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Modi’s Nehruvian games

A few days back, I had the pleasure of discussing with one of the top Gujarat bureaucrats, who loves to remain faceless, in detail, about one of the most controversial acquisitions Gujarat government has been trying to clinch – gas network of Gujarat Gas Co Ltd, a subsidiary of the top MNC, British Gas, operating in south Gujarat. With a net worth of around Rs 4,500 crore, Gujarat Gas supplies around 3 million standard cubic meters per day of gas to lakhs of households and enterprises in and around three cities, Surat, Ankaleshwar and Bharuch. Known for his expertise in finance, I asked this bureaucrat pointblank: “Why do you at all want to acquire Gujarat Gas? Don’t you think that you are moving away from the established norm of what many believe should be an ideal state policy – of shedding economic activity and concentrate, instead, on social sector, in which Gujarat still lags? Why not, instead, allow a private player to clinch the deal?”
The acquisition move had already become controversial. It had been reported how a top minister in the Modi government pressured two well-known business houses, Adanis and Torrent, to keep away from the competitive bid floated by British Gas to sell 65 per cent of its stakes. The move, it was suggested, was to ensure that the state public sector undertaking (PSU), Gujarat Sate Petroleum Corporation (GSPC), remained “competition free” and was able to freely negotiate at a lower-than market rate. The pressure move, ostensibly, was to showcase Narendra Modi as the “sure winner” against a top MNC, which was obviously trying to make an all-out effort to sell off its stakes at a competitive rate. Known for his tantrums, if the deal had been struck, Modi would have indeed declared how he had succeeded in acquiring a company, despite heavy odds, owned by India’s former British rulers. It would have been an important issue in the long list in his kitty for propaganda during the forthcoming Gujarat state assembly polls, scheduled for December 2012.
The report, which appeared in the Times of India, it is said, became the main reason for the British Gas to suddenly withdraw from negotiations with the GSPC. The MNC executives argued during a meeting, which took place at Taj in Mumbai, citing the Times of India report, that the Gujarat government was seeking to “rig” competition and force a lower price. The faceless bureaucrat, who is in the know of all that had happened during the negotiations, told me, “British Gas has now begun an independent inquiry into the whole affair. Ever since the negotiations were snapped, there is no further communication from the MNC whether it would like to talk any more.” He did not rule out the MNC once again going in for a fresh bid. Much would depend on what it concludes at the end of its investigation.
Soon after the negotiations were snapped, a thought came to my mind: Wasn’t what the GSPC – and through it the Gujarat government – trying was actually a reversal of what the state government had long been seeking, to attract investment from foreign investors? After all, all of it had happened ahead of the sixth global investment summit, which Narendra Modi, sure of his victory in the state assembly elections, had planned for mid-January 2013. I asked the faceless bureaucrat: Wouldn’t it harm the investment climate? And, more important, wouldn’t it mean that the GSPC (and the Gujarat government) was taking the clock backward by literally entering into an important economic activity, which should ideally fall within the purview of the private sector? After all, Adanis were distributing gas, quite successfully, in Ahmedabad, so why can’t they do it in the South Gujarat cities, too?
The explanation that the faceless babu gave me reminded me what Jawaharlal Nehru used to say (and about which many of us used to be taught during our student days!) – that the public sector should be the engine of economic growth. The bureaucrat only fell short of Nehru’s famous phrase, that the public sector enterprises should be treated as “modern temples” of growth. He said, “The need for acquiring the gas distribution network is important because the private sector is not interested in taking gas to the common man, especially the poor, living in small towns and villages. This is the social cause which only public sector can fulfill. The private sector is only interested in profit. If we succeed in taking over the gas network, one of our major missions will be fulfilled.” I took a dig: “Why not, in that case, nationalize all the gas networks that are there in Gujarat, something that Indira Gandhi did to become popular in early 1970s? The gas network owned by the Adanis, too, would come in state hand, and that would serve the social cause even better.” I reminded him of what critics say, that Adanis are not interested in distributing gas in those areas of Ahmedabad where cost is high, and profit limited. I went on: “Torrent-owned distribution power network exists in Ahmedabad and Surat. Why not do the same with them, just to serve the same social cause?”
The bureaucrat smiled, and answered, “One can only do what is possible, not what is impossible to achieve. Acquisitions of this kind – nationalization of private undertakings – would require legal backing, which is not in the hands of the state government. That’s the reason why we decided to acquire 65 per cent stakes, which is the best way to fulfill our social aim.” I came out of his chamber wondering about a bureaucrat working under Modi who still thinks the Nehru way. I also wondered if Modi had a similar view, or whether his aim for acquiring an MNC-owned company was just another political game. Was that the reason why Modi allowed one his ministers to pressure two big business houses to fall in line? Those who know Modi well know how he pressured several joint stocked listed companies (loosely PSUs) with majority shares owned by the state, to hand over 33 per cent of their profits to the Gujarat government in the name of corporate social responsibility (CSR). Important PSUs involved were – Gujarat State Fertilisers and Chemicals, Gujarat Narmada Valley Fertiliser Company, and Gujarat Alkalies and Chemicals Ltd. All know, how the effort was spurned as “not feasible” not just by the bureaucrats who headed as managing directors of these PSUs but also by their shareholders. Modi even tried pushing a similar CSR line to top corporates, but what he got was not more than lip service. There may be reason to wonder: Was he trying to centralize CSR?



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