People's Democracy(Weekly Organ of the Communist Party of India (Marxist)
April 29, 2001
Another BALCO in the Making
To Oppose Privatisation
NFL Workers For Two Days Strike
Swadesh Dev Roye
TO stall the retrograde move of the BJP-led NDA government to privatise the National Fertilizers Limited (NFL) through strategic disinvestment of a 51 per cent share along with transfer of complete management authority to the private party, the entire workforce of the NFL observed a total strike on March 30, all over the company. Unfortunately, ignoring the protest of the workers, the government is desperately going ahead with its sinister move. In this situation the NFL workers have decided to intensify the struggle and fight back the design to hand over this national asset to the private sector. To this end the NFL workers have decided to go for two days strike throughout the company on April 25-26.
It may be recalled that the Union Cabinet Committee on Disinvestment has approved the disinvestment of the 51 per cent equity held by the government of India in National Fertilizers Limited to a strategic buyer, along with transfer of management control. In pursuance of this said decision the ministry is taking steps to sell the equity.
This is to be the first case of the complete privatisation of a major public sector fertilizer company. It is important to understand the actual reasons behind targeting the NFL. Its excellent performance apart, this public sector giant has numerous inherent commercial advantages. The NFL has five units, one each at Nangal, Bhatinda, Panipat and Vijaipur-I and Vijaipur-II, with a total installed annual production capacity of 28.05 lack MTs of urea and 3.18 lack MTs of CAN and a wide range of industrial products. It is the largest urea producing public sector undertaking with a share of 13.0 per cent of the total installed capacity in the country. NFL plants are located in the states of Punjab, Haryana and MP. Now these states together constitute half of the total urea market in the country.
If considered from agronomy point of view, land under food-grain, (mainly wheat and paddy) cultivation consumes large doses of urea. The three states where NFL plants are located make the largest contribution to the countrys food-grain production. Further, a third of NFLs markets are not exposed to the vagaries of the Indian monsoon.
Noting the strong commercial potentials of the fertilizer giant even the Disinvestment Commission have had to say,
"NFLs plants have been set up in the seventies and are well depreciated. As a consequence, NFL is competitive even compared to gas-based fuel plants. In the event of decontrol, the company would not face any major threats from imports as the location of consumers deep in the hinterland would result in high freight cost, thus giving a degree of protection."
EXCELLENT TRACK RECORD
NFLs contribution to the exchequer through dividends, taxes, excise duty, etc, between the period 1983-84 to 1998-99, has been to the tune of Rs 1,17,100.6 lakh. NFLs total contribution to the exchequer in the last 14 years has increased manifold and the company has paid back to the exchequer approximately two and a half times its equity during this period. The accumulated reserves of the company are of the order of Rs 876.5 crore against a paid-up capital of Rs 490.6 crore In the matter of return on net-worth, the Vijaipur-I plant of the company has an excellent a peak record of 29.6 per cent with a capacity utilisation of 118.0 per cent. The value added per employee has been increasing continuously. From Rs 2.68 lakhs in 1981-82, it has climbed to Rs 12.35 lakh in 1998-99.
The efficiency attained in the matter of cost of production by NFL is far better than the private sector. It may be mentioned that cost of production, the retention price and the amount of subsidy outgo are inter-related. Now the retention price of the Natural Gas (NG) based NFLs Vijaipur plant-I is Rs 4,998.00 per mt of urea and that of the Vijaipur-II is Rs 6,207.00 per mt of urea. On the other hand, the per mt urea retention price of some of the NG based private sector plants are as follows: Chambal Fertilizers Rs 7,345.00, Tata Chemicals (Babrala) Rs 7,534.00, Nagarjuna: Kakinada I & II Rs 7,242.00 and Rs 9,579.00 respectively. Thus these private sector plants are drawing much more than the NFL plants from the government on account of retention price.
WORLD BANK PRESCRIPTION
It is very pertinent to take note of the fact that the very concept of `strategic disinvestment originate from the World Bank. In one of its `Research Report the World Bank has prescribed that: "If potential buyers cannot otherwise raise the funds, the enterprise can be sold in trenches (passing management control immediately to private, allowing them time to raise the funds to buy out the rest of the shares gradually) .with freedom to hire and fire, which is an important factor in successful management contracts."
The recommendations of the Disinvestment Commission (DC) have been formulated in the light of the above prescription of the World Bank. The "strategic sale of share" as defined by the DC "implies sales of a substantial block of government holdings to a single party which will acquire substantial equity holding of upto 50% .). Elaborating the concept further the DC noted: (report of the DC Vol 1, page 38) "At that time (strategic sale) there will also be an agreement with such strategic partner that at a later date, within a stipulated period, government will disinvest its balance holding" (ibid Vol.IV page 6).
Thus, the government decision to sell out 51per cent equity of NFL to a strategic buyer with complete management control (as has been done in the case of BALCO) is in strict compliance with the World Bank prescription. That the governments aim is full privatisation of NFL is evident from the recommendation of the DC: "After the induction of a strategic buyer and completion of ongoing modernisation programmes, government could eventually disinvest its balance holding in NFL."
PIVOTAL ROLE OF FERTILIZERS
Todays world-class fertilizer industry in the country with as high as 85 per cent self-sufficiency self-reliance in urea production, is the contribution of the public sector. From a humble beginning, today India is the third largest fertilizer producer in the world with an installed capacity of 192.92 lakh mt of urea per annum. Consequent upon the dangerous shift in the public sector policy, the private sector started making inroads into the fertiliser industry also. With the total policy support from the successive central governments the private sector has been tightening its grip over the fertilizer industry.
Now if both the retrograde decisions to privatise the NFL and to close down the plants of the Fertilizer Corporation of India (FCI) and the Hindustan Fertilizer Corporation (HFC) are implemented, then the share of urea-installed capacity of total public sector plants shall come down to the insignificant level of around 34.0 lakh mt or around 17 per cent of the total urea-installed capacity.
There are several important factors, which must be taken into consideration in deciding the fertilizer policy of our country. To achieve and sustain food security, fertilizers have a pivotal role. Per hectare consumption of fertilizer and production of foodgrains from the available cultivable land is still low in our country. Take the examples of our three neighbours.
In the matter of foodgrains production the position of the two most populous countries in the world are:
There are also many other important factors. In pushing up the foodgrains production from a mere 52 million tonnes in 1951-52 to around 200.0 million tonnes, fertilizers have played an extremely effective role. It would be pertinent to note that for every additional unit of fertilizer consumption, the increase in agricultural production ranges between 8.09 to 12.0 or more.
In view of the very important role of fertilizers for augmenting the production of foodgrains in our country, as noted above, it would be dangerous to depend on the private sector for production of fertilizers. Dependence on imports would be all the more dangerous. Through the current budget proposal the government has already announced its decision to deregulate the pricing of urea. In the deregulated scene the producers will fix the price of urea. Against the current regulated price of Rs 4,600 per tonne of urea, the deregulated price of urea would be around Rs 10,000 per tonne. It should be noted that as a consequence of deregulation, the price of phosphatic fertilizers shoot up to Rs 8,300 per tonne from the regulated price of Rs 2,500 per tonne. The consequence was that the farmers stopped buying the costly phosphatic fertilizers, resulting in gross imbalance in the use ratio of N:P:K varieties of fertilizers, causing great damage to soil fertility.
Therefore the senseless and scandalous move of the BJP-led NDA government to handover the profit-making public sector fertilizer giant the NFL - to a single private owner will squarely establish almost total control of the private operators over the indigenous fertilizer industry. Thus the combination of the notorious factors: privatisation, deregulation, decanalisation and withdrawal of quantitative restrictions for spell doom our agriculture.
We have been saying that the very concept of disinvestment/privatisation of public sector units, more so the blue chip ones, is in itself a bankrupt corrupt policy perception, treachery for the nation and a great fraud on the people of the country. The ill-conceived dsinvestment operation is bound to be scam-tainted. Right from the onset of the Fund-Bank dictated new economic regime all the disinvestments operations were full of corruption.
"The Comptroller and the Auditor General (CAG) had to make the stringent observation that the loss to the government exchequer from the sale of PSU shares in 1992, was hovering around Rs 3,441.7 crore. The Parliamentary Standing Committee on Industry estimated a loss of Rs.10,000 crore to the national exchequer in the disinvestments of PSU shares carried on till 1994-95. The sale of Gail shares abroad at a rate cheaper than that prevailing in the domestic market also exposed the corrupt practices by the operators at the highest level." (Tapan). The latest glaring example is the BALCO privatisation episode.
In the case of NFL also the government has initiated the same BALCO type exercise. Right now the end result is a matter of imagination based on past experience. Therefore, it may not be too much to say that another BALCO is in the making so far as the government is concerned.
On the contrary it is a matter of high hope and great encouragement that the trade unions in NFL have raised their united voice against the suicidal move of the government. All the trade unions functioning in the NFL have come together under a Co-ordination Committee. The strike on March 30 2001 protesting the privatisation move was complete. Hundred percent workers participated in the strike. The workers of NFL are in the thick of various agitational programmes aimed at making the two days strike on April 25-26 a reverberating success. The Fertilizer Workers Federation of India has lodged its strong protest with the government against the NFL privatisation and extended active support to the movement of the NFL workers.
The BALCO experience must serve as an be eye opener to all concerned. The lesson of the heroic struggle of the BALCO workers should guide the workers of NFL. Without taking any lesson from the BALCO scandal and ignoring the protest of the NFL workers, if the government goes ahead with the scandalous move to privatise the NFL, the entire trade union movement and the patriotic forces in the country must stand by the workers of NFL too, as they are doing in case of the BALCO workers. Such united aggressive action alone can defeat the design of the imperialist forces to eliminate our public sector which is so essential to safeguard the economic sovereignty of our country.