Events & Issues

New Delhi, 18 November 2014

Role of Private Sector

MAXIMUM PROFIT ONLY GOAL?

By Dhurjati Mukherjee

Most political and economic analysts talk about the need for more privatization for only then can efficiency be brought into the system. But the record of the private sector in various areas proves that it has very little social and economic responsibility as its only object is maximization of profit at any cost. Whether it is in the realm of health or education or even mining and industry, there are various examples of the private sector violating rules and regulations of the land through unethical practices and manipulation at all levels.

Recently, a division bench of the Bombay High Court slammed private hospitals, stating that they were being run more like businesses than as a service to the people. This was on a public interest litigation (PIL) seeking the discharge of two patients detained by Seven Hills Hospital at Maroi and Prachin Healthcare Multi-specialty Hospital at Panvel over disputed medical bills. There are umpteen such examples of private hospitals and nursing homes across the country reportedly cheating people and minting money taking advantage of their illness.

Both health care and higher education – engineering, medicine and other professional course – have been areas where private sector has entered in a big way and has been making huge profits. The lower middle class – let alone those from economically weaker sections -- cannot get their wards inducted in private colleges and universities due to exorbitant fees or afford treatment in private hospitals.

There is no mechanism to check how many students from the lower echelons of society are admitted into these institutions, most of whom have got land at subsidized rates. These sectors have become safe areas of investment as returns are assured. Moreover, State governments give land at a subsidized price for setting up such institutions and/or hospitals as the companies assure reserving seats/beds for the poor, which is rarely done.           

The very fact that illegal income was made and stashed abroad is a pointer to the fact that the private sector did not do clean business in the country. According to unofficial estimates, this figure comes to around $500 billion, which may be a fourth of our national income. Though the Government has started getting this or even a part of the amount back into the country, it may not be possible due to various constraints. Those who feel that this accumulation has been due to high levels of taxation are wrong, it is because the Indian business community has been unethical and only interested in making money at whatever cost.  

The changing reality of crony capitalism made possible by unethical business approach and politician-business nexus has vitiated the private sector and except, for a few, most analysts believe that though it may be a little more efficient but the overall record of the sector is not worth appreciation. It is also felt that neither do politicians want the sector to do fair business in the country as at all levels the political class want to be rewarded. At the highest national or State levels, it is an open fact that the private sector has always given money to get various types of clearances.            

The mining scam, the 2G spectrum scandal and Coalgate mess are all the result of politician-business bonding. In most States there is such nexus. The Sahara Group’s alleged nexus with the ruling political party in U.P. and that of the Sarada scam with the ruling party in West Bengal is well known. Take the case of the erstwhile Tamil Nadu Chief Minister Jayalalitha, who could amass thousands of crores of assets due to favours extended to the private sector. These are just few of the hundreds of thousands of illegal dealings that take place in each State whereby both the party in power and the business group benefits.         

As is well known, the Supreme Court had tried to clean up the system by cancelling telecom licenses and coal mining leases allotted without adherence to clear principles. Private parties were allotted so that the nation and people could benefit from their early exploitation. While a section used illegal means to get the coal leases, others did not start exploitation in time. It remains to be seen whether the private parties would be honest and adhere to the rules and regulations of the land in carrying out exploration work of our valuable national resources.     

The Government is always ready to help the private industrial sector at all costs as big business houses have enjoyed a huge competitive advantage of being on the inside track and having the network to cut through the labyrinthine licensing and regulatory processes. This has to change as governance becomes more transparent.

Let us take the banking sector. The Reserve Bank of India (RBI) then deputy governor K C Chakrabarty had stated (at the annual bankers’ conference) that banks had sacrificed around Rs one lakh crore by writing off bad loans to corporates which is much higher than Chidambaram’s farm loan waiver in 2008. As Chakrabarty informed: “In the last 13 years, banks have written off Rs 1 lakh crore and 95 per cent of these are bad loans. Everyone talks of the farm loan write-off but it is the medium and large enterprises segment that has a 50 per cent share in NPAs (non performing assets)”.            

Apart from this, the arrest of Bhusan Steel vice chairman and that of chairman & managing director of Syndicate Bank over an alleged bribe of Rs 50 lakh for favour doled out to the steelmaker is again a pointer to the fact that the private sector  is grabbing whatever it can, legally or illegally. The case of Kingfisher Airlines is well known and many politicians and bankers have been beneficiaries as the company received huge loans, which have now become NPAs. There are numerous other such cases in the banking sector but rarely such high-ups are caught and public money is allowed to be squandered for the benefit of the industrial class.        

Doing business honestly and efficiently, following the guidelines has to be the norm of the private sector if it has to play an expanding role in economic development of the country. This is unfortunately not happening at the moment. Reforms do not mean giving everything to the private sector but judiciously scrutinizing the potential and track record of the companies before giving them more opportunities.      

One may conclude with a significant observation by Prof. Romila Thapar, the renowned historian, who aptly pointed out: “The neo-liberal culture and economy cannot easily be changed but its ill-effects can be reduces, provided we are clear that society must be rooted in the rights of citizens to resources, to welfare and to social welfare”. --- INFA

(Copyright, India News and Feature Alliance)