The losses suffered by various sectors like telecom, oil and gas and aviation make it clear that there’s more to the crisis than meets the eye. While the private sector must thrive, it must not come at the cost of stifling the public sector
Air pollution, farmer’s issues and oil and job crises have put the nation at risk. The US’ nonchalant response has added to India’s economic concern. Coming close on the heels of America’s withdrawal of zero duty import benefit, its decision to re-impose oil-related sanctions on Iran has hurt us all the more. This move will exert maximum pressure on Iran to follow the US’ dictates on nuclear issues. The Donald Trump administration pulled out of the landmark 2015 nuclear deal in May 2018.
The move has hurt India the most as Iran is its fourth-largest supplier of oil after Iraq and Saudi Arabia. Iran supplied 23.5 million tonnes of crude oil in 2018-19 at a price and credit facilities that no other suppliers offer.
India relies more than 80 per cent on imports to meet its oil and 40 per cent of its gas needs. On the other hand, domestic production has declined in the last few years. The price of Indian basket — a combination of Dubai, Oman and Brent crude — has been rising. The US move will further increase oil prices and, thus, lead to severe inflationary situation.
The decision should also be looked at against the background of Saudi Aramco’s (world’s largest crude oil producer) bid to acquire 25 per cent stake in Reliance Industries’ refining and petrochemicals businesses. The stake sale may fetch $10.5 billion to debt-ridden Reliance. This step will not only hamper India’s progress towards petroleum self-sufficiency but also lead to high cost of repatriation of profits at a time when the country is striving to maintain its balance of payments. Indian refiners are over-dependent on OPEC, Mexico and even the US. In short, America’s move is designed to benefit itself. The Indian diplomacy of hugging foreign dignitaries has not helped.
The grounding of the Jet Airways and the deepening crisis of Air India have further impacted the economy. Air fares are shooting up at a time when the Indian railways, despite efforts, is not performing at its best. The cost of travel and goods transportation has shot up. Even international travel is bleeding the airlines due to Pakistan’s ban on its airspace.
The licence for international travel now remains blocked with Jet. Further, Air India has not been able to use it for its sickness. The Jet is a classic case. It proves that seemingly thriving organisations may be in the throes of a crisis. BSNL, the official telecommunication backbone of the country, is losing on its clientele because of poor services and heavy losses.
The management has made it clear that it does not have the cash flow to pay salaries to 1.68 lakh employees. A sick BSNL, with accumulated losses of more than Rs 90,000 crore, according to Kotak Equities, may end the affordable communication and digital boom that the country has seen.
Private companies were forced to be provided by all successive Governments, be it the Congress or others, by BSNL. It is a folly of Manmohanomics that forced public sector giants to go into the red for the benefit of private capital.
Another classic case is that of the international oil giant, ONGC. This public sector enterprise was developed in the 1950s as a key to India’s energy security. Successive Congress regimes since 1990s chipped away at the company in favour of private businesses, to dig into profitable oil and gas sector. In 1992-93, 28 prime oil and gas fields were discovered and developed by ONGC. Despite protests from think-tanks like the Planning Commission, they were given away to private firms for a pittance.
In 1991, the Government forced ONGC to take a loan of $450 million from the World Bank, which told ONGC and Oil India to go into joint ventures with private and foreign capital, an unnecessary condition. This was just the beginning. In between, a private company virtually drilled out gas from ONGC’s field. Litigation, too, did not help ONGC. Further, it was forced to shell out a sum of Rs 8,000 crore to bail out loss-making Gujarat State Petroleum Corporation so as to exit the Krishna Godavari basin in 2016. The GSPC could not find gas in its fields and the losses were dumped on ONGC. The Ministry of Petroleum and Natural Gas tried to push ONGC to sell 60 per cent stake in its oil and gas fields. However, the tough stance of the company saved it. The cash balance of ONGC came to a critical low in 2018 and was reduced by 90 per cent in a year. It is now under a huge debt.
Even Ruia’s Essar deal with Russia’s Rosneft is stated to have caused severe losses to ONGC. Essar sold its 20 million tonne refinery to Rosneft at a high price of $12.9 billion, stated to be the single largest Russian investment in the world, including acquisition of Gujarat’s Vadinar port for $2 billion.
The deal is peculiar. Prior to this, ONGC-IOC-BPCL signed for the purchase of Russia’s Vankor oilfield at an exaggerated price despite its falling production. A fellow with Russia and Eurasia programme at a policy-based institute is quoted to have remarked that the Indian purchase looked very unusual for Russian observers because the buyers definitely overpaid while the purchase was done in a period of US sanctions.
ONGC Videsh sought renegotiations in 2016 but ended up paying an unprecedented interest payment. So, if India is losing jobs, its public sector is collapsing and private sector is “thriving.” There more to this than meets the eye. The telecom, oil, aircraft manufacturing and other works done by the public sector profitably are under threat. Questions on the closure of HMT were also raised instead of strengthening its operations. Its exit has helped watch manufacturing and other tool and instrumentation companies, once rivals of HMT.
There is nothing wrong in the rise of the private sector. But should this come at the cost of manipulating losses to the public sector? Private gain is not an eyesore but the process takes the wealth of the people to some chosen hands, may be in a particular region. Is the public sector really faltering or is it that the private sector is being made to thrive at its cost, particularly since 1992?
(The writer is a senior journalist)
