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The silence of Dr Singh

It would be easy to accuse the Opposition of being so many frogs in a small pond when they oppose the privatisation of BALCO. I hear cries of 'Don't they know that it is a case of 'reform or perish'?' I believe the criticism is unwarranted. The leaders of the Opposition are not being blind (deliberately or otherwise); no, they are desperately trying to pull wool over our eyes.

There is, if you ask me, only one real scandal where the privatisation of BALCO is concerned. I am horrified that it has taken so long for common-sense to prevail. Why wasn't privatising BALCO set in motion half a decade ago? That this didn't happen is the true reproach.

For the record, privatising BALCO was put on the agenda back in 1997. The government of the day, as you probably recall, was not one in which the Bharatiya Janata Party was a participant. It was a United Front ministry, one backed by both the Congress and the CPI-M. Sadly, cowardice -- or was it the continuous political turmoil -- prevailed over economic wisdom. Given this history, neither the Congress party nor the Marxists are well-placed to oppose privatisation per se. And, to give credit where it is due, the Congress is not doing so; instead, Sonia Gandhi's troop is content to chant 'sell-out!'.

But where, my friends, is the sell-out? What methodology proves that anyone could have procured a better deal in the circumstances? Yes, it might have been possible to obtain a better deal some years ago, but that is your fault, not that of the National Democratic Alliance ministry! Why did you wait until BALCO's relative position had slipped so much?

But the Opposition has raised the bogey of a sell-out, of 'selling the family silver' and so on. So let us examine these accusations, shall we?

The first charge is that BALCO is being 'sold for a song'. Since Sterlite is prepared to pay Rs 551.50 crore, that must be very expensive music! Need I point out that the only other bid was for Rs 275 crore by the Birla-owned Hindalco? By the way, the government has cheerfully agreed to scrap the deal with Sterlite if anyone comes up with a better offer...

The confusion, deliberate I am sure, arises over the Opposition dextrously muddling up two things: the price being paid by Sterlite and BALCO's aggregate value. Much of BALCO's so-called 'assets' are in the form of land. Under Indian law this value can never be realised since the land can't be sold off.

How about other assets such as machinery? Well, BALCO, which has been stagnating for the past five years, actually needs an infusion of money to invest in modern technology. (While technically profitable, BALCO has just about managed to break even in the last couple of years.) Does any government -- whether the Union government or the Congress ministry in Chhatisgarh -- have enough funds to invest in BALCO?

(Permit me a minor digression. I understand that Chattisgarh Chief Minister Ajit Jogi has threatened to cancel certain mine deals with BALCO. This is a foolish statement, both because the Union government could overrule him and because it sends the wrong message to potential investment in the state. I would wager that the chief minister is speaking under compulsion from Sonia Gandhi!)

Let us get back to that charge of BALCO being 'under-valued'. Asset valuation is only one of the four standard methods. (Nor, for the reasons given above, is it necessarily the most accurate.) The other three that are in common use are discounted cash flow, the trading multiples of comparable firms, and the multiples paid in previous transactions.

Given all this, we must ask Congressmen why their leaders in Parliament are raising such a ruckus about BALCO's assets. It is perfectly possible, we might inform them, to have plenty of 'assets' which will not, however, prevent a company from sliding into bankruptcy. If you don't believe that, look no farther than the once-booming textile mills in Bombay; they are sitting on thousands of crores worth of prime real estate but there is no ready cash to run the business.

Or, come to that, look again at BALCO itself. In 1996, it made a profit of Rs 163 crore; by the year 2000, profits amounted to only Rs 25 crore. What was the use of all those assets?

One can easily conjecture that it will not take too long before BALCO slides entirely into the red. Given the Opposition's vehement declarations about selling off a profit-making public sector undertaking, I suppose these people think it is better to wait until profits turn into losses! Of course, by then it might be difficult to find anyone who shall pay Rs 551.50 crore for the firm. Or even Rs 275 crore...

Let us return to where we started. Why is the Opposition being so mulish about BALCO, preferring to stall Parliament rather than accept the government's offer of a debate? I can think of several reasons.

First, the leaders of the Congress, the Marxists, and so on are genuinely stupid when it comes to economics. Second, they know the facts but will make the country pay for the pleasure of throwing mud at the Bharatiya Janata Party and its allies. Third, they genuinely abhor the implications of reform -- such as diminished patronage, for instance. Whatever the reason, there is nothing that does not put them all in a very poor light.

Oh yes, there is one final thing. Dr Manmohan Singh is often called both the architect of liberalisation and the conscience of the Congress. Why is Dr Singh so careful to keep his mouth shut today? Why isn't he joining in the condemnation of the government?

T V R Shenoy