An Attack on India's Sovereignty


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Disinvestments or Sale of India’s Assets

               (i) Back-door Entry

               (ii) The Oil Rush

               (iii) The Disinvestments Mania


It is inconceivable that the imperialist sharks would spare the huge Public Sector Enterprises (PSEs) when they are set to take over every aspect of the Indian economy. Having grown to giant size over the earlier decades, particularly in the 1970s and the 1980s, they are important prey for the vultures of finance capital. With a capital and turnover of roughly Rs 3 lakh crores 1 and an asset value of about twice that, inroads into this sector would result in a huge market for the imperialists and their TNCs. Not surprisingly it has been one of the key demands of the IMF/WB combine. The process of disinvestments has been slow because of the resistance of powerful lobbies of bureaucrats and ministers who have been milking this sector, minting crores of rupees. Now that most of these are getting well entrenched into the globalised scenario, and see even bigger returns from these foreign links, the disinvestment speed is somewhat picking unless there is strong opposition from the workers and employees.

As disinvestments clearly entails the sale of the country’s wealth to the big compradors and TNCs, that too at dirt-cheap rates, and there has been a howl of protest from all sections of society, particularly the employees, a number of excuses had to be put forward for such a traitorous policy. First, they said they would sell only the loss making units. But when it became obvious that this was a big lie as all the most profitable units were put up for sale, they changed their tune and said that such sales would be useful to cover the huge fiscal deficit (i.e. the government’s excess expenditure over its income). This too is ridiculous — it is like telling a housewife to sell household furniture to meet daily expenses — but it is taken as the ultimate truth by the worshipers of the dollar. For them, if black is to be called white, so be it, so long as their fat salaries are not effected.

Unfortunately, answering these agents of the moneybags, has become more complex as the main opposition to it by the CPI/CPM revisionists is also based on falsehood. These hypocrites have idealized the public sector, portraying it as some socialist sector within India’s ‘bourgeois’ economy. This too is a big lie. Firstly, it is no socialist sector, and nothing but state capitalism. Secondly, it was initiated by no socialists, but the Tata-Birla Bombay Plan, with full backing of the British colonialists, to use public funds to create the raw materials industry, to supply it at cheap rates to the private sector. Thirdly, it developed to full bloom under patronage, not of socialist Russia, but a Soviet Union that was now imperialist. Fourthly, mostly those industries and projects which needed a long gestation period to give returns on investment and required large capital (like river projects, transport, coal etc.) were put under the public sector. Finally, and most important, it was no ideal sector as made out by the CPI/CPM, but rife with the worst forms of corruption, nepotism, unscrupulousness, unethical practices and degenerate to the core. While it continued to suck out vast quantaties of public funds; due to the lack of bourgeois ethics necessary for any capitalist economy, it turned into a white elephant, unsustainable in the long-term. Besides, it too was inter-twined in a vast network of foreign collaborations, whether with the West or the Soviet type.

So, the revisionist arguments do not hold water. They become easy grounds for the pro-West lobby to dismiss them as out-dated. Though, the existing PSEs are no doubt preferable to the wholesale take-over by big capital, particularly for the security of employment of its vast work force (relative to that in the private sector) it was no ideal of "socialism". Also with its take-over, foreign capital’s sweep over the country would increase ten-fold and so it is another reason to be resisted tooth and nail. Yet, the answer to the ills of the PSEs is not privatization, but a genuine socialist sector, where productivity is high due to the workers’ knowledge that industry and society at large are the common ownership of all the toiling people, and that the managers are not the corrupt leeches that one sees today but selfless communists who work not for personal gain, but for serving society. It is only by reducing the sense of alienation witnessed by the employees of the PSEs with the production process (and the defacto owners of production) that productivity will increase through a sense of belonging and not through external incentives. It is only then that this sector will flourish and act as a major motor for industrialization of the country.

Now, let us take a look at the process of sell-out in this period of globalisation. It must be remembered that the three most lucrative sectors, Telecom, power and finance, were all in the control of the public sector. Not only that, other moneymaking and key sectors, like tourism, mining and heavy industry were also in the public sector. The imperialists had a two pronged approach — either disinvest or go into collaboration with ‘Indian’ partners. While the pace of disinvestments was slow the latter was much faster, particularly in the mineral sector. Let us first look at the entry through the back-door by means of collaborations.

i) Back-door Entry

The opening out of the mining sector led to a mad rush for India’s rich natural resources. Hardly had the decision in mining been taken when the FIPB approved 32 joint ventures worth $500 million (Rs 2,500 crores) — it has set a target of $2 billion (Rs 10,000 crores) for the coming years.

Reliance formed a $30 million (Rs 150 crores) joint venture with the notorious South African firm De Beers for prospecting and mining of diamonds. A large number of companies have also set up JVs for exploration and mining of gold : ACC (Tatas) with CRA Exploration (Australia); BMD Holdings with Signet Engineering (Australia); Bharat Gold Mines with Normandy Augo Asian (Singapore); Birla Periclase with Dupont (USA) or Lurgi (Germany); and Hindustan Zinc Ltd with Niugini Mining (Australia). Also other mining contracts signed are : Finolex Cables Ltd with Eassex Group (USA); Indian Barytes & Chemicals Ltd with CARPCO-USA; Ashton Mining India Pvt. Ltd with Ashton Mining-Australia; etc. in the field of Copper, Lead, Zinc, Baryte Ores and all other non-ferrous metals. Also Kudremukh Iron Ores has signed an MOU (memorandum of understanding) with a consortium of Australian mining firms called ‘Australian-Indian Resources’, and Orissa Mining Corporation has teamed up with UK’s Rio Tinto Minerals..... It is virtually like a 20th Century Gold Rush to rob our rich natural wealth!

Even in the petroleum sector the oil giants have begun their forays. Both Shell and Exxon have made their entry, with Shell announcing a massive plan for India. The ONGC has handed over the very lucrative business of oil exploration to the private sector. The oilfields of Mukta, Panna, and some others, plus the South Tapti free gas reserves, have been handed over to Enron in collaboration with Reliance. The fields in the Krishna-Godavari basin have been handed over to Videocon with a Japanese collaborator. The Bikaner oilfield was in negotiation with Shell. 2 In addition, Bharat Petroleum Corporation Ltd (BPCL) plans a massive Rs 10,000 crore expansion in which the three refineries already coming up are joint ventures with Shell and Oman Oil Co.; and the redesigning of all the 4,300 sales outlets is to be done in collaboration with Shell. In heavy industries, BHEL was forced into a strategic tie-up with Seimens, in its turbines section, in order to withstand international competition.

ii) The Oil Rush

Oil and gas are big business. The biggest TNCs are involved. Wars have been fought for control of oil and gas resources. The war in Afghanistan was more about control and piping of the huge Central Asian Oil and gas deposits, than about the Taliban or democracy for the Afghan people. Therefore, quite naturally this is a key sphere of interest for the imperialists. Exxon, Shell, Unocol, Total, Amoco, et al, are all in India, demanding opening up at a faster pace. But unlike some other countries, there is no need for war, as our servile rulers have from the very start of globalisation been surreptitiously opening out parts of this sector and sabotaging local production so that the big guns can increase their exports to India.

Since 1991, through the ‘reforms’ period, the Government has taken several measures in the name of ‘Petroleum Policy’ hiking oil prices, squeezing subsidies on petroleum products (particularly kerosene and diesel), more dependence on the import of crude petroleum than indigenous production, privatization of public sector oil companies. In 1996, the UF government (of which the CPI/CPM was a major part) took a major policy decision that "comprehensively laid down the time-table for dismantling the administered price mechanism in a phased manner". With that the shift to market-determined prices began in a few petroleum products, while the public sector oil companies were restructured to pave the way for their sell-out. Subsidies too were slowly eased out, raising the price of the poor-man’s fuel, kerosene, 3 to 5-fold. By April ’98 prices of only petrol, diesel, kerosene and domestic LPG were controlled; prices of all other products were decontrolled. In that year the BJP government decided to totally dismantle the APM (Administered Prices Mechanism) in phases over the next four years. This it has now been done by virtually removing the entire subsidy on kerosene, diesel and LPG.

The Indian compradors, besides dismantling price controls on petroleum products, has had a dual policy for the oil sector in the globalisation scenario — first sabotage indigenous production to allow greater imports; second, slowly hand over the indigenous production to the TNCs and their local comprador collaborators. Let us see how both worked out to the detriment of the country’s interests:

Crude oil production has been steadily declining in the country, though demand has been galloping ahead. Indigenous production dropped from 35.2 million tons in 1995/96 to 32mt in 2000/01; while simultaneously imports have grown from 27.3million tons to over 57 mt in the same period. 3 To imagine the scale of these imports in the year 2001 it was estimated that the total imports of crude plus petroleum products was a gigantic Rs 89,000 crores or $19.2 billion. 4 Quite naturally the western oil lobby is thrilled with the Indian rulers.

Also regarding natural gas, whose consumption is increasing rapidly, it continues to burn the gas produced from Bombay High, while seeking massive deals with foreign Oil & Gas majors to import it through pipelines from Iran, or Central Asia through Afghanistan. In this, the Russian major, Gazprom, is also competing with the US giants.

What is most ridiculous is that the cash-rich ONGC has been investing huge sums abroad while ignoring oil and gas production at home. With $1.7 billion (Rs 8,126 crores) already invested in Russia’s Sakhalin-I oilfield, it plans another $2.85 billion investments (JVs) during the 10th Plan (2002 to 2007) in fields stretching from Algeria to Vietnam. In other words India is to become more and more dependent on foreign produced oil and gas, whose price will be double or even triple that produced in the country.

And simultaneous to this the process of privatization has been going on apace. The Government has decided to completely privatise all (the oil companies in two phases, by the year 2005. The process began the sale of one-third of the shares of IBP to a IOC. The first time since 1974, the private sector will be given direct access to the consumer. India’s public Sector oil companies are probably the single biggest and juiciest item for foreign plunder, since they yield fabulous profits: just the dividends the eleven oil sector PSUs paid last year were Rs 1,935 crore. ONGC’s profits last year were Rs 3,500 crore; IOC’s, Rs 2,500 crore; GAIL’s, Rs 873 crore. When the Government decontrols prices, and allows the oil companies to charge international prices, the loot will be even greater.

That the Government intends to hand the oil companies over to multi-nationals for a song was proved by the sale, at the end of 1999, of 18 per cent of the shares of Gas Authority of India Ltd (GAIL) at just Rs 70 — less than half the price the Government was advised to expect in 1998. Moreover, substantial chunks were sold to the very firms, which are potential competitors of GAIL, namely, Enron and British Gas!

We have already seen above some major oil and gas tracts sold off by the ONGC (Oil and Natural Gas Commission) to Enron/Reliance, etc. This took place in 1994/95 itself. Other such examples are: In 1996 the IOC (Indian Oil Corporation), GAIL (Gas Authority of India Ltd) and India IIP (Indian Institute of Petroleum, Dehra Dun) signed a JV with Amoco of the US for the development, production and marketing of DME (dimethylether) as a multipurpose fuel in India. In 1995 the BPCL (Bharat Petroleum Corporation Ltd) got the approval to set up a refinery in Madhya Pradesh in collaboration with Oman Oil Corporation. In 2000 HPCL (Hindustan Petroleum Corporation Ltd) signed a MoU with Total SA France to construct an LPG import terminal at Vishakapatnam. In 1997 the ONGC approached the World Bank for a $450 million loan for a project to burn the gas being emitted at the Bombay High oil field and for future plans. The World Bank agreed, but with its conditionality that the government would have to allow ONGC and IOC to enter into JVs (joint ventures) with TNCs. The government not only agreed with this conditionality but also went a step further to lease out the oil and gas fields that were already discovered and developed by ONGC & OIL to new JVs (i.e. the Enron/Reliance JV, etc.) where the TNCs and their Indian collaborators held majority share!!! 5

Now, the government is all set for the wholesale privatization of the huge oil and gas sector. After all, IOC is the largest company in India (valued at Rs 1 lakh crores) and the ONGC is the largest profit-making company in the country. In July 2002 6 the Cabinet Committee on disinvestments declared it plans to immediately sell off 25% of its stake in ONGC to a strategic partner for Rs 13,000 crores; 26% of its stake in HPCL, also to a strategic partner, for Rs 4,400 crores; 15% of its stake in GAIL and 25% of its stake in IOC. From the sale of its shares in the 5 petroleum giants — BPCL, HPCL, ONGC, IOC AND GAIL — the government expects to gather Rs 27,000 crores. Sale to a strategic partner entails handing over management control. Disinvestment of BPCL is to take place before Jan. 2003 and that of HPCL by March 2003. All bidders, except Reliance, are the foreign giants like Mobil Exxon, Total Fina, Shell, BP-Amoco and Chevron. Though, at present, this has been temporarily stalled due to the fierce fights within the ruling alliance, acting on behalf of one or the other lobby, it is only a matter of time before this takes place.

This amounts to the sale of India’s most profitable and valuable assets. No doubt the sales will go to the giant TNCs who have been waiting for the opportunity to grab this gold mine, either on its own or in partnership with the comprador houses like Reliance.

iii) The Disinvestments Mania

As part of the new economic policy, the central government initiated disinvestments in the PSEs from October 1992. The importance given to this can be seen from the fact that not only has a new ministry been created, called the DoD (Department of Disinvestments), but there is also a high profile Cabinet Committee for Disinvestments (CCD), headed by the deputy prime-minister. Though each year a target of Rs 10,000 crores is set to be achieved through disinvestments, but not yet realized, the importance attached to it, can well be realized. Till the year 2000 a total of Rs 21,238 crores has been raised through disinvestments.

All these sales have taken place at huge discounts, which, in effect is nothing but outright robbery of India’s public assets. To just take two examples of this loot, we present the sale of Modern Foods and the oil company IPCL.

The year 2000 began with the announcement that Modern Foods, the prominent public Sector bread maker of north India, had been sold to Hindustan lever Ltd (HLL) for just Rs 105 crore. Modern, under normal conditions, was a profitable company, but in just the last three years its profits have been deliberately made to fall, in order to provide an excuse for privatisation. Modern Foods’ real estate alone is valued independently at Rs 550 crore, and its whole worth at Rs 2,100 crore; instead it has been handed over to a multinational for less than the value of one year’s sales! Having got control, HLL can fund the entire purchase by merely selling a fraction of the assets.

The Government has also systematically smashed a highly profitable PSU, Indian Petrochemicals Ltd (IPCL), in order to justify privatising it. After the Disinvestment Commission announced that IPCL should be privatised, its profits began plummeting from Rs 510 crore in 1996-97 to Rs 29 crore in 1998-99. Finally, the Government went ahead with IPCLs privatisation.

A group of academics and financial consultants has recently pointed out that the procedure the Government is adopting to privatise IPCL was fraudulent. A party is to be chosen by the Government for the purchase of 25-26 per cent of the shares of IPCL; with this the complete management control would be transferred to the private party. The Government is talking of a price of Rs 160/share, at which price a quarter of the shareholding would cost only Rs 1,100 crore. The ‘lucky’ winner, Reliance, has, for this trivial price, got immediate access to fixed assets worth over Rs 10,000 crore and free reserves worth Rs 2,781 crore!

Similarly, Container Corporation of India, BALCO, the earlier disinvestments in GAIL, MTNL, the recent sale of VSNL to Tatas, etc. etc. — all went at a fraction of the asset value of these companies. With market capitalization taken as the basis of valuation, (instead of its real asset value or its profit-making ability) with stock markets exceedingly low, and with valuations done by foreign companies like Merrill Lynch, etc. (discounting even the market manipulations before and after sale), all companies have been sold well below their true worth.

Now, in mid- July the DoD has put forward an immediate plan for the sale of large chunks of shares of India’s best and most profitable PSEs, to corner a good Rs 50,000 crores. The plan shown in Table VII.1 and VII.2 was put forward by the DoD before the CCD: 7

Table VII.1

Projected price realization from strategic sales, IPOs


Dilution (%)

Proceeds Rs Crores.










NALCO (strategic)






Maruti (IPO)















Table VII.2

Receipts from sale of equity in the Open Market


Dilution (%)

Proceeds Rs Crores.



















In June 2002 a large number of hotels, owned by the public sector ITDC, were sold off. Earlier even defense production was privatized, with public sector ordnance factories allowed to take private contracts. The major 5 ports in the country are being corporatised, as a first step towards full-scale privatization.

The financial sector is being completely handed over to the TNCs.

With the government deciding in Dec.2000 to disinvest its stake in the public sector banks to 33%, most are ready for foreign take-over. The public sector banks, with Rs 8,10,000 crore of deposits, are a rich plum to be picked. In the investment banks like ICICI, IDBI and even the housing bank, HDFC, foreign investments is more than all others put together. With the permission for foreign investments in insurance and the entry of all the giant international insurance companies, it is only a matter of time before the public sector insurance companies, LIC and GIC, fall into their hands. And now, on July 23, 2002, the Joint Parliamentary Committee on the stock scam has demanded the privatization of India’s largest mutual fund, the UTI (Unit Trust of India) — that too within one year. Over two crore people have invested in the UTI, and with the JPC proposing that a huge 60% of the shares be sold to a strategic partner, it can only mean the take-over by a foreign financial magnate.

What then is left of the Great Indian Public Sector? Everything is being handed over on a platter to the foreign tycoons and comprador magnets. From the current year the government has been speeding up its disinvestments programme. Within the next three month alone it plans to sell off three PSUs to get Rs 3,900 crores — i.e. to sell 51% in National Fertiliser Ltd. by Sept. 30; 51% in Shipping Cooperaion of India by Oct.7; and 51% in Engineers India Ltd. by Nov.25.

With the TNCs taking over the entire public sector they will gain a vice-like grip on the commanding heights on the economy, and will be able to further consolidate their control over the country.



1. Alternative Economic Survey 1998-2000

2. Update No.3; May 2000

3. Tata Year Book; 2001-02

4. Business Standard; Nov. 29, 2001

5. Update No.3; May 2000

6. Hindustan Times; July 26, 2002

7. Hindustan Times; July 26, 2002



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