By Com. Girish, Joint Secretary, Kamgar Ekta Committee (KEC)
Saying “yes” to IPOs and FPOs means accepting privatization of the enterprise, sacrificing our job security, accepting that our children and grandchildren will work as contract workers without any job security and sacrificing society’s interests! We workers should not allow the assets built with our years of sweat and by using public money to be handed over to capitalists for their personal gain. These assets should be used for the benefit of the working class and other toilers!
Recently the government of India has sold shares of total worth about Rs 20,000 crore in a number of public sector enterprises (PSEs) like Coal India, Neyveli Lignite, Central Bank of India and NHPC (earlier National Hydro Power Corporation) in the share market. Sale of a few more PSEs is under consideration. All these share sales are Follow-on Public Offerings (FPOs), which means the government has already sold shares of many of these public sector companies earlier, in some cases, many times.
During the last few months, a number of state government-owned power distribution and transmission companies have announced the plans of Initial Public Offerings (IPOs), which means these PSEs will be selling their shares, will get listed on the stock market for the first time and start reducing government shareholding.
Are IPOs and FPOs of Public Sector companies in the interest of its workers, is an important question for PSE workers and their unions. There is more than 30 years of experience of IPOs and FPOs to take a view in this matter.
PSEs have been in existence since early fifties. There were no attempts to reduce government shareholding till the end of 1980s. The process of the sale of shares of PSEs began only after the launch of the policy of globalisation through liberalization and privatisation (LPG) in 1991 by the Congress-led Rao-Manmohan Singh government. The Hindustan Petroleum Corporation Limited (HPCL) was the first Public Sector Enterprise (PSE) to have an IPO and get listed on the Bombay Stock Exchange (BSE) in 1992.
Since then, every political party in power at the Center has pursued this approach of privatization. As of now IPOS and FPOs of approximately 70 Central Public Sector Enterprises (CPSEs) and Public Sector Banks (PSBs) have been carried out.
As a result of repeated sale of government shares, the government shareholding in 20 PSEs has already fallen to less than 60%. The government shareholding in the country’s largest bank, the State Bank of India, a PSB, is now only 55.5%; in the country’s largest power generating company, the National Thermal Power Corporation (NTPC), a PSE, it is only 51.1%; it is between 51% to 53% in Bharat Petroleum Corporation (BPCL), Power Grid Corporation (PGCIL), Bharat Electronics Ltd. (BEL), Hindustan Aeronautics Ltd. (HAL), Mahanagar Telephone Nigam Ltd. (MTNL) and National Aluminium Co. Ltd. (NALCO).
There is now a proposal to reduce the minimum shareholding of the government from 51% to 26% for it to be considered a PSE. This proposal will make the government a minority shareholder and would effectively amount to mass privatisation of the PSEs.
We can thus conclude that an IPO is the stepping stone towards of privatisation of a PSE.
There are a number of reasons why IPOs and listing of PSEs on stock market are not in the interest of workers.
- Threat to Job Security and Protections: The transition from a government-owned entity to a publicly traded, market-driven enterprise leads to downsizing, restructuring, and changes in terms of employment. Workers fear losing their Constitutional protections and the social safety nets associated with central government employment.
- Increased Workload and Service Pressure: Profit-driven enterprises generally push for leaner workforces, leading to increased workloads and burnout for the remaining staff.
- Dilution of Social and Welfare Mandates: While establishing PSUs, it was said that they would serve broader national interests, such as providing affordable services, regional development, and employment reservations. An IPO forces companies to prioritize maximizing shareholder profits, which often results in the reduction of these public welfare functions.
- Loss of Bargaining Power of Unions: As private or diluted enterprises, managements attempt to roll back hard-won union rights, pensions, and terminal benefits to cut costs and appeal to investors.
- Loss of National Sovereignty and Strategic Assets: PSEs involved in infrastructure, energy finance, etc, are strategic assets. Selling equity of these PSEs to private or foreign investors adversely affects national sovereignty.
- Sale of assets built with public money for private profit is anti-social and anti-national.
In case of some PSEs, workers realised that the IPO and FPOs open up the path to privatisation and opposed them. In order to lure workers and to blunt their opposition, the government often reserves a certain quantity of shares on sale for employees. Sometimes it even offers shares to employees at a price lower than the price offered to the others. The government and others with vested interests also make lot of propaganda that by holding a handful of shares, workers become part owners of the company for which they work. But workers now have the life experience of more than 60 PSEs and their IPOs and FPOs over the last 35 years. Being a shareholder has not given them any say in the organization. No individual becomes a part owner of the company by holding a few hundred shares of a company.
The government has also been adopting another approach to blunt the opposition to privatisation. It sells its part or full shareholding to another PSE. In case of HPCL, it sold its entire shareholding to ONGC. In case of IDBI Bank, it reduced its holding to minority and made the LIC, also a PSE, the major shareholder. It then declared that the IDBI Bank is no more a public sector bank by saying that now the government share-holding is less than 50% and justified its privatisation. This approach may be adopted in future in case of other PSEs too to fully privatise them.
The government also tries to entice workers saying that we shall allow representatives of workers’ unions as directors on the board of the company, thus giving a voice to workers in running affairs of the company. However, this is not true. Workers know that one or two seats on the Board of Directors does not mean anything. And once the move towards privatization starts, earning profit quarter after quarter will become the sole motive of the enterprise, and the Board of Directors will have to take steps for increasing profits sacrificing everything else. Serving the needs of the society does not remain even a part of its objective.
Maximising the profit and growth of the enterprise is in contradiction with the interests of workers. The first target of cost reduction is invariably the reduction of workforce and replacement of permanent workers with contract workers. Even if there are workers’ representatives on the Board of Directors, they have to toe the line of maximising share price and profit.
Moreover, key decisions in case of most of the PSEs are taken by the Ministry in Central or state government controlling the PSE. The decisions taken by the Boards of Directors are just a formality.
The experience of workers of PSEs where there have been multiple FPOs and where shares have been listed on stock market for decades is a valuable guide for workers of PSEs which are going for IPO.
The example of the State Bank of India makes it clear what happens when shares of a PSE are listed on stock exchange. It is the largest bank of the country yet the government shareholding over the years has been brought down to about 55%. Its share price is closely watched. The Bank is always under pressure because its market capitalisation is less than that of HDFC Bank, the largest private bank. SBI workers are under tremendous pressure of increasing workload as vacancies are not filled in to reduce cost. Contractualization of work is increasing, again to reduce cost. Workers have to resort to agitation even for small demands.
It is thus very clear that saying “yes” to IPOs and FPOs means accepting privatization of the enterprise, sacrificing their own job security, accepting that their own children and grandchildren will work as contract workers without any job security and under inhuman working conditions, and sacrificing society’s interests!
We workers should not allow the assets built with our years of sweat and by using public money to be handed over to capitalists for their personal gain. These assets should be used for the benefit of the working class and other toilers!