PM-designate Narendra Modi wishes to put the Indian economy on a new footing. A good way to set the ball rolling would be to pick up the threads of two ideas mooted by Atal Bihari Vajpayee’s NDA government. Public sector companies should be put up for disinvestment, not through piecemeal sale of shares but rather through big bang transfers of controlling stakes. Second, coal mining must be denationalized. Both measures will invite determined opposition from vested interests. But failure to do so will mean a far greater number of people are deprived of opportunities to better their lives.
State ownership of a commercial venture such as Air India represents throwing good money after bad. Borrowing more money to do this will increase the size of fiscal deficit and eventually push up inflation. In this situation, how will a BJP government make good its promise to invest in building capabilities of India’s ‘neo-middle class’ through scholarships, better healthcare and extensive public transport? Disinvestment is the answer as it allows for transfer of resources from areas such as airlines and steel plants — where private companies are competitive and do the job anyway — to activities that improve the productive capabilities of Indians.
Coal is India’s most important source of energy supply and it is at the heart of plans to give every home access to electricity. Mining of coal was nationalised over four decades ago, with the result that India is currently the third highest importer of coal despite sitting on the fifth highest coal reserves in the world. Vajpayee’s government introduced legislation in April 2000 to denationalise coal mining. Till date, it has not been passed. Private companies can drill for oil and gas in India, but not mine coal. To fire up idling power plants across the country, Modi must denationalise coal right away.