Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,
I have written to you time and again, pointing out the imprudence of disinvesting the CPSEs and the illegality of monetising the CPSE lands. 
CPSEs were created by the previous governments for valid reasons, such as the need for social control over scarce resources, the importance of State involvement in the nation’s transport and other infrastructure lifelines, the need to promote self-reliance through State intervention in R&D etc. 
Moreover, as an arm of the State under Article 12 of the Constitution, the CPSEs function as the instruments of the State to fulfill the latter’s social and welfare obligations under Part IV (Directive Principles) of the Constitution. PSU banks and insurance companies were created for extending socio-economic development to the rural and the remote areas and for reaching out to the most disadvantaged sections of the society. A public sector insurance company like the LIC was created, not for making profits, but to provide an extensive social security cover for the low-income groups of the population. These considerations on the basis of which the public sector enterprises were created at that time continue to be valid even today. As such, it is ill-advised for the government to pretend ignorance of the same and put up the valuable public assets, built assiduously over the last several decades, for a distress sale, as your government is doing at present.
I have time and again pointed out that all disinvestment sales are bound to be distress sales without much competition, with no addition to the fiscal resources, as those who buy them obtain the needed funds from the same pool of savings in the economy from which the government borrows on much more advantageous terms.
It is unfortunate that, in each and every case of CPSE disinvestment, a highly objectionable clause is introduced prohibiting the other competent CPSEs from bidding for the same. This has eliminated competition, indirectly allowing the private bidders to have an undue advantage, in addition to eliminating any possibility of the other CPSEs acquiring those on sale and building mutually beneficial synergies.
Thus, in every possible way, your disinvestment approach systematically precluded synergies within the public sector, eroded the idea of self-reliance, transferred control of scarce natural resources to private hands, who would profiteer instead of optimising their use and, more unfortunately, made way for a massive distress sale of the public assets. 
As far as the CPSE lands are concerned, since they were originally acquired from the landowners specifically on the premise that the acquisition was for a company wholly owned by the government, it would be illegal to privatise them either through the disinvestment route or the monetisation route.
Despite my cautioning you quite some time ago on the sale of the CEL (, your government had gone ahead recklessly, seeking a final nod from the Cabinet, for selling this valuable electronics and solar photovoltaics company, with its valuable R&D capital, highly talented well-trained personnel and precious land assets, for a measly amount to a small company with dubious antecedents, whose track record bears no relationship whatsoever with the kind of strategic work carried out by the CEL. There were NCLB and National Law Company Appellate Board proceedings against the buyer, which your Ministry did not care to ascertain before putting up the proposal for the Cabinet’s approval. It is unfortunate that your Ministry failed to respond till there was a public uproar and till court cases were filed. Today, the whole exercise of the sale of the CEL stands totally blemished. Had your Ministry heeded to sane advice at the right time, it would have allowed another CPSE like the BEL to take over the CEL, capitalised on the R&D investments already made and promoted self-reliance in a genuine way.
The sale of Pawan Hans stands approved by the Cabinet, apparently without the concerned department caring to ascertain the status of the NCLB proceedings in respect of the bidders and their antecedents. Only when there were protests from the public, your Ministry chose to put the sale on hold, a situation that has significantly brought down the credibility of the entire disinvestment exercise.
As far as the recent, dubious exercise of disinvestment of the LIC is concerned, in my letter dated 28-4-2022  (, I requested you to stop it at that time, in view of the two possible scams arising, one as a result of the gross undervaluation of the LIC paving the way for speculative investors profiteering at the cost of the policyholders and the second one, as a result of deep-pocket investors borrowing the accounts and the personal information of the small policyholders and making benami investments to exploit the discount-based window provided to the policyholders. What the government has done in the case of the LIC is fundamentally improper, as it has transferred the policyholders’ funds to a handful of speculating investors, a dubious accounting manipulation amounting to a fraud committed on the policyholders. I am sure that the full impact of these scams will soon surface bringing further discredit to your government’s disinvestment programme. By initiating disinvestment, your government would soon be dismantling an excellent social security cover for the disadvantaged sections of the society for no valid justification. 

In the case of the Nilachal Ispat Nigam Ltd (NINL), instead of selling the CPSE to a private company at a nominal price, the government could have derived greater social benefit by merging it with the Rashtriya Ispat Nigam Ltd (RINL). Having its own captive iron ore mine, RINL would emerge much stronger, a synergy that is being lost mindlessly as a result of your government choosing to privatise both the NINL and the RINL, only to give away precious public assets for a song to private companies.
The indiscriminate auctioning of coal blocks to private companies during the last few years has deprived the CIL of its ability to develop greenfield coal projects to boost up India’s self-reliance in coal. As if to orchestrate a systematic weakening of the CIL, your Ministry has also been syphoning of the company’s surplus funds through unconscionably excessive dividends, an indirect way to weaken a CPSE to benefit the private companies. Today, this has plunged the country into an unprecedented coal crisis, crippling the economy, only to force the State utilities to lean more heavily on Indian private companies having coal mines overseas, many of whom are also those who have failed to develop their domestic coal blocks, leading to the present crisis.. This is a unique case of a government going all out to grant largesse to private companies, even if such a largesse meant a huge economic and social cost!
These are only examples that illustrate the imprudence of the CPSE disinvestment programme. As a concerned citizen, I demand that an independent enquiry by a member of the higher judiciary be ordered into the privatisation of the LIC, the CEL and Pawan Hans. 
I also demand that the government should immediately put on hold the entire disinvestment exercise, as otherwise it would impose heavier and heavier costs on the economy in the coming months. I would further suggest that the very question of privatisation of the CPSEs and monetisation of the CPSE assets and lands should be examined in a more meaningful manner and a white paper on the subject placed for a discussion before the Parliament. The Centre should also take the states into confidence as there are issues concerning federalism involved.
Yours sincerely,
E A S Sarma

Former Secretary to Govt of India