the strategy paper on state PSUs to discover the logic behind the mad and headlong rush to liquidate the essence of the state.

The paper declares “that since the return on investments made by the state is negligible, there is a huge loss of opportunity in revenue that could be generated on such investment. Therefore, it proposes to privatise as many manufacturing and trading companies as possible, and encourage ‘market forces’ to play in areas which are socially relevant. This, it claims, releases resources for poverty alleviation, education, health and development infrastructure and technology.” Unabashedly, the paper proclaims that the private sector has become an inescapable alternative to government effort and that there is no business it cannot operate. All this attack on the public sector deliberately ignores the basic function of the public sector, that is, nation-building and not profit-making. To judge its performance by commercial returns is to accept the primacy of free market economics.

The Nizam Sugar Factory, the Praga Tools Corporation, not to mention the Road Transport Corporation, were the pride of government economy under the Nizams. Indeed, even before Nehru thought of a public sector for the country, a flourishing public sector was in place in the former Hyderabad state. There is not much doubt, that succeeding people’s governments have wantonly weakened the public sector units so that they could be sold to private bidders for pay-offs they bring to the ruling classes. As Jayati Ghosh says, “The Andhra Pradesh Small Scale Industries Development Corporation, the Andhra Pradesh Agro Industries Development Corporation, the Andhra Pradesh Textile Development Corporation and the Andhra Pradesh Meat Development Corporation are potentially of great significance even in terms of assisting private sector development. They have all been closed down.” What is necessary is to ask the bureaucrats who are in charge of public sector units to explain the losses in the units that they are managing and receive punishment for ruining the public sector and the lives of thousands of workers. So far, nobody has heard of any public sector chief or the industry secretary being asked for explanation and face punitive action. Public sector failure is a failure of the government. It owes an explanation to the people for the destruction of what originally were flourishing and economically viable industrial units.

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