India’s state employees are on notice. After years of dithering about the country’s government enterprises, the five-month-old government of Prime Minister Atal Behari Vajpayee has unveiled a raft of privatization plans. Even Indian Airlines, the onetime monopoly airline, will be sold off. In last week’s annual budget, the government announced plans to prune its stake in most state enterprises to 26 percent or less and promised to “close down PSU’s [Public Sector Undertakings] which cannot be revived.” Though state enterprises employ only 3 percent of the country’s 340 million workers, they are symbolically important as vestiges of the socialist system established in the 1950s. That’s all changing now. “The government has a right to restructure the way it sees fit,” says Pradip Baijal, the pugnacious secretary of the government’s new Department of Disinvestment. Baijal’s bureau, set up in December 1999, is scrutinizing the country’s 248 public enterprises, which between 1991 and 1998 ate up $12.6 billion in subsidies. It will have to tread carefully. The unions have mounted protests; they pledge mayhem if the government doesn’t back down. “India’s heading for a prolonged period of turmoil,” says Madhukar Pandhe, general secretary of the Centre of Indian Trade Unions, sitting amid portraits of Marx and Lenin. Since state enterprises are concentrated in key sectors–banking, insurance, postal services, railways, telecommunications and power–their inefficiency drags the whole system down.
New blood could help weak companies. Modern Food’s 14 bread plants run at only 56 percent of capacity. The company keeps 60 paid staff in the cake-making division despite the fact that it stopped making cakes six months ago. Rumors are flying that Hindustan Lever will cut the work force by more than half. But company officials say the goal is to expand the business. “We feel we’re going to revive [the company],” says Irfan Khan, a Hindustan Lever official. The owners promised the government that there will be no layoffs at the bread factory in the first year. After that, all bets are off.
