Only a deluded optimist will agree with the view being peddled by some people that the government’s decision to defer the privatization of Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited does not adversely affect the reform process. The disinvestment minister, Mr Arun Shourie, was entirely justified when he had said that the privatization of these two companies was the litmus test for the government’s commitment to the programme of disinvestment. Mr Shourie’s statement can logically be taken as a step forward. Commitment to disinvestment is the proof of the government’s commitment to economic reforms since the dismantling of the public sector and the reduction of the state’s role in the economy are two of the necessary conditions for the success of economic reforms. Following this, it can be said, without unduly straining the logic, that brakes on the disinvestment programme, evident from the reluctance to push through the privatization of HPCL and BPCL, are a sign of the slowing down of reforms. Economic reforms in India, ever since they were initiated a decade ago, have invariably been hamstrung by political considerations. On too many occasions, political will and expediency have run counter to economic logic. This time round too, the deferral has not been based on the merits or demerits of the case but on grounds of political compulsions.
The campaign to oppose the privatization of the two companies was led by the defence minister, Mr George Fernandes, and the oil and natural gas minister, Mr Ram Naik. But there is no evidence that in the meeting of the cabinet committee on disinvestment the prime minister, Mr Atal Bihari Vajpayee, attempted to stamp his own political will in favour of disinvestment. On the contrary, the impression is that powerful groups ranged against disinvestment somewhat carried the day. The decision is not only a direct threat to the policy to privatize oil but is also a blow to the initiative displayed by Mr Shourie, by any reckoning the most efficient minister in the current cabinet. The decision of the cabinet committee sends out wrong signals about the intentions and policies of the government. The impact of this is already evident in the fall of the stock market index. The ambiguity of the government towards the disinvestment programme in particular and the reforms process in general is rooted in the pressures inherent in a coalition government. As the leader of a not-too strong coalition and with a number of assembly elections looming before him, Mr Vajpayee will be chary of pushing through economic reforms that may not only divide his allies but may also not bring electoral dividends.