Public Sector Got Raw Deal From Budget

By Binoy Viswam

The maiden budget of Nirmala Sitharaman could be rightly called as the manifesto of Modinomics for the coming five years. In her budget speech which lasted for more than two hours she was trying to present the growth trajectory of the NDA government. In unequivocal terms, she made it clear that for development, it would be private investment to play the prime role. Hyper nationalism of the Sangh Parivar has no hesitation to sing praises for foreign capital, in the form of FDI. The economy is surrogated to serve big capital from around the world. In the political economy of the right reactionary government, agrarian crisis is not a matter of concern. Same is the case with unemployment.

Public sector which was once considered as the back bone of Indian economy, and the biggest provider of employment opportunities would no longer be supported by the government. Most of them have already enlisted for disinvestment. Right from railways to retail sector, FDI may now dictate the terms. The government says all these are meant for making India a five trillion economy (One trillion = One lakh crore). ‘Ease of doing Business’ would be their mantra. In order to facilitate this, the government is bent to undertake labour law reforms as one of its priorities. In the budget speech a special paragraph was included to proclaim this commitment. These labour law reforms are nothing but attempt to snatch away the workers’ rights and to place them at the mercy of capital.

Hypocrisy of the government and the hollowness of their tall claims was visible in the whole budget exercise. It was more explicit in the references to banking sector. They boast that as part of building a robust economy, they have cleansed the banking system. If one is to blindly believe the finance minister the insoluble problem of NPA has been miraculously solved by the Modi government.

In her budget speech as well as in the replies to the debates in both houses of the Parliament she emphasized on this ‘meticulous’ achievements. The Finance Minister stated in Rajya Sabha, “…it is the duty of the government to ensure that the banks or the affected companies or assets are reviewed, and solution is given in such a way that the problem of NPA is judicially resolved”. She further states that “So, the four-R strategy of resolution, recovery value from stressed accounts, recapitalization, and reforms of the PSBs has resulted in a great deal of easing of the NPA situation”.

Like magicians they came and wonders they made! If we look into the inner stories of this magic, one would understand the truth behind it. In fact, the epidemic of NPA was eating away the vitals of the banking sector since long. It was the people’s money deposited in banks which was taken away by the corporates with the connivance of top brass in government and banking itself. No wonder, it has come up to the tune of five lakh crores in the course of time. The political chieftains were never serious in addressing this serious threat. They were afraid of even publishing the names of the willful defaulters who are close to them in many ways. The very same government and the banks chase the poor peasants for recovery of loans. It was in this background the government came with the Insolvency and Bankruptcy Code (IBC) in order to ‘save’ the banks and economy from disaster! (Code is the beautiful word now the Modi Government uses to cover its ulterior motives!)

The magic wagon of Insolvency and Bankruptcy Code was never intended to resolve the crisis that has engulfed the financial sector. It’s only an eyewash to help the looters of the public money in the financial institutions. Bank Employees Movement and the left parties since long have been demanding the recovery of bad loans. If the government was politically sincere and courageous enough to do that it could have mobilized huge money for the country’s development. It would have strengthened the economy and would have helped the government to address serious issues like agrarian crisis, malnutrition etc. But the government believes only in talking about Sabka Sath, Sabka Vikas, (and lately) Sabka Viswas. The primary concern of the government is to be with the corporate looters, to pave path for their development and to reconfirm their trust.

The strategy adopted by Modi government to overcome the NPA issue speaks about it. Just have a look at the following instances: In the case of Bhushan Steels, the loan outstanding referred to NCLT was Rs. 56,000 crores. Tatas have taken over this Company for Rs. 35,200 crores. Thus, one NPA account is resolved. So, the result is Neeraj Singhal of Bhushan Steel is free from the entire loan liability and Tatas have gained by getting the Company worth Rs. 56,000 crores for Rs. 35,000 crores. But Banks have lost Rs. 21,000 crores. It is a haircut of nearly 40 percent. Then came the Electrosteel Steels deal. The dues to the Banks were Rs. 13,600 crores. Sterlite fame Vedanta has purchased it for Rs. 5,320 crores. In this deal Anil Agarwal gained 8,400 crores and the Banks sacrificed Rs. 8,400 crores. Here the haircut is 60 per cent . Next in the series is the Alok Industry deal. The Company owed to the Banks Rs. 30,000 crores. Reliance takes over the company for Rs. 5,000 crores and Ambani gains Rs. 25,000 crores. Banks sacrifice Rs. 25,000 crores and the haircut in this case is 83 percent (Source: Documents released by AIBEA).

While replying to the budget debates in Rajya Sabha, finance minister gleefully talked about the amount ‘recovered ‘by the bank. But she decided to keep mum about the amount which was sacrificed by the banks for this great recovery. The total gross profits of all the 20 Public Sector Banks for the year ended on March 31, 2019 is Rs. 149,804 crores. But amount provided for bad loans and other contingencies was Rs. 2,16,410 crores. There arises the question that who will be answerable for the net loss, Rs. 66,606 crores, suffered by the banks. Of course, it is an unpleasant question, difficult for the government to answer. Hence the government opted to come out with those figures which would help them to create an impression that something great has been achieved.

There exists a gap which cannot be overlooked, between the claim of the government and the facts of the matter. The finance minister, as part of her political obligation, painted a rosy picture of the NPA recovery adventures made by the government. In order to fulfill that political task, she misled the Parliament and the people and denied their right to know the truth. This author has given a privilege motion in Rajya Sabha on this issue. The rules and regulations and their interpretation will decide the fate of that motion. Whatever may be its outcome, people do have the right to know and discuss such critical facts that are related to the health of the economy and wellbeing of society. (IPA Service)