The Telegraph
Since 1st March, 1999
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So far, the courts have reacted favourably to privatization decisions, be it Bharat Aluminium Company, Jessop or Indian Tourism Development Corporation properties. The Supreme Courtís decision on the appeal filed by the Centre for Public Interest Litigation and the Oil Sector Officers Association is therefore a bolt from the blue. Strictly speaking, the court has not ruled on privatization. It has just ruled on the privatization process followed for Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited. Some nationalization acts, such as for banks, insurance companies and coal mines, clearly specified a minimum government equity of 51 per cent. In such instances, equity reduction through executive action was precluded, since statutes needed amendment first and this could only be done through Parliament. Air India, Indian Airlines, HPCL, BPCL and Oil and Natural Gas Commission belong to a different category, since respective nationalization acts did not specify a minimum government equity. Hence the attorney generalís advice that parliamentary approval was not necessary. The court ruled otherwise.

In thus interpreting the law, the court has stayed away from expressing a view on other privatization decisions. But since other public interest litigations can follow, it is not just future privatization decisions that will be adversely affected. Past decisions like Maruti can also be questioned. The government now proposes an options paper that will be presented to the cabinet on October 3. However, an appeal option against the present two-judge order does not seem feasible. Nor can the nationalization acts be readily amended through Parliament. While the National Democratic Alliance can push through a legislative amendment in the Lok Sabha, the Rajya Sabha is a different proposition, with opposition parties rooting against privatization. This therefore pushes back privatization to after the general elections. The process may also become open-ended, since regardless of the outcome of elections, opportunistic opposition characterizes parties not in government. The external world, including institutional investors, will see this as lack of consensus on reforms and the capital markets will be affected, quite apart from disinvestment targets going for a six.

Two points emerge. First, the necessity of a common minimum economic agenda that will not be opposed is underscored, since coalition governments seem inevitable. Second, the constitutional underpinnings of liberalization also need consideration. Despite a Supreme Court ruling that the basic structure of the Constitution cannot be altered, India no longer possesses the 1950 Constitution. Instead, the Constitution has become more socialist in content and court judgments capture this spirit. Hence, several reform decisions can be challenged as unconstitutional. The constitutional review commission left this issue unaddressed. The objection is not to a judicial review of executive decisions. But democratically feasible solutions have to be found for the problem.

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