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  • More Privatisation on the cards?
Parliament

More Privatisation on the cards?

M R Madhavan , Prachee Mishra - October 22, 2019

The core group of secretaries on disinvestment has recently  approved the disinvestment of five public sector undertakings (PSUs).  This includes the entire shareholding of the government in four PSUs: Bharat Petroleum Corporation (BPCL), Shipping Corporation of India (SCI), North Eastern Electric Power Corporation (NEEPCO) and THDC (operates and maintains the Tehri Hydro Power Complex), and 30% of the shareholding in Container Corporation of India Limited (Concor).  The government currently holds 54.8% of Concor, so the sale will reduce its stake below 25%.

Over the last few years, the government has removed legislative barriers towards privatisation of several other PSUs.  This raises the question whether the government plans to privatise them.

What was the Supreme Court’s order on privatisation of PSUs?

In 2003, a similar proposal had been raised by the government for the sale of its shareholding in HPCL and BPCL.  This proposal was challenged in the Supreme Court on the grounds that it would violate the provisions of the laws that transferred ownership of certain assets to the government (which later formed these PSUs).  For example, BPCL was formed by nationalising Burmah Shell in India through an Act of Parliament, and merging their refinery and marketing companies.   The  Court ruled that the central government cannot proceed with the privatisation of HPCL and BPCL (i.e., reduce its direct or indirect ownership below 51%) without amending the concerned laws.  So the government continues to hold majority stake directly in BPCL, and indirectly in HPCL ( through ONGC, another PSU).  

The five Companies approved for privatisation include BPCL and SCI (into which two nationalised companies, the Jayanti Shipping Company, and the Mogul Line Limited were merged).  The relevant nationalisation Acts have been repealed over the last five years.

How did the government remove the legislative barriers for privatisation?

Between 2014 and 2019, Parliament passed six Repealing and Amending Acts which repealed around 722 laws.  These included laws that had transferred the ownership of companies to the central government which later formed BPCL, HPCL, and OIL.  These also repealed the laws that had transferred ownership of the companies to the central government which were later merged with the SCI.  This implies that now the government can go ahead with the privatisation of these government companies as the conditions imposed by the Supreme Court’s order have been fulfilled.  These Repealing and Amending Acts also repealed several other nationalisation laws that were later formed into PSUs.  In the Table below, we have listed some of these companies.  Note that the  Law Commission of India (2014) had suggested the repeal of several of these laws (including the Esso Act, the Burmah Shell Act, the Burn Company Act) on the grounds that these laws do not serve any purpose with respect to the nationalised entity.   However, it had suggested that a study of all the nationalisation Acts should be done before repealing these Acts, and if necessary a savings clause should be provided in the repealing Act. 

Did Parliament scrutinise these Acts before passing them?

Many of these repeals were made through the Repealing and Amending Act, 2016.  These include the Acts relating to BPCL, HPCL, OIL, Coal India Limited, SCI, National Textiles Corporation, Hindustan Copper and Burn Standard Company Limited.   The Bill was not referred to a Parliamentary Standing Committee, and was passed after a cursory debate (50 minutes in Lok Sabha and 20 minutes in Rajya Sabha).  Similarly, the two Acts passed in 2017, that enable privatisation of SAIL, PowerGrid, and State Trading Corporation were not examined by a Standing Committee.

So what comes next?

The repeal of these Acts have cleared the legislative hurdle for privatisation of these companies.   That is, the government does not need prior approval of Parliament to sell its shareholding.  Therefore, it is now up to the government to decide whether it wishes to privatise these entities. 

A version of this article was published by the Business Standard on October 20, 2019.

Table 1: Some Nationalisation Acts repealed since 2014 (list not exhaustive)

Company

Act being repealed

Repealing Act

Shipping Corporation Of India (SCI)

The Jayanti Shipping Company (Acquisition of Shares) Act, 1971

Repealing and Amending Act, 2016

The Mogul Line Limited (Acquisition of Shares) Act, 1984

Bharat Petroleum Corporation Limited (BPCL)

The Burmah Shell (Acquisition of Undertakings in India) Act, 1976

Repealing and Amending Act, 2016

Hindustan Petroleum Corporation Limited (HPCL)

The Esso (Acquisition of Undertakings in India) Act, 1974

Repealing and Amending Act, 2016

The Caltex [Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Limited] Act, 1977

The Kosangas Company (Acquisition of Undertaking) Act, 1979

Coal India Limited (CIL)

The Coking Coal Mines (Emergency Provisions) Act, 1971

Repealing and Amending Act, 2016

The Coal Mines (Taking Over of Management) Act, 1973

The Coking Coal Mines (Nationalisation) Act, 1972.

Repealing and Amending (Second) Act, 2017

The Coal Mines (Nationalisation) Act, 1973.

Steel Authority of India Limited (SAIL)

The Bolani Ores Limited (Acquisition of Shares) and Miscellaneous Provisions Act, 1978

Repealing and Amending (Second) Act, 2017

The Indian Iron and Steel Company (Acquisition of Shares) Act, 1976

Power Grid Corporation of India Limited

The National Thermal Power Corporation Limited, the National Hydroelectric Power Corporation Limited and the North-Eastern Electric Power Corporation Limited (Acquisition and Transfer of Power Transmission Systems) Act, 1993.

Repealing and Amending (Second) Act, 2017

The Neyveli Lignite Corporation Limited (Acquisition and Transfer of Power Transmission System) Act, 1994.

Oil India Limited (OIL)

The Burmah Oil Company [Acquisition of Shares of Oil India Limited and of the Undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited] Act, 1981

Repealing and Amending Act, 2016

State Trading Corporation of India Ltd. (STC)

The Tea Companies (Acquisition and Transfer of Sick Tea Units) Act, 1985

Repealing and Amending Act, 2017

National Textile Corporation Limited (NTC)

The Sick Textile Undertakings (Taking Over of Management) Act, 1972

Repealing and Amending Act, 2016

The Textile Undertakings (Taking Over of Management) Act, 1983

The Laxmirattan and Atherton West Cotton Mills (Taking Over of Management) Act, 1976

Hindustan Copper Limited

The Indian Copper Corporation (Acquisition of Undertaking) Act, 1972

Repealing and Amending Act, 2016

Burn Standard Co Ltd

The Burn Company and Indian Standard Wagon Company (Nationalisation) Act, 1976

Repealing and Amending Act, 2016

Indian Railways

The Futwah-Islampur Light Railway Line (Nationalisation) Act, 1985

Repealing and Amending Act, 2016

Braithwaite & Co Limited, Ministry of Railways

The Braithwaite and Company (India) Limited (Acquisition and Transfer of Undertakings) Act, 1976.

Repealing and Amending (Second) Act, 2017

The Gresham and Craven of India (Private) Limited (Acquisition and Transfer of Undertakings) Act, 1977

Andrew Yule & Co. Ltd.

The Brentford Electric (India) Limited (Acquisition and Transfer of Undertakings) Act, 1987

Repealing and Amending (Second) Act, 2017

The Transformers and Switchgear Limited (Acquisition and Transfer of Undertakings) Act, 1983

Repealing and Amending Act, 2019

Alcock Ashdown (Guj) Limited, Government of Gujarat Undertaking

The Alcock Ashdown Company Limited (Acquisition of Undertakings) Act, 1973.

Repealing and Amending Act, 2019

Bengal Chemicals & Pharmaceuticals Ltd. (BCPL)

The Bengal Chemical and Pharmaceutical Works Limited (Acquisition and Transfer of Undertakings) Act, 1980

Repealing and Amending (Second) Act, 2017

Organisations under Department of Pharmaceuticals

The Smith, Stainstreet and Company Limited (Acquisition and Transfer of Undertakings) Act, 1977

Repealing and Amending (Second) Act, 2017

The Bengal Immunity Company Limited (Acquisition and Transfer of Undertakings) Act, 1984.

Sources: Repealing and Amending Act, 2015; Repealing and Amending (Second) Act, 2015; Repealing and Amending Act, 2016; Repealing and Amending Act, 2017; Repealing and Amending (Second) Act, 2017; Repealing and Amending Act, 2019. 

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Legislation

The Importance of Parliamentary Committees

Sanat Kanwar - September 19, 2019

Last week, the Departmentally Related Standing Committees were reconstituted for the first year of the 17th Lok Sabha.  In this context, we discuss the functioning and role of Standing Committees.

The visible part of Parliament’s work takes place on the floor of the House.  Parliament meets for three sessions a year i.e., the Budget, Monsoon, and Winter Sessions.  This part of Parliament’s work is televised and closely watched.  However, Parliament has another forum through which a considerable amount of its work gets done.  These are known as Parliamentary Committees.  These Committees are smaller units of MPs from both Houses, across political parties and they function throughout the year.  These smaller groups of MPs study and deliberate on a range of subject matters, Bills, and budgets of all the ministries.

During the recently concluded first Session of the 17th Lok Sabha, Parliament sat for 37 days.  In the last 10 years, Parliament met for 67 days per year, on average.  This is a short of amount of time for MPs to be able to get into the depth of matters being discussed in the House.  Since Committees meet throughout the year, they help make up for this lack of time available on the floor of the House. 

Parliament deliberates on matters that are complex, and therefore needs technical expertise to understand such matters better.  Committees help with this by providing a forum where Members can engage with domain experts and government officials during the course of their study.  For example, the Committee on Health and Family Welfare studied the Surrogacy (Regulation) Bill, 2016 which prohibits commercial surrogacy, but allows altruistic surrogacy.  As MPs come from varying backgrounds, they may not have had the expertise to understand the details around surrogacy such as fertility issues, abortion, and regulation of surrogacy clinics, among others.  The Committee called upon a range of stakeholders including the National Commission for Women, doctors, and government officials to better their understanding of the issues, before finalising their report. 

Committees also provide a forum for building consensus across political parties.  The proceedings of the House during sessions are televised, and MPs are likely to stick to their party positions on most matters.  Committees have closed door meetings, which allows them to freely question and discuss issues and arrive at a consensus. 

After a Committee completes its study, it publishes its report which is laid in Parliament.  These recommendations are not binding, however, they hold a lot of weight.  For example, the Standing Committee on Health made several recommendations to the National Medical Commission Bill in 2017.  Many of these were incorporated in the recently passed 2019 Bill, including removing the provision for allowing a bridge course for AYUSH practitioners. 

There are 24 such Departmentally Related Standing Committees (DRSCs), each of which oversees a set of Ministries.  DRSCs were set up first in 1993, to ensure Parliament could keep with the growing complexity of governance.  These are permanent Committees that are reconstituted every year.  They consist of 21 Members from Lok Sabha, and 10 Members from Rajya Sabha, and are headed by a Chairperson.  The DRSCs primarily look at three things: (i) Bills, (ii) budgets, and (iii) subject specific issues for examination.  Other types of Standing Committees include Financial Committees which facilitate Parliament’s scrutiny over government expenditure.  Besides these, Parliament can also form ad hoc Committees for a specific purpose such as addressing administrative issues, examining a Bill, or examining an issue. 

To ensure that a Bill is scrutinised properly before it is passed, our law making procedure has a provision for Bills to be referred to a DRSC for detailed examination.  Any Bill introduced in Lok Sabha or Rajya Sabha can be referred to a DRSC by either the Speaker of the Lok Sabha or Chairman of the Rajya Sabha.  Over the years, the Committees have immensely contributed to strengthen the laws passed by Parliament.  For example, the Consumer Protection Act, 2019, overhauling the 1986 law, was recently passed during the Budget Session.  An earlier version of the Bill had been examined by the Committee on Food and Consumer Affairs, which suggested several amendments such as increasing penalties for misleading advertisements, making certain definitions clearer.   The government accepted most of these recommendations and incorporated them in the 2019 Act.

Besides Bills, the DRSCs also examine the budget.  The detailed estimates of expenditure of all ministries, called Demand for Grants are sent for examination to the DRCSs.  They study the demands to examine the trends in allocations, spending by the ministries, utilisation levels, and the policy priorities of each ministry.  However, only a limited proportion of the budget is usually discussed on the floor of the House.  In the recently dissolved16th Lok Sabha, 17% of the budget was discussed in the House. 

Committees also examine policy issues in their respective Ministries, and make suggestions to the government. The government has to report back on whether these recommendations have been accepted or not.  Based on this, the Committees then table an Action Taken Report, which shows status of the government’s action on each recommendation. 

While Committees have substantially impacted Parliament’s efficacy in discharging its roles, there is still scope for strengthening the Committee system.  In the 16th Lok Sabha, DRSCs examined 41 Bills, 331 Demands for Grants, 197 issues, and published 503 Action Taken Reports. 

However, the rules do not require that all Bills be examined by a Committee.  This leads to some Bills being passed without the advantage of a Committee scrutinising its technical details.  Recently, there has been a declining trend in the percentage of Bills being referred to a Committee.  In the 15th LS, 71% of the Bills introduced were referred to Committees for examination, as compared to 27% in the 16th Lok Sabha.

With the DRSCs now constituted for the first year of the 17th Lok Sabha, they will soon begin their meetings to select the subjects they are going to examine.  Some Committees already have Bills to examine that were referred to them during the 16th Lok Sabha.  Some of these Bills are: (i) the Cinematograph (Amendment) Bill, 2019, (ii) the Allied and Healthcare Professions Bill, 2018, and (iii) the Registration of Marriage of Non- Resident Indian Bill, 2019.  So far in the 17th Lok Sabha no Bill has been referred to a Committee yet.

 

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