State Govt.’s Entanglement

When Lenin said that imperialism means domination and not liaises faire tolerance of the local bourgeoisie, little did he realize the extent to which it could reach in this period of ‘globalisation’. Due to lack of a significant opposition in India they are attacking from all fronts. The imperialists while focusing on the Central government have also been tightening their hold over the State governments independently. Weaker than the Central government and starved for resources by it, they become easy prey for the TNCs and the multilateral agencies.

Here too there is a two-pronged attack, not to speak of the pressures exerted by independent TNCs, like the Enron affair. One line of attack is from Davos, or as it is known the World Economic Forum — a conclave of the most evil on this earth, comprising top business, top politicians and top bureaucrats from the major countries of the world. Here lies the real ‘axis of evil’. They have floated, what is called the Global Investors’ Meet (GIM) in various states, targeting one at a time, beginning from Karnataka in 2000. The second line of attack is from the IMF/World Bank combine. The World Bank, for the first time ever began giving Structural Adjustment loans to State governments, starting with the test case of Andhra Pradesh. The World Bank has been giving loans for various projects to the state governments, which are, of course packaged with its conditionalities. In August 2002, the Congress(I) government in Punjab signed a gigantic $1 billion deal with the International Financial Consortium, a New York-based funding agency, for several schemes. The terms of the agreement have been kept secret, but as part of the deal includes a grant, one can assume that through it, the CM, Amrinder Singh, has handed over Punjab’s rich agricultural resources to US agri-business.

As most welfare measures are state subjects, it is these that have come under major attack by the imperialists. Privatization of electricity and removal of its huge subsidy is one of the key areas of State ‘reforms’. The others are privatization of water and health and increase user charges in both public spheres. Also the privatization of education and the increase in fees is another important sphere of ‘reform’.

Let us look at each of these separately. Regarding the social impact, we shall deal with that in a later Chapter.

i) Davos & GIM

It was in June 2000 that the first GIM meet was organized in Karnataka after the Congress(I) chief minister, Krishna, attended the Davos meet. There, India’s top business houses, NRIs, and big bosses of the TNCs conspired for holding the first such meet in Bangalore.

The Karnataka government agreed to pay Rs 5 crores for publicity for the GIM. The man that bagged the contract was Arthur Anderson, owner of the US accountancy company that goes by his name, and the chief accused in the Enron scandal.

On their part the Chief Minister, Industries Minister RV Deshpande and a select coterie of bureaucrats such as VP Baligar, N Sriraman, BS Patil and Vishwanath flew to and from Mumbai, Calcutta, Chennai, Kuala Lumpur, Singapore, London, Sydney, Tokyo, Toronto, Dubai, and New York meeting Indian and Asian compradors as well as managing brief interviews with the directors of imperialist companies. RV Deshpande later revealed that Rs 5 crores was spent for these jaunts. The government sent 2,000 invitations worldwide. 462 delegates, 32 diplomats and 260 invitees finally turned up for the GIM.

After the three-week jamboree, the Karnataka government bagged Rs 25,242.3 crores in proposals from TNCs. Figures provided by the Directorate of Industries and Commerce state that this amount was to generate employment for 34,770 people. This amounts to an average of Rs 72 lakhs investment per job. If the actual investment is taken as Rs 12,000 crores, (i.e. 40% of the proposals, which was the ratio earlier) the total number of jobs this is going to really create is 16,560.

Unemployment in Karnataka at the beginning of the millennium stood at 40 lakhs. The employment this windfall of investment is likely to generate only scratches the surface……… a mere 0.4%. But for the moneybags it was a resounding success and so it was decided to repeat such a meeting and also hold them in other States. Since then, similar meetings were held in Maharashtra, and more recently in Kerala.

Finance Ministry’s Report, External Assistance 1997-98, discloses that external funds to States have almost doubled, from 31.4% of total external aid in 1990/91 to 60% in 1997/98. The maximum increases have been in three State : A.P.’s shar increase from 2.8% of the total to 9.8% in that period; Maharashtra from 3.4% to 7.6%; and not very surprisingly the State run by the hypocritical CPM, West Bengal, which increased from 1% to 6.6%. Between 1997 and 1999 Andhra Pradesh got more loans from the World Bank than the Centre.(Alternative Economic Survey, 1998-2000)

No doubt the IMF/WB chose Andhra Pradesh as the first test case of State-level Structural Adjustment loans, for the added fact that the imperialists fear the powerful Maoist movement there and seek to kill it with a combination of terror and economic doles. The Naidu/Advani gang provides the terror, while the IMF/WB provides the doles, and of course, much advice. Both work in close coordination to make A.P. ‘safe’ for the vast flows of global capital expected.

With Naidu’s rise to office for the second term, the second phase of reforms was launched. The first phase of reforms began with the World Bank inspired "White Papers" on vital aspects of the State’s economy and an "Agenda for Economic Reforms". The reforms were operational through the "Andhra Pradesh Economic Restructuring Programme" (APERP), funded substantially by the World Bank (WB). In return for this loan it lay down a number of stipulations for the period 1999 to 2003, the most vicious being: reduce employment in the state government by 1.9% per year and to increase irrigation charges to at least 90% of cost by March 2001.

Soon after the APERP the Naidu government came out with their notorious Vision 2020 document in Jan.1999. This was nothing but promotional trash seeking to create a false picture of a future utopia if the APERP is implemented. This was followed by the second phase of reforms initiated through a series of "Working Papers", each covering a major sector of the state and each produced by a cabinet sub-committee, to supposedly translate the Vision 2000 into reality. One of these 16 "Papers" deals with agriculture. So, what does this propose?

While accepting that agricultural growth is in decline in the 1990s, its solution it says lies not in land reforms (which the Paper considers as outdated), but in ‘privatisation of agricultural services’, through ‘organised farming’ and through ‘corporate farming’. It therefore demands to undo the existing land ceiling and tenancy legislation. It aims at the "twin goals of value addition and export-oriented agriculture". To encourage investment in large-scale farming, agriculture would be treated on par with industry. The Paper says that the Privatization of agricultural services entails: further reduction of public investment; winding up of the entire cadre of agricultural extension officers; further promotion of private trade in seeds, fertilizers and pesticides; hiring of agricultural machinery through NGOs, corporate sector and others; and even soil survey, soil conservation, etc. to be done through the private sector.

In other words this is nothing but a Vision for the massacre of the vast poor and marginal farmers of AP, and is nothing but a blueprint for promotion of agri-business for the big corporate houses and TNCs. No wonder to implement this big-business charter, they must crush the CPI(ML)(PW) which has an extensive hold on the vast countryside. Ironically the Vision statement came at the same time as the reports of the large number of suicide deaths in rural AP.

In February 2002 the World Bank imposed its real dose of horrifying conditionalities in exchange for a Rs 1,670 crore loan. Though it has ten demands in all, it calls for a huge cut in subsidies and grant, amounting to as much as Rs 694 crores in just the current year of 2002-03. No wonder the signing of this agreement went on simultaneously with the big propaganda of the government calling for the PW to bring peace and give up armed struggle. With such a massive attack on the people’s already worsened living conditions, the rulers and their foreign bosses know, that mass revolt is likely — if peaceful, it can be easily contained (like that against the electricity charges), but if led by the PW it could get out of hand.

In effect the WB conditionalities imply that the AP government has committed itself to the World Bank to enforce immediately a heavy reduction in the subsidy on rice, increasing the rates of providing water for irrigation purposes and cutting down on salaries of government employees and laying off a large contingent of government employees. From a longer term perspective the government has agreed to systematically reduce subsidies for power and rice over the next three years, and fully do away with the subsidy on power after 2005 and reduce the subsidy on rice to one-fourth its present. This will entail a massive increase in burden on the masses of roughly Rs 3100 crores through extra payments on power and rice over the next three years — i.e. each family will have to pay an extra Rs 2,400 per year, or Rs 200 per month!!

Such then are the type of agreements being signed by state governments with the World Bank. Though AP is neck-deep in its grip, most State governments are following their conditionalities, like cutting down on subsidies, reducing the number of government employees and increasing expenditure on roads and communications. So, for example the UP government has reduced its budgetary expenditure in 2001-02 on irrigation, flood control and capital projects to just 3.6% of its total expenditure. It has reduced Plan expenditure on irrigation and flood control for the Ninth Plan by half compared to the Eighth Plan. At present more is spent on the police than on irrigation and flood control.

Besides these controls we see TNCs directly influencing policies of State governments to suit their interests. The best example of this was Enron in Maharashtra, where two state governments — the then Congress(I) government led by Sharad Pawar and, later, the Shiv Sena government — signed humiliating agreements to pay electricity at such rates that would have resulted in the State government going totally bankrupt, or the masses having to pay 4-times the existing rate for electricity. This is only one example that has come to light; numerous others exist in most States, some are kept secret, others are open.

So, we find that every State government is getting entangled in a deadly network of relations with foreign finance capital, which will add to the further impoverisation of the masses and futher infringement of the sovereignty of the country.

iii) Dismantling of SEBs

From the very start of liberalization the IMF/WB combine has been putting enormous pressure on both the Central and State governments for the privatization of the State Electricity Boards (SEBs) which they claim are subsidising electricity to the tune of Rs 25,000 crores each year. Here, the big energy giants, like the once-was Enron, sees a gigantic market. But the rates they demand are so high, that, if implemented, the urban consumer will have to pay 3 to 4 times the existing rates, while the farmer may have to pay up to ten times the subidised rate they are now paying. So, for example, while the MSEB (Maharashtra State Electricity Board) is purchasing electricity for Mumbai at just over Rs 2 per unit from its own power plants and the Tatas, Enron was to charge them Rs 8 per unit.

That the pace of this privatization has been slow is for a number of factors: First has been the people’s opposition (as witnessed in AP) and of the employees (particularly in UP); second, has been the opposition of a section of the entrenched bureaucracy that was milking this sector; third, from a section of business and landlord sections involved in major power thefts, or who demand cheap power as power would be their chief cost of production. Anyhow, the governments at both the Central and State levels are hell-bent on pushing through the privatization of the SEBs. To facilitate this the Central government passed the most sweeping Electricity Bill 2000.

But well before this, the Orissa Electricity Board was dismantled and sold to an American company. Other Boards have proceeded step-wise (seeing the failure of the Orissa experience) in it privatization, as in AP, Haryana, the attempts in UP and now in Delhi. Even the Marxist-mouthing West Bengal government was one of the first to start the process of the privatization of its Electricity Board, which had also been strongly opposed by its employees.

These changes were facilitated by the 1991 New Power Policy, which was one of the key demands of the World Bank’s structural adjustment loan conditionalities. The GoI announced a number of wide ranging policy measures that ‘liberalised’ the power sector in order to facilitate private/foreign investment. To facilitate this the Indian Electricity Act 1910 and the Electricity (Supply) Act 1948 was amended. Immediately the government allowed foreign investors upto 100% ownership of power projects; with a return of minimum of 16% being assured on the capital invested.

With this the Orissa Board was dismantled and sold piecemeal to the American TNC, AES. In West Bengal the vertically integrated structure was changed to the formation of separate companies for generation, transmission and distribution (i.e. bowing to a major World Bank recommendation), and opening up these independent corporations for entry of private capital. So the West Bengal government entered into an agreement with Japan for the Teesta Canal Fall project, the Purulia Pump storage scheme and the Bakreswar thermal power project. The British TNC, Rolls Royce, has been collaborating with the West Bengal government for the Balagarh and Budge thermal power stations. These were just a few of the numerous steps taken by the CPM govt. to open up the power sector. In this they have not lagged behind any of the other State government; on the contrary, they have acted as their ‘vanguard’. In AP too the Board was dismantled and independent bodies were set up for transmission and distribution. The Transco and the AP Electric Regulatory Commission were set up and prices were immediately hiked by as much as Rs 1,100 crores in late 2000, resulting in a massive agitation and the killing of three in police firing. In UP when the Kanpur board was sought to be privatized, the massive militant upsurge of UP’s 90,000 employees resulted in the arrest if over 11,000, before the agitation could be curbed.

The Electricity Bill 2000 put the seal on the process of privatization of the SEBs. The power sector was intended to be made free for all, answerable to none, and the role of the State reduced to that of a helpless spectator. The salient features of the Bill are: The SEBs will have to act as a business organization; Transmission Companies under the Companies Act, 1956 in vogue, will be reconstituted through public and private investment for generation and transmission of power from different Generating Companies; Transmission companies will enter into agreement with Area Distributor/Distributor/Subsidiary/Associate/Purchaser/Retailer for transmission and distribution of power. The latter may also enter into sub-contract with any individual or group of individuals for distribution of power to the end consumers; An Electricity Regulatory Commission (Centre/State) will take policy decisions regarding fixing of tariff/fuel surcharge/cess, taking the reasonable profit element, at every level, into consideration; Before dismemberment of the SEBs, the respective States will constitute ‘Corporations’ (Generation/Transmission/Distribution) registered under the Companies Act, 1956. TRANSCO will come up as the main company; after the unbundling of the SEBs, all their assets will vest with the State Government., and the state government in turn will hand over the assets to the respective stakeholders in accordance with the sale deeds. The liabilities of the erstwhile SEBs including the terminal benefits of their employees will be met from the sale value of the assets thus received by the government; employees are not entitled to prefer any suit against the Government/Stake Holder/SEB for any relief or compensation for such transfer in any court; The consumers will have to enter into fresh agreement, with the distributor of power, at their own cost; and so on.

This Bill is a virtual Charter to hand over all aspects of electricity business to the moneybags — from being a service to the public, it is now turned into a profit-making machine which will cause untold hardships for the crores and crores of people eking out an existence. It will badly hit not only the poor, who may just cut off their connection, but also the vast middle and even rich peasants in the rural areas and the middle-classes in the urban areas.