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The Rediff Money Interview/S Gurumurthy

'Divestment proceeds are used only for current govt expenses'

The tug of war between Divestment Minister Arun Shourie, other political heavyweights -- like Petroleum Minister Ram Naik, Defence Minister George Fernandes -- and the Swadeshi lobby over the Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd sell-off has come as a major setback for the government.

After major hiccups and delays, the government's divestment process seemed to have taken off and was achieving the desired results.

However, with the postponement of the sale of HPCL and BPCL -- the two oil refiners which hold 20 per cent each of the $15 billion domestic oil market -- the divestment plans have gone haywire.

Analysts believe this derailment could affect India's economic reform process adversely. It has already started to have an effect on the stock markets which are slipping badly and could scare away foreign investors too.

Although the divestment of Bharat Aluminium Corporation Ltd, Indian Petrochemicals Corporation Ltd and even Videsh Sanchar Nigam Ltd went through quite successfully, the opposition to the oil firms' sell-off has raised questions about the future of the divestment process.

The Rashtriya Swayamsevak Sangh and the Swadeshi Jagran Manch too have aired their opposition to the divestment of BPCL and HPCL.

"There should not be any strategic sale in HPCL and BPCL. The government has, as a matter of policy, decided to be present in the oil sector for national security," says S Gurumurthy, co-convener of the Swadeshi Jagran Manch.

The Manch, which advocates economic self reliance, has been critical of the Bharatiya Janata party-led government's economic policies.

Gurumurthy clarifies the Swadeshi Jagran Manch's stand on divestment in a frank interview with Shobha Warrier.

Are you against divestment as such or only against the sale of HPCL and BPCL?

The Swadeshi Jagran Manch is not against divestment, per se. However, SJM favours the evaluation of the divestment programme on a case-to-case basis, both for the need and desirability of divestment, and the method of sell-off.

As for divestment in Hindustan Petroleum and Bharat Petroleum, our opposition is because of the strategic nature of the oil industry in Indian conditions. We are also opposed to the method of divestment proposed, namely, strategic sale.

Are you worried about a private company like, say, Reliance bidding for both the oil companies and then holding sway over the oil sector?

No, not at all. In fact when I came to know that someone from Reliance had even offered not to bid (for the two oil refiners) so that it should not cause any embarrassment to the government, my response was very clear. If the government were to go ahead with divestment of HPCL and BPCL, Reliance must have the right to bid.

There's a view that many groups, including the SJM, are opposing the divestment (of HPCL, BPCL) not because of any fear of a monopoly or risk to security, but because of the Reliance factor?

I need not have to react to such critical comments. I do fight Reliance, but I do that on my own. I have never attempted to garner support from any one in the government to fight Reliance. Why, some of my best friends are even supporters of Reliance.

I have never used the friendship or association of any one to help me in my fight against the practices of Reliance.

Do you, like Defence Minister George Fernandes, feel that foreigners will gain entry to the oil sector and create a risk to national security?

Yes.

But you agree with Petroleum Minister Ram Naik who says the government should first offer the oil companies' stake to the public.

Yes. It is the public of India who must get these shares. We are for initial public offering in the Indian stock market.

Also, the stock market needs good shares. The investment of household savings in the stock market is less than 2 per cent today. This is because of lack of reliable stocks available in the market for investment. If good shares are available, investors would begin to go back to the bourses.

Earlier you were against foreign firms taking control of Indian companies. Now that foreign investment is not coming in, you talk about monopoly. Are you against privatisation itself?

Not at all. My case is that a monopoly may be created by the market. But the government, by its action of divestment, cannot create a private monopoly.

Why? Is divestment not transparent?

I feel if a group could create a monopoly by winning in the bidding process, it should be disqualified (from the process). That the divestment bid is transparent does not mean that it can be allowed to result in a monopoly. And this should not happen.

The issue is not whether a monopoly is created transparently or covertly. The issue is that the government is creating a private monopoly.

In the last few months, there have been 24 completed transactions of privatisation and the government raised a total of $2.5 billion. Would you call this successful?

I do not measure the success of the divestment programme only by the amount realised, but by the kind of companies divested and the method of divestment. The amount raised is certainly a criterion, but not the only one.

Even people like Jairam Ramesh of the Congress call the Vajpayee government's privatisation programme an outstanding success story. Do you agree?

That is his view.

What do you say about the government manufacturing things: from bread to cars? How long can we go about with such an economy?

That is why I have said the SJM is not opposed to divestment, per se. There are areas where divestment is necessary. Of course,
Modern Foods should have been divested, but not to Hindustan Lever Ltd. It should, perhaps, have been sold to the workers of Modern Foods.

SJM talks of self-reliance. In what way? Do you visualise 'insularisation' of the economy, considering that in there is no country which is self-reliant?

This is a very large issue. It cannot be addressed in answering one question. Self-reliance does not mean self-sufficiency. So it is not being insular. While I agree that no country can be self-sufficient, I think most countries can be self-reliant.

B>You have spoken about divesting sick public sector units first. But who will buy a sick PSU?

That is the real challenge in the divestment programme. Where is the challenge in selling a profit-making PSU, particularly when bids are global? To sell sick public sector units, the government may even have to extend a package of concessions -- including tax concessions, debt waivers and other benefits.

The justification for all this is to save employment and to ensure that government does not foot the bill for the losses of the PSUs in future.

Don't you feel, other than the SJM and the RSS, that vested political interests are stalling the divestment process?

I would say that bureaucratic and political vested interests are pushing the divestment process.

Divestment Minister Arun Shourie says the government has taken care in protecting the interests of the employees. Are you not happy with that?

I do not doubt what Arun Shourie says. I am sure that so far divestment has not adversely affected the interests of employees. But where profit-making public sector units are involved, the issue is not just the interest of the employees.

The divestment ministry has said it will not use the money generated from the divestment process for current expenses of the government, but for infrastructure development, et cetera. Is this not a good idea?

The department of divestment already also knows that the divestment proceeds are used only for the current expenditure of the government.

The talk about the money being used for infrastructure development, et cetera is merely for public consumption, unless there is a clear legal bar against the use of the proceeds for current expenses.

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