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Scandal, strike stalls India's privatisation plans

A crippling strike at a newly privatised aluminium firm and a bribes scandal appear to have thrown a spanner in the government's ambitious plans to sell other state-run firms.

The Cabinet Committee on Divestment, a panel headed by Prime Minister Atal Bihari Vajpayee, which gives the go-ahead to privatisation plans, has not met since February 21.

At that meeting the committee approved the sale of a controlling stake in Bharat Aluminium Company Ltd to private sector metals firm Sterlite Industries, the first big-ticket privatisation in a decade of economic reform.

But the deal ran into big trouble, with 7000 Balco workers staging a strike and opposition parties accusing the government of selling the profit-making firm too cheaply.

The government's focus on its economic agenda was then hit last month by a scandal over graft in the defence establishment, which broke when an Internet news portal went public with several hours of sensational, secretly shot video footage.

The film showed a string of public figures, military officials and bureaucrats apparently accepting money to promote a fake arms deal.

"The Cabinet Committee on Divestment is unlikely to take any fresh decision soon," a Department of Divestment official, who did not wish to be identified, said.

"We will keep our proposals ready but decisions will have to wait till the situation returns to normal."

SOFT-PEDALLING ON PRIVATISATION

Analysts said Vajpayee's 18-month-old government has been wounded by the corruption scandal, which led to the resignation of the defence minister and the withdrawal of a key partner from the 22-party ruling coalition.

Although Vajpayee still has a majority in Parliament, regional parties, which may drag their feet on economic liberalisation now hold the balance of power in his government.

For this reason, he is likely to soft-pedal on unpopular policies and -- as the response to the Balco deal showed -- privatisations can be risky, analysts say.

"Decisions will have to wait. No more reforms for some time now," political analyst Prem Shankar Jha said.

Officials were unable to say when the Cabinet Committee on Divestment would meet again.

However, the Department of Divestment official said his department was ready to roll out the 27 firms which have been lined up for government equity sales in 2001. The government also plans to close down loss-making firms.

Big companies on the block include flag carrier Air India, domestic carrier Indian Airlines, overseas telecom monopoly Videsh Sanchar Nigam Ltd, computer firm CMC Ltd, Hindustan Copper Ltd, Hindustan Zinc, National Fertiliser Ltd and the Indian Tourism Development Corporation.

The government plans to raise Rs 120 billion through the sale of stakes in state-run firms in fiscal 2001/02.

But it has had a poor track record of meeting privatisation targets. The process has been bogged down over the years by political and trade union opposition and a lack of consensus within the coalition government.

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