Impact of Accelerated Strategic Disinvestment on Workers

Lakhs of defence civilian employees of 41 ordnance factories, under the Ordnance Factory Board (OFB), had demonstrated against the Modi government’s likely decision to corporatize the ordnance factories, and had decided to go on a month-long strike from August 20. Ordnance factories, as of now, are not present in the stock market; corporatizing them would mean a step towards privatization, converting them into Public Sector Undertaking (PSU) and allowing trade of their shares in the stock market. This move would bring OFBs under the ambit of major economic reforms as part of the 100 days program of the 2nd term of the Modi government as declared by Rajiv Kumar, the Vice-Chairman of the NITI Aayog at the end of May 2019. He declared that these reforms are meant to entice foreign investors, and along with changes in labor laws, privatization and creation of land banks for new industrial development, the government will focus on fully privatizing or closing more than 42 state-controlled companies in the coming months.

Finance Minister Nirmala Sitharaman, during her Budget speech in July 2019, said that the government is looking to pare its stake below 51% for the Central Public Sector Enterprises (CPSEs), which could not be traditionally allowed till now. She added that “Strategic disinvestment of select Central Public Sector Enterprises will continue to be a priority”. As a result, at the end of July 2019, the government gave ‘in-principle’ approval for strategic disinvestment of 23 CPSEs.

As a part of these reforms, recent data show that of the disinvestment of Rs 3.8 lakh crore over the ten-year period from FY10 to FY19, Rs 2.8 lakh crore, accounting for 74% of the total amount, was carried out during the Modi regime [1]. It is claimed by the government that accelerating disinvestment and privatization will boost economic growth which is in a severe crisis with GDP growth rate decelerated to 5% in the January-March 2019 quarter – lowest in the last 6 years. As government propaganda says, the boost in growth is further expected to create jobs which are in a dismal state. According to data compiled by the Centre for Monitoring Indian Economy (CMIE), the unemployment rate rose to 7.2% in February 2019, the worst in 28 months. Meanwhile, since September 2016 the number of employed persons has declined by 183 lakhs [2]. Although the said reforms are being carried out in a much more intense pace since 2014 during the Modi regime, the policy under which these implementations are being carried out is an architecture of the Congress Party. On July 24, 1991, New Industrial Policy (NIP) was declared by the Congress-led government that opened up most sectors of modern industry and services to private investment, including foreign investment, under the same argument of boosting the economy and creating jobs.

As the current intensified implementation of the policies of disinvestment is a continuation of the structural changes started by the previous governments, let us have a look from the available data on its impact on the workforce of the CPSEs which contribute more than 20% of India’s GDP, around the last 12 years. The total employment in CPSEs got reduced from about 17.8 lakh to 14.7 lakh in 12 years of FY06-07 to FY17-18. The total employment loss from FY06-07 to FY13-14 was about 89 thousand, whereas, in the term of FY 13-14 to FY 17-18 (Modi regime) more than 2.2 lakh employment has been lost. That is, there have been more than 2.5 times employment losses in 4 years of Modi regime than in the earlier 8 years due to acceleration of the economic reforms. The number of regular workers (excluding managers) decreased from 13.6 lakh to 10.8 lakh between FY06-07 to FY17-18, employment loss has been 2.8 lakh in FY06-07 to FY13-14 (8years) and almost equal loss in the 4 years of the Modi regime up to FY17-18. The number of contractual workers is on a gradual rise in CPSUs with 1.6 lakh workers in FY06-07 to 3.8 lakh in FY17-18, a rise of 1.7 lakh has been observed between FY06-07 to FY13-14 and a rise of 39 thousand in the Modi regime up to FY17-18. However, the increase in contractual workers is far from compensating the loss of permanent workers even by numbers [3, Figure 1].

In this span of 12 years, the number of managers remained almost the same, i.e. about 2.6 lakh. However, the percentage of unionized workers in CPSEs decreased from about 89% in FY06-07 to about 65% in FY13-14, and has further lowered down to 44% in FY17-18. Whereas, the percentage of contractual/casual workers got doubled from 11% of the total workforce in CPSEs in FY06-07 to more than 21% in FY17-18. This shows that on one hand, where the power of the management remains the same, the workers’ unions have been stripped off of its power and the unionized workers have been reduced to a minority. Much lesser number of contractual workers who are paid almost 1/4th of their wage, without any job security and dismal labor rights are gradually replacing the permanent workers to undertake almost the same amount of work [3, Figure 2].

As a result of privatization through deregulation and disinvestment of the public sector, employees are forced to shift from the public sector to the private sector. This means a transfer of secured well-salaried government job to ill-salaried insecure private job for workers. The share of public sector in employment in the organized sector (public+private) was 62.26% in 1970-71 which was increased up to 71.28 % in 1990-91 and afterwards, it continuously reduced and reached to 59.53% in 2011-12 [4]. The Modi government has stopped revealing these figures in this regime, thus data after 2012 is not available. However, the intensification of privatization and disinvestment of PSUs indicate that this share of the public sector will have a steep reduction.

Moreover, the employment opportunities in the overall organized sector (public+private) was increased by 8.4% between 2004-05 and 2009-10, but the share of informal employment (contractual/casual) in this sector has increased from 32% in 1999-2000 to 54% in 2004-05 and 67% in 2011-12 [5].

With respect to the workers, the overall picture shows that the policy of strategic disinvestment has caused privatization and informalization of an expanding organized sector, forcing the skilled and unskilled workers from the public sector to move to contractual jobs in the private sector with much lower wages. The increasing informalization of the workers in PSEs makes their jobs insecure and disarms them from the power of unionization, thus making it easier to steeply increase their exploitation. News of disinvestment of five CPSEs in the last two years, deregulation of BSNL, etc, show that this trend would intensify further and lead the workers to a massive crisis. Thus, the policy of escalated strategic disinvestment and privatization by the Modi government is an attempt to help the domestic and foreign corporations to come out of their crisis by increasing exploitation of the working people and is far from solving the unemployment scenario, rather it has the potentiality to worsen it.




[3] Data source – Public Enterprises Survey, Department of Public Enterprises.

[4] Data source – Directorate General of Employment and Training, Ministry of Labour & Employment, Government of India.


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