ALONG WITH devaluation and trade liberalisation, the third crucial component of the present package of structural reforms is the new industrial policy. Backed up by the budget and supplementary provisions for small-scale industries, the new policy
- removes licensing requirements for all but 18 industries and also the stigma of ‘monopoly’ from all industrial houses regardless of the level of their assets, thereby allowing a free expansion, growth and operation of Indian big business;
- restricts the exclusive domain of the public sector to eight strategic industries concerning defence, atomic energy, coal, mineral oils, mining and railways and that too with plenty of loopholes for the private sector to make increasing inroads even into this so-called ‘prohibited zone’;
- clears the way for automatic approval of foreign technology agreements and foreign equity participation upto 51% and even more in virtually all but a few industries;
- signals the formal beginning of the privatisation campaign with transfer of 20% public sector shares to private hands and legitimises the indiscriminate closure of ‘unviable’ industries by launching a token renewal and rehabilitation fund for the affected workforce; and
- provides easier and greater avenues for big houses and foreign capital to penetrate into the small sector and take full advantage of its lax labour laws by raising the investment limits for small-scale industries to Rs. 60 lakh and for ancillary and export-oriented units to Rs,75 lakh and allowing 24% target sector equity participation in the small sector.
You may be wondering about our coinage of the phrase, Pepsification. Well we feel in more ways than one, this term gives a more accurate description of the emerging shape of the Indian economy than such conventional terms as privatisation or the jettisoning of the so-called ‘Nehruvian model’. Against the facile, compartmentalised way of viewing the Indian industry in terms of public vs private and domestic vs foreign sectors, Pepsi symbolises the increasingly open and aggressive alliance between Indian big business, foreign multinationals and the state and perhaps we may also note the indirect inclusion of the rising farm lobby.
Consider the sheer contrast between what Pepsi Foods, a food-processing unit located in Punjab and sponsored jointly by PepsiCo International (a US agrobusiness giant), Voltas (a Tata company) and the public sector Punjab Agro Industrial Corporation had committed to achieve during its clearance two years ago and what it has delivered since then.
What Pepsi had promised
The agreement with Pepsi was that while spending just Rs. 37 crore in foreign exchange over 10 years – including capital good, raw materials, technology costs and dividend, – it would earn Rs. 194 crore of foreign exchange through high value-added exports, thereby bringing scarce foreign exchange to the country and providing a profitable commercial outlet for the Punjab farmer. Half of its turnover would be exported and 80% of its exports would come from its own plants.
What Pepsi has delivered
Since inception, Pepsi has shown a threefold rise in its project cost. Complaining of all sorts of teething troubles, it has secured loans from the parent PepsiCo International, which are now to be converted into additional equity for the parent firm. The entire exports claimed by Pepsi-rice, fish and tea, apart from being traditional items that certainly do not need a multinational to export them – are proxy exports. While no advanced food-processing research is going on in its plants, Pepsi has already cornered a good share of the domestic soft drinks and potato chips market with imported know how. And the Punjab farmer is now left at the mercy of Pepsi, for the kind of tomatoes he has started growing according torts specifications are difficult to market elsewhere in India.
We have singled out Pepsi, whose arrival two years ago was a clear indication of the Indian industrial policy completing a full circle since the throwing out of Coca Cola in the late 70s, only as the most striking symbol of our ‘new industrial order’. Like Maruti, Pepsi is also a telling example of the guiding role played historically by the Indian public sector in fashioning new alliances with foreign capital and technology. This is in perfect continuation of the ‘commanding role’ played by the public sector in propping up the private sector with infrastructure, subsidised raw materials and intermediate goods, and by providing the bulk of share capital and cheap credit.
Pepsi also brings out the true pattern of Indian industrialisation catering to the booming market of the emerging middle class. And, of course, Pepsi brutally explodes the myth of export-led growth and foreign investment in selected high-priority areas. As the chart (in the matter caption ‘High Technology’ of Imperialism!) shows, it has joined the long list of multinationals in India which with meagre investment largely in the consumer goods sector have year after year siphoned off huge quantities of precious Indian resources through all sorts of channels.
Box
‘Privatisation’ Begins at Home
THE ‘private’ vs ‘public’ debate is back. But while on earlier occasions, it used to be for or against nationalisation of sick private enterprises, now the agenda is privatisation of healthy public sector units. Or only ‘partial disinvestment of the share capital of selected public sector concerns to the broad investing public’, as the finance minister puts it.
However, in India, this has always been more of a false debate hinged around unfounded assumptions. Historically, the Tatas and Birlas with their ‘pioneering’ Bombay Plan have been among the first to articulate the need for an extensive public sector to provide infrastructural support and key inputs to private industrialists. Nehru and Indira Gandhi draped this bars economic reality with the colourful camouflages of ‘socialistic pattern of society’ entirely to suit their own political convenience.
A second and more basic point is that the public sector occupying the so-called ‘commanding heights of the economy’ here has been anything but public. A more appropriate term for it would be state sector, for barring a few exceptions the public sector in India is hardly distinguishable from the rest of governmental bureaucracy with all its characteristic features of ad-hocism and arbitrariness, delay and wastage. The private sector too is a misnomer. It is a sector which is generally controlled on narrow family lines and operates within the feudal framework of authority, but in terms of share capital and credit inflow, there is very little private about it. The contribution of the controlling families generally amounts to only around 5 to 10 per cent, while the ‘public sector’ financial institutions and banks have an average stake of not less than 50 per cent. In fact, had the government’s intention been just to raise funds through disinvestment, the more profitable ‘private sector’ shares should have been the most ideal candidates.
The plea that privatisation would promote efficiency is a big black joke. Inefficient and corrupt management is identified as the key factor behind the ailment of at least 75% of over two lakh sick units in the private sector. The real game plan behind the privatisation campaign is one of hitting two birds with one stone – transferring massive assets built with decades of public money and labour to the private empire of big business and tightening the screws still harder on the Indian workers.
This gameplan cannot be countered on the old plank of ‘public sector zindabad’. The legacy of arbitrary bureaucratic control over the public sector must go. The point is to take the battle right into the enemy’s camp and fight for a greater public control and workers’ say in industrial ownership, management and policy-making and bringing about a modem democratic industrial culture in place of the present family-controlled and bureaucratic set-up. In the face of the ongoing onslaught of capital, the Left trade union movement must also pay increasing attention to the emerging agenda of ‘privatising the private sector’.
