GOVERNMENT
ment that the VSNL decision to invest in Tata TeleServices
Arrogance of Power
F or some time now the only part of the government’s
economic programme which has seemed to be making any
headway has been the sale of government equity in govern-
ment-owned enterprises. While the focus has been on the
revenue this is bringing to the exchequer, more importantly
the transfer of control of high profile companies such as Maruti
Udyog, VSNL and IPCL, among others, to private manage-
ments have at last marked some progress in the direction of
the much-needed redefinition of the role and responsibilities
of the government in relation to the economy. That these
transactions have not been vitiated by the kind of acrimony
and breast-beating which had marked the sale of BALCO
just last year speaks for the clear-sighted and professionally
very competent efforts of the cabinet minister in charge of
disinvestment and his aides.
However, a reminder that long-entrenched habits of arbitrary
exercise of power and authority are not easily given up by
politicians and bureaucrats has not been long in coming. It
has come in the form of the leaked reports this week of the
communications and information technology minister’s anger
over the decision of the reconstituted board of directors of
VSNL to invest Rs 1,200 crore in Tata TeleServices. The
controversy kicked up by these reports has made it necessary
for the disinvestment ministry to clarify that the VSNL board’s
decision did not in any way constitute a breach of the terms
of the strategic sale of the government’s equity in VSNL to
the Tatas, as set out in the shareholders’ agreement and that
the use of VSNL’s reserves for investment in another company,
including a group company, did not come within the purview
of the restrictions on asset-stripping imposed under those
terms. Clearly, VSNL’s decision would be subject to
Article 372 of the Companies Act just as any inter-corporate
investment is. Spokesmen for VSNL, in turn, have sought to
set out the business rationale of the company linking up with
Tata TeleServices which holds licences for basic services for
six telecom circles and will thus provide critical access to direct
customers to VSNL which, with close to 90 per cent of its
revenue currently coming from international long-distance
services, lacks such access. And without access to customers
VSNL will not be able to face the emerging competition from
the likes of Bharti, Reliance, MTNL and BSNL all of whom
will have integrated services with presence in access provision
and national long-distance and international long-distance
services. Tata TeleServices’ plans, it has been disclosed, call
for an investment of Rs 8,247 crore, with equity contributing
Rs 4,325 crore, of which the Tata group would provide
Rs 2,552 crore and VSNL Rs 1,200 crore with the balance
of Rs 573 crore coming from other sources.
The communications minister and spokespersons for his
ministry have chosen not to address the information and
explanations provided by the disinvestment ministry and by
VSNL. Instead, claiming to speak on behalf of the whole
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government, the minister passed the ex cathedra public judg-
“made a mockery of the disinvestment process”. Indeed not
so much the pros and cons of the VSNL decision but the manner
and tone of the communications minister’s response are sig-
nificant and merit serious public attention for the light they
throw on the mental make-up and attitudes of those who govern
the country. Clearly the minister thought nothing of going
public with his judgment on the VSNL board’s decision and
indeed on the disinvestment process as a whole before his
ministry had even officially communicated its objections to
VSNL or the Tatas, not to mention given any consideration
to their response. More important was the assumption that what
the minister had to say had to be taken to represent the public
interest not because of what he was saying – by way of reasoned
argument he has had precious little to say so far – but because
he, the minister, was saying it. And in typical off-with-their-
heads style, great play has been made of how orders had been
issued to place one of the two government directors on the
board of VSNL under suspension and have a show cause notice
served on the other – as if these purely internal government
actions prove or settle anything in regard to the merits of
VSNL’s action or the communications ministry’s locus standi
to intervene in the matter.
The questions raised by the whole episode – which, of
course, crop up ever so often in this country in so many
different contexts – are: are not government functionaries
bound by laws and rules and bound to abide by agreements
and commitments that they enter into? And when they behave
as if they are not so bound, should they be allowed to get away
with their actions just because they claim to be acting in the
public interest? These are matters which have very major and
very general consequences for the whole quality of governance
and of public life. They are immediately material in the specific
context of the government’s disinvestment programme. By
both the substance (rather the lack of it) and the arbitrary, gung-
ho manner of his intervention in the VSNL case the commu-
nications minister has dealt a body blow to disinvestment
efforts by undermining the credibility of the government’s
commitment to agreements accepted by it. The disinvestment
minister and his officials had had to wage a long and difficult
fight to defeat the moves to discredit and undo the sale of
BALCO. It finally took the Supreme Court’s intervention to
vindicate their position. A similar determined and well-planned
effort, within the government and the cabinet this time, will
once again be called for if the whole process, which was only
just gathering some momentum, of getting the government out
of areas and activities where it should not be is to be kept
on the rails. - 2 9
Economic and Political Weekly June 1, 2002