Saturday, November 15, 2014

Nehru and Patel: Inheritance Quarrel between Congress and BJP


An interesting debate has started in our country on the occasion of the 125th birthday of Pandit Jawaharlal Nehru on 14.11.2014. It appears that it will not stop in the near future. The debate is about who is great among the two important leaders of independence struggle, Jawarlal Nehru or Vallabh Bhai Patel? In fact, this debate is not a recent debate. The debate was started in the past by RSS and its political department BJP (earlier Janasangh). Their argument is that if Patel had been the Prime Minister instead of Jawaharlal Nehru, a part of the Kashmir would not have gone to Pakistan, India would not have been defeated by China and the country would have been entirely different. Those who are of this ideological view believe that Akhand Bharat, as conceived by RSS would have been possible if Patel had been the Prime Minister. Narendra Modi told the same in a recent meeting. The reason for their belief in Patel even though he was a Congress man is that he was inclined to Hindu communal ideology. He was close to RSS parivar and he was slightly anti Muslim. He expressed his communal ideology and anti Muslim feelings on several occasions.These are all on record. That is why RSS-BJP is trying to degrade Nehru and upgrade Patel. RSS parivar helped the British rulers during independence struggle. Hence they do not have independence struggle heritage. That is why  they are borrowing Patel who is close to them ideologically, among the Congress leadership.

RSS parivar always hated Nehru. It was because Nehru tried to build India on the foundation of secularism and democracy. He led the liberal group among the Indian bourgeoisie. He believed scientific thinking. He opposed communalism and religious bigotry. Internationally, he opposed fascism and welcomed socialism. In 1936 when the Popular Front in Spain has been waging a heroic struggle against fascists, Nehru went there and extended support to Popular Front. With this, he became popular as a great Statesman of the World. RSS does not like any of these great qualities. The Guru of RSS, Shri Golwalkar was a worshipper of Hitler. He welcomed fascism. He strongly opposed socialism. That is why RSS opposed Nehru then and is still opposing and will continue to oppose.

The RSS parivar gathered courage now since the BJP came to power having full majority on its own. Therefore it started to implement its agenda in full. It started its efforts to change the text books of Indian History, to fill the text books with Hindu Puranas, to stop the spread of modern thinking and spread the outdated ancient beliefs among the people in the name of science and in this process, it started to make recent history also upside down. As a part of this scheme, it started honouring Congress leader Patel with RSS shawl and making him a leader greater than Mahatma Gandhi and Pandit Nehru. It started building a 597 feet tall statue for Patel in Narmada river at Vaddodara at a cost of Rs 3000 crore. It allotted Rs 200 crores in this year’s budget for building the statue. It announced Patel’s birthday as National Unity Day.  It is not stopping with praising Patel. It decided to remove the names of Nehru and his heirs earlier given for some 650 schemes and projects.

Worried with this campaign of BJP-RSS, the Congress party started claiming it self as the sole inheritor of Nehru. It held Nehru birthday in a big way. They invited several leaders from the the country as well as from other countries. But they did not invite the Prime Minister Narendra Modi. The reason they are telling is that Narendrra Modi is hard core opponent of Nehru and only the Congress aprty inherits the legacy of Nehru. Nehru is the first Prime Minister of this country. He ruled the country from 1947 to 1964. Inspite of this, the BJP Government has not cared much for observing 125th birth day of Nehru. But the fact is that the Congress and the BJP who are claiming the inheritance of Nehru and patel respectively have left their inheritance in practice. Congress party lost its right to claim Nehru’s legacy the moment it started the neo-liberal economic policies in 1991. Now it has nothing with it to claim the legacy of Nehru. Nehru gave importance to Public Sector. Congress sold them in the open market. Nehru implemented policies strengthening self reliance. Congress party opened the doors to foreign capital and foreign goods. Nehru laid the foundation for non-alignment in foreign policy. Congress Party left non-alignment and made India as a junior partner of imperialists. Nehru stood for secularism and democracy. Congress vacillated on secularism and made several attacks on democracy. Tehrefore Congress has no real legacy of Nehru, except using his name to sell its bad fruits in the name of a good tree.

The BJP has been utilizing Patel’s name without implementing his ideals. Though Patel might be inclined to communal ideology, he fought strongly against imperialism. He was a disciple of Mahatma Gandhi. Patel expressed his serious anger against RSS on the occasion of killing Mahatma Gandhi. On 10th July 1948, after the assassination of Mahatma Gandhi,  he wrote a letter to Jansangh leader Dr Shyam Prasad Mukherjee stating, “ As regards the RSS and the Hindu Mahasabha, the case relating to Gandhiji’s murder is sub-judice and I should not like to say any thing about the participation of the two organisationss, but our reports do confirm that as a result of the activities of these two bodies, particularly the former, an atmosphere was created in the country in which such a ghastly tragedy became possible. Therre is no doubt in my mind the extreme section of the Hindu Maahasaabha was involved in the conspiracy. The activities of the RSS constituted a clear threat to the existence of the Government and the State.”(Sardar Patel’s Correspondence, Volume 6, page 323, Navjeevan, 1973). Whereas in those days Patel fought against British rule in the country, now the BJP leaders are mortgaging the country to foreign capitalists. To get some favors from America, Japan etc., they are endangering the lives of crores of the people of our country (A clear example in this regard is that the Modi Government has lifted controls on 100 life saving drugs to satisfy Obama, before the visit of Modi to America. Due to this, the American companies will get more profit and the price of life saving drugs would be beyond the reach of common people).  Therefore it is not simply about the legacy of Nehru or Patel. The Congress and the BJP have no right at all to claim the legacy of innumerable martyrs who sacrificed their lives fighting for independence of the country.

The Corporate media organising this debate on the legacy of Nehru and Patel are hiding some naked facts. These facts are— the RSS and Hindu Mahasabha never participated in thee independence struggle. Savarkar, who fought, has come out of Jail by writing a surrender letter to the British rulers and there are several evidences to prove that the RSS parivar helped the British rulers. Media is escaping from debating these facts.

Therre is another fact to be noted. The corporate media is not telling any thing about the independence movement legacy of the communists. In fact, it was the communists who introduced radicalism in Congress after 1920. The Communists, who were in the Congress party at that time, have brought forward the slogan of “Complete Independence”. The Communists were instrumental in bringing the agenda of elimination of feudalism, elimination of caste oppression to bring social change, into the independence movement. The communists have organised peasant struggles in several places in the country against feudalism and thus brought forward the question of land reform  and elimination of rural povery, into the agenda of independence movement. By oraganizing trade unions and working class struggles, the Communists have brought forward the issues of the working class into the agenda of the independence movement. The Communists ahve built people’s cultural movement during the sstruggle against fascism. Therefore the Communists are the best inheritors of the legacy of the independence movement and they are still continuing to carry forward this glorious legacy of the independence movement. The RSS parivar that never participated in the independence movement and on the other hand collaborated with the British rulers and still continue to to hanker for the small mercies from the imperialists and the Congress which has mortgaged the legacy of independence movement can not claim the legacy of the independence movement. The quarrel between Congress and BJP over the legacy of Nehru and Patel is only for deceiving the people.

(This article was originally written in Telugu by S.Venkata Rao and published in the Telugu daily “Prajaasakti” on 15.11.2014. The English translation was done by P.Asokababu)


















Monday, August 11, 2014

Government’s Cure for BSNL is more dangerous than the disease

Losses of BSNL and remedies of the Government

In the Rajyasabha, while answering several questions raised by MPs in July and August  2014 on the viability of BSNL, the Minister for Communications and IT, Sri Ravishankar Prasad has revealed the following facts and proposals:
1.       The losses of BSNL on its landline network and its net losses are as below:

Item
Loss for 2011-12
Loss for 2012-13
Loss for 2013-14
Loss on landlines
Rs 12669 crore
Rs 13445 crore
Rs 14979 crores
(provisional)
Net Loss
Rs 8851 crores
Rs 7884 crores
Rs 7085 crores
(provisional)

2.       The landline connections of BSNL have reduced by 38.04% during the period from March 2009 to May 2014 and the market share of mobile subscriber base of BSNL has reduced from 14.87% in March 2009 to 10.95% in May 2014.

3.       The wire line connections of BSNL were 2.247 crores as on 31.3.2012 and it declined to 1.818 crores as on 31.5.2014.The wireless connections of BSNL were 9.851 crores as on 31.3.2012 and it declined to 9.162 crores as on 31.5.2014.The total number of wire line and wireless connections taken together were 12.098 crores on 31.3.2012 And it declined to 10.98 crores as on 31.5.2014, with the percentage of decline as 33.4%. The market share of BSNL and MTNL taken together as on 31.5.2014 in wire line connections is 77.03% and wireless connections is 10.44%.

4.       The market share of BSNL in wire line connections was 85.61% on 31.3.2012 and it declined to 82.57%
5.       The revenues from operations of BSNL have reduced by 11.67% in the last five years

6.       The total debt of BSNL is Rs 6448 crores (unaudited) as on 30.6.2014. It was Rs 3335 crores on 31.3.2012, Rs 4772 crore on 31.3.2013 and Rs 5948 crore on 31.3.2014.

7.       The declining market share of BSNL  is for the following reasons:
·         The declining wire line business due to shift to mobile communication
·         Inability to expand coverage due to finance and procurement problems
·         Lack of adequate skill sets due to changing nature of technology and customer centric business with focus on sales, marketing and customer services
·         Stiff competition in the telecommunications sector

8.       The following measures were taken by the Government to revive BSNL:

a)      Waiver of Government loan to BSNL involving an amount of Rs 1411 crores

b)      Financial support of Rs 6724.51 crores to BSNL on surrender of BWA spectrum

c)       The Government is formulating a coordinated plan aimed towards revival of BSNL by addressing issues of high employee expense and gainful utilization of assets to enhance availability of finances for network expansion and improvement in Quality of Services.

d)      BSNL has submitted a proposal to offer Voluntary Retirement Scheme(VRS) to one lakh employees to reduce employee expenses. After consideration of various options and based on the recommendations of Group of Ministers, Department of Telecommunications is considering a proposal to provide annual financial support for reduction of employee expenses with certain conditions.

e)      BSNL has taken the following steps for improving its landline business:

·         Migration from Public Switched Telephone Network to Next Generation Network(NGN) in the current Five year plan(i.e 2012-2017)to provide enhanced value added services like Personalized Ring Back Tone, Broadband VAS, Multi Media Video Conferencing, Wide Area Centrex, Voice over Internet Protocol(VOIP) services and fixed –mobile services convergence etc(fixed-mobile convergence means your cell phone will work on mobile networks when you are outside your office or home and will work on landline network while you are at home or office)[Note—these portions in italics are added by me…asokababu]

·         Redeployment of workforce with more focus on Sales, Distribution and customer care activities

·         Measures to retain and enhance the landline connectivity by increasing penetration of broadband.

·         Sales and marketing set up has been strengthened by having exclusive channel management team consisting of 4500 exclusive sales representatives.

·         Introduction of Call Detailed Record (CDR) based billing, commercial and fault repair service and work order management system.

f)       BSNL is preparing a revival plan for increasing revenue potential, identifying business opportunities, organizational restructuring to enable them to grow into customer-centric companies with expertise in marketing and customer services delivery and developing human resources strategy in line with restructured organizational vision.

g)      The long term measures, including revival of BSNL and MTNL, would attempt to position these PSUs to emerge as market leaders in the converged telecommunications market. For an in-depth study on the implications of merger of the two PSUs, three groups have been constituted to study issues of human resources integration, technology integration, and corporate integration. Views of the Unions on merger would be taken into consideration before a decision is taken in best public interest and that of two companies.


If landline network is not there, BSNL would have been in profit-But the society would have lost

As per the above figures given by the Minister, BSNL’s loss on its landline network for the year 2013-14 was Rs 14979 crores where as its net loss was Rs 7085 crores only. Thus if the landline network is not there, BSNL would have been in a profit of Rs 7894 crores (14979-7085). The losses are on account of landlines. The losses on landlines means that the expenditure on landlines(including salaries of staff working on landlines, administrative and operational expenditure on landlines, depreciation on landline assets etc) has exceeded by Rs 7894 crores over the revenue on landlines for the year 2013-14. But most of the staff of BSNL is engaged on landlines only. Thus the issue is how to make the landline business profitable. Another question is since BSNL is having vast landline network in throughout the country including rural and backward areas which are necessarily loss making, whether BSNL should operate its landline network only in urban areas like the private operators? If so, how the fixed line broadband connectivity can be provided to the rural and backward areas? Whether proper quality bandwidth can be provided on mobile connections without the necessity for landlines in the loss making areas? As per the technical considerations, quality bandwidth for broadband connections cab be provided only through wire line connections. Therefore there is necessity to maintain landlines in rural and backward areas for providing broadband connections, although the landlines in these areas are loss making. In the urban areas, the wire line connections are generally loss making. If BSNL has not maintained the vast land line network even by posting huge losses, it would not have been possible to provide internet and broadband connections in the scale provided at present on wire line connections. As on 31.5.2014, BSNL’s wired broadband (speed >512 Kbps) subscribers are 99.8 lakhs whereas the next largest provider Airtel has 14 lakhs wire line broadband connections.

Thus the BSNL’s wire line network is socially required, although it is essentially a loss making business. At the same time, with proper steps taken by the Government and management in providing necessary equipment, tools and material, the revenue on landline network would have been more. In spite of this, there will be some loss to BSNL on landlines and it is the responsibility of the Government to compensate BSNL for this, since the landline network is being maintained as a social obligation by BSNL.

The decline in mobile connections

As per the statement of the Minister, the number of mobile connections of BSNL has declined from  9.851 crores as on 31.3.2012 to 9.162 crores as on 31.5.2014.As per the TRAI’s report, In May 2014 alone, while there is  increase in the customer base of all other operators (except Reliance), BSNL lost 15,73,275 mobile customers. In May 2014, the proportion of VLR subscribers for BSNL was 61.53% i.e. only 61.53% of mobile subscribers have made calls/accessed data etc using their mobile connection. But the VLR subscribers for Idea, Airtel, Vodaphone and Relaince in the same month were more than 94%. Thus even in mobile services, BSNL is losing its customers and market share and even in these customers only 61.53% are active using their connections.  Non procurement of the required GSM equipment in time, defects in operation and maintenance of the services, defective services, and poor strategy in marketing and sales are the reasons for this.

Recommendations of Deloitt  Consultant-A serious  attack on the job security of BSNL employees

Instead of compensating BSNL thus, the Government and BSNL management are now resorting to a serious attack on the job security of BSNL employees. The Minister Sri Ravishankar Prasad told in Rajyasabha, “  BSNL is preparing a revival plan for increasing revenue potential, identifying business opportunities, organizational restructuring to enable them to grow into customer-centric companies with expertise in marketing and customer services delivery and developing human resources strategy in line with restructured organizational vision.”  He also told that the plan for revival of BSNL includes “addressing the high addressing the  issue of high employee expense. This means there will be an organizational restructure of BSNL and according to that the man power also will be restructured. In fact, BSNL has appointed the Deloitte Consultant, on the issue of revival of BSNL. It submitted its recommendations recently.

Following are the important recommendations of this Deloitte Consultant:

a)       Restructuring of the field units of BSNL:   Instead of the present 300+ SSAs, there should be only 167 SSAs by merging some SSAs and these 167 units are to be called as Area Offices

b)      These Area Offices will have to focus on sales, marketing and   customer service delivery.

c)       These Area Offices also have to monitor the outsourced agencies for O&M of wireless and wire line networks. Thus the entire work of Operation and maintenance of wire line and wireless networks has to be outsourced.

d)       The transmission, network planning has to be moved to circle office. The non-territorial circles like Projects and Maintenance Circles, Civil and Electrical wings etc have to be abolished.

e)       After full implementation of ERP, the functions such as HT and Finance have to be moved to Circle Office. Thus there will be no staff, pay, TRA sections in Districts. According to these recommendations Sr ToAs are required only until implementation of ERP.

f)       For sales, marketing, customer service delivery, and IT,  fresh recruitment of a total 13300 executives has  to take place, but majority of them will be off the rolls of BSNL. Thus there will be a new situation with two kinds of employees, on roll and off roll.

g)      The recommendations have declared that most of the non-executives are surplus, even without full implementation of ERP and outsourcing of O&M.

h)      According to these recommendations, in the case of AP Circle, even without implementation of ERP and without outsourcing of O&M, out of the 20775 non-executives in all the SSAs of the Circle, only 5889 are required. Similarly, as per these recommendations, out of the 15378 non-executives in all the SSAs in Gujarat , only 8415 are required. Similarly in UP(E) Circle, out of the 8425 non-executives working in all  the SSAs, only 1798 are required.  In this manner, these recommendations have proposed drastic reduction in the requirement of non-executives, in all the circles.  These recommendations have proposed to show the vast majority of the non-executives as surplus, to be shown against supernumerary posts.

i)        The excess staff beyond requirement has to be shown against   supernumerary posts. This means they will not be shown against their own posts which will be abolished and will be shown against supernumerary posts, thus declaring that they are surplus and unwanted.

j)        BSNL has to claim half of the salaries of the employees shown against supernumerary posts, from the Government.( After full implementation of ERP and outsourcing of O&M as per these recommendations, more number of non-executives will be declared surplus and shown against supernumerary posts. )

Thus these recommendations are a serious attack on the job security of the BSNL employees. The staff strength has been in decline considerably after the formation of BSNL due to lack of recruitment and large scale retirements on superannuation. Therefore there is no basis for declaring the large number of staff as surplus. It is only a mind game of the management and Government to make the propaganda that the staff are surplus.  Also, these recommendations, if implemented, will result in two sets of employees-on rolls and off rolls, thus creating disunity among employees and weakening their potentiality to fight against the attacks on them. These recommendations, if implemented, will lead to privatization of the maintenance and operations of the networks of BSNL, both landline and mobile.

The BSNL Corporate Office has issued a circular to all CGMTs vide No.4-2/2014-Restg dated 18.7.2014 asking them to come prepared for a discussion on these recommendations proposed to hold a discussion in the Heads of the Circles meeting to be held on 12th & 13th August 2014(now postponed to 21st  and 22nd August 2014).  Thus the management is going ahead with the process for implementation of these recommendations. It is a part of the Minister’s statement in Rajyasabha that the Government is “formulating a coordinated plan aimed towards revival of BSNL by addressing issues of high employee expense”. Thus a serious attack on the job security of BSNL employees is in there in the near future.

Merger of BSNL and MTNL-another proposal for further attack on BSNL

The Minister told in the Rajyasabha that merger of BSNL and MTNL is one of the long term measures proposed for the revival of BSNL and MTNL and three groups were constituted to study the implications of this merger. While BSNL and MTNL have been continuously in losses since 2009-10, MTNL has posted a profit of Rs 7825 crores for the year 2013-14 not due to increase in revenue or decrease in expenditure, but due to the Government’s decision to write back of provisions on account of pensionary liabilities of MTNL since 1.10.2000 and spectrum amortization costs, as per the decisions of the Government.  Thus the issue of operational losses to MTNL continues in spite of this. When both MTNL and BSNL are in losses, how their merger can result in the magic of profit to them? MTNL is disinvested to the extent of 43.75% and if BSNL and MTNL are merged, the combined entity will be a disinvested company, whereas at present BSNL is a 100% Government owned company. Thus, the merger will lead to disinvestment and privatization in installments. Moreover, as on 31.3.2013, the net worth of MTNL was negative, with (-)2784 crores. The net worth of BSNL on the same date was Rs 63639 crores. Their combined net worth as on 31.3.2013 would be Rs 60855 crores. Their combined losses as on 31.3.2013 would be Rs 39777 crores. Thus as on 31.3.2013, their combined loss was more than 50% of their combined net worth and hence the combined entity would become sick as per rules on the date of its formation itself! Merger will not result in MTNL scales for BSNL employees, but will result in BSNL scales for MTNL employees, as per the rules issued by the Government for payment of Government pension to MTNL employees. On the other hand, the merged company would be a sick and disinvested company. Thus merger will create more problems instead of solving it.

Forming a subsidiary tower company by separating the 62000 towers from BSNL

As per the reports in the news papers on 25.6.2014, the Communications Ministry has prepared the draft of a note on the merger of BSNL and MTNL and sent it to the Communications Minister Ravi Shankar Prasad for his approval. It seems the note has proposed for forming a separate 100% subsidiary tower company by separating the towers from BSNL, with outsourcing of operation, maintenance, sale and marketing functions. But some other reports talked about inviting a private partner into the tower company by forming a joint venture. As per the reports in various newspapers, a DoT has proposed a note  It seems the note has proposed for forming a separate 100% subsidiary tower company by separating the towers from BSNL, with outsourcing of operation, maintenance, sale and marketing functions.

No proposal for financial assistance to BSNL for expanding and upgrading its services, but all proposals for fragmentation and privatization of BSNL along with a serious attack on the job security of the employees

The replies given by the Minister Sri Ravishankar Prasad on the issue of revival of BSNL and MTNL are clearly indicating that the Modi Government is following the UPA Government in rejecting the compensation to BSNL for the huge losses incurred by it on landlines which are maintained by it as a social obligation. It is equally as adamant as the UPA Government in not providing any financial help to BSNL for expanding and upgrading its network. As per the previous CMD Sri R.K.Upadhyay, Rs 40,000 crores capital is required to be invested by BSNL during 12th plan (2012-17) for expanding and upgrading the network of BSNL so that it is able to achieve profit and viability by 2017. Since BSNL is incurring losses on landlines as a social obligation for the commercially unviable landlines, it is the responsibility of the Government to evolve a policy for compensating BSNL   for these losses so that it can utilize the amount  for expanding and upgrading its network. But such a help is being denied by the Modi Government.  Instead, it is resorting to various proposals to divide BSNL into Tower Company and Services Company, to privatize the operation and maintenance of these tower and services companies, to declare thousands of staff as surplus and to merge BSNL and MTNL to create a sick and disinvested entity etc. Its talk of providing annual financial support for reduction of employee expenses with certain conditions is aimed at declaring staff surplus.

The proposals of BSNL employees for the revival of BSNL

The Forum of Unions and Associations of BSNL Non-Executives and Executives has been demanding that the Government should take the following steps for reviving BSNL:

1.       Fully compensate the losses incurred by BSNL on landlines

2.       Refund the Rs 18500 crore amount collected by the Government from BSNL   in the name of 3G and BWA spectrum. BSNL was compelled to take 3G spectrum even for the commercially unviable circles, whereas the private operators are allowed to take 3G spectrum only for some circles and share the spectrum of other operators in the remaining circles. BSNL was allotted poor quality BWA spectrum and it surrendered it back to Government in most of the circles.

3.       Financial assistance to BSNL for expanding and upgrading its services

4.       Necessary procedure for immediate procurement of the required equipment, tools and materials

5.       BSNL be allowed to pay pension contribution on the actual pay of the employee instead of on the maximum of the pay scale.

6.        BSNL/MTNL services be made mandatory for Central/State Government departments and PSUs.

7.       Filling up the posts of Directors of the BSNL Board(BSNL is now not even having a regular CMD)
8.       Absorption of ITS officers in BSNL

9.       Dropping the proposed tower company/BSNL-MTNL merger/Deloitte consultant recommendations.

The  Government has to be compelled to concede these demands by organizing a serious struggle and mobilizing  the support of the people. It is also necessary for the BSNL employees to work with dedication for extending better service to the customers.
                                                                                                                           

…..P. Asokababu














Monday, August 4, 2014

Resist the attack of the Modi Government on Insurance and Pension


Hold demonstrations on the same day when Insurance employees will go on strike
Modi Government proposed to submit the bill  for enhancing the FDI ceiling limit in Insurance Companies from 26% to 49%, in Rajyasabha on 4.8.2014. Since the opposition parties have demanded to refer the bill to a select committee before submitting it in Rajyasabha, the Government deferred the submission on 4.8.2014 and  held meeting with opposition parties on 4.8.2014  requesting them to accept this bill. Since it has no majority in Rajyasabha, the Government is trying to convince the opposition parties to support the bill. Since there is no consensus, it was decided to meet again on 5.8.2014 and 6.8.2014. The NCP and BJD have already decided to support the bill as proposed by the Modi Government. The Congress party is not opposing the bill, but wants some amendments in it. Except the Left Parties, all other parties are not opposing the bill, although they seek some modifications in it.  The Government is trying to convince other opposition parties except Left in order to get the bill approved by Rajyasabha. In case the bill gets approval of the Rajyasabha,  the very next day the insurance  employees will go on strike. If Rajyasabha approves the bill, thereafter, it would be sent to Loksabha for its approval. If the bill gets the approval of the Parliament, the ceiling limit of FDI in pension sector also will be enhanced automatically erom 26% to 49% as per thee provisions in the PFRDA(Pension Fund Regulatory and Development Authority) Act.
Raising the FDI ceiling limit is the demand of the American Corporates. Neolieral circles are demanding that there should be no regulation on the coming in and going away of finternational finance to our insurance, banking and pension sectors.
In 1999 the Vajapayee Government has brought “Insurance Regulatory and Development Authority Act” to allow private companies and 26% FDI in insurance sector. Since then, the international and national big capitalists are pressurizing for enhancing the FDI limit to 49% in insurance sector. UPA-1 Government could not do so due to the opposition from the Left Parties on whose support it depended. After the withdrawal of the support by the Left parties, the UPA-1 Government has introduced the bill in Rajyasabha in 2008 for enhancing the limit to 49%, but could not get it passed. UPA-2 also tried, but failed to get it passed. The Parliamentary Standing Committee at that time which was chaired by the BJP leader Yeswant Sinha has recommended that there was no necessity to enhance the ceiling limit to 49%.
But now, Modi’s BJP Government is introducing the amendment in the Rajaysabha, although BJP opposed the same when it was in opposition. Modi Government is now doing this only to prove that it is committed to neoliberal economic policies and its goal is to satisfy the international finance capital. The Congress Party was in favored this bill previously and therefore it is likely to support this bill.
The argument of the Government and neoliberalists that raising ceiling limit of FDI to 49% will help in mobilizing capital for developing insurance sector so that more and more people are covered under insurance is not a valid argument. Much capital is not required in insurance since it is not a capital intensive sector and India is capable of investing the required capital in insurance. The FDI or any capital from foreign countries is not required. Moreover the history of foreign insurance companies is the history of serious threat to the insurance funds of the people. The biggest insurance Company AIG could be saved from bankruptcy only with the infusion of huge funds of the American Government. There are several instances where these foreign insurance companies failed to pay the insured amount to the customers. The insurance sector in India was nationalized in 1956 because of thee scams and failures of the private insurance companies. Therefore enhancing the FDI limit in insurance to 49% is nothing but sacrificing the insurance funds built by our people at the altar of the profit hunger of the foreign and Indian private insurance companies. These companies will invest in risky areas to get higher profits and it will endanger the insurance funds.
The PSU Life Insurance Corporation(LIC) was able to capture 74% of the life insurance market in a tough competition with the private insurance companies. It has been paying considerable dividend amounts to the Government and investing huge amounts for the developmental activities of thee Government. Ignoring these beneficial aspects and opening more and more of our insurance and pension sectors for satisfying the profit hunger of the big finance and corporate companies is irregular and unjust.
In banking sector, at present the FDI limit is 26%. But their voting rights were restricted to 10% even if they hold 26% of the shares in the private sector banks. The UPA-2 Government has raised this limit of voting rights of foreign banks in our private banks from 10% to 26%, thus allowing the foreign banks to control Indian banks. Now the Modi Government has declared large scale disinvestment of PSU banks.
All these steps taken by earlier UPA Governments and further continued by the present Modi Government will make our insurance, banking and pension sectors privatized and foreign dominated, thereby making the funds invested by our people in insurance, banking and pensions fund companies unsecure.
The then NDA Government lead by Vajpayee has brought the Central Government employees recruited on or after 1.1.2004 out of the purview of Government pension and imposed on them a new contributory pension scheme. As per this new pension scheme, the employee will contribute every month 10% as pension contribution and the Government also will contribute equal amount and the entire contribution will be deposited in a pension fund company as per the option of the employee. But the amount of pension the employee will get from the pension fund company after retirement is not known. It depends on the profits the pension fund company will get on its investments in the share market.If the pension fund company becomes bankrupt, the employee will get no pension. Thus the contribution from the employee for pension is definite and certain whereas the pension payment after retirement is not definite and it is uncertain.But this new pension scheme endangering the pension of the Government employees recruited after 1.1.2004 was not implemented by the Left lead Governments in Kerala, Bengal and Tripura at that time, whereas all other state governments have brought their employees recruited after 1.1.2004 under the purview of this new pension scheme.
Thus the Government employees(except in Bengal, Kerala and Tripura where the Government pension scheme continues for all) are divided into two categories: (1) Those recruited before 11.1.2004 and under Government pension rules as per which they need not pay any pension contribution while they are in service and will get 50% of their basic pay as pension from the Government after retirement, and (2) those recruited after 1.1.2004 who have to pay 10% of their salary every month as pension contribution without any guarantee for pension after retirement.
The UPA-1 Government that came after Vajpayee Government has tried to enact this new pension scheme in the Parliament in the name of “Pension Fund Regulatory and Development Authority Act”. But it could not do so due to the opposition from the Left parties on whose support it depended at that time. But the UPA-2 Government which was not dependent on Left Parties got the approval for this bill with the help of the then opposition party BJP. This PFRDA Act allowed 26% FDI in pension fund companies and also stipulated that whenever the FDI ceiling is more in Insurance sector than this 26%, it will be automatically applicable for pension fund companies also. Thus if the Parliament approves this raising of FDI ceiling in insurance to 49%, it will be automatically applicable for pension fund companies also.
If in an insurance company or in a pension fund company the share of a foreign investor is 49% and the remaining 51% shares are divided among Indian investors, the share of foreign investor will be more and the foreign investor will dominate the company. Thus the BJP Government is trying to make our insurance, banking and pension sectors privatized and foreign dominated.
The PFRDA Act provided the powers to the Government that whenever it decides so, it can bring even the employees recruited before 1.1.2004 under the purview of this new pension scheme, by issuing a notification. Not only this. Even the existing Government pensioners also can be brought under the purview of this new pension scheme by the Government by issuing a notification. Thus there is a hidden threat to the pension of those recruited before 1.1.2004 and also for the pension of the existing pensioners.
The Congress will be favorable in principle for enhancing this ceiling since it has proposed the same when it was in power. But the Congress says that the BJP’s bill now under submission to Rajyasabha is different from what they proposed, in that, the Congress’s bill is for the ceiling limit of 49% for FDI only and such FDI will be fully with the Insurance Company without leaving it, whereas the BJP bill ahs included the portfolio investments which can leave the company as and when they like, in this enhanced ceiling limit of 49%. Therefore Congress is saying that it has to think before extending support. If Congress supports and the bill gets approval in the Rajyasabha, thereafter, it has to be sent to Loksabha for its approval. The AIIEA(All India Insurance Employees Association has decided to go on one day strike the next day as and when the Rajyasabha approves the bill.
This attack is not only on insurance sector. It is an attack on pension and banking sectors also. Therefore it is the responsibility of all the government employees, bank employees ,  pensioners  and their organizations to support this strike of insurance employees by holding demonstrations when they go on strike.

Letter written by Com Amanulla Khan, President, AIIEA, to Smt Sonia Gandhi, President, Congress Party, requesting not to extend support to the bill enhancing the FDI ceiling limit in Insurance from 26% to 49%

                                                                                             July 28, 2014                                                                                     

Smt. Sonia Gandhi,
President,
Indian National Congress,
10, Janpath, New Delhi-110011

Dear Madam,

FDI HIKE IN INSURANCE

The All India Insurance Employees’ Association is the biggest and oldest trade union of insurance employees.  We have been playing a very constructive role in the growth of the public sector insurance industry with a clear understanding of its role in the national economy.  We have been agitating against the FDI hike in the insurance sector from 26 percent to 49 percent.  Our opposition is not based on any partisan reasons but on the grounds of its impact on the national economy. We firmly believe that financial sector is the key to national development and liberalization of this sector is fraught with dangerous consequences. The global financial meltdown and the consequent economic crisis vindicate our understanding. Therefore, we are disturbed by the statements of the important functionaries of the Indian National Congress in support of the decision of the NDA government to hike the FDI and steps towards privatization of the public sector general insurance companies.  We, therefore, wish to place our views on the subject and request you to reconsider the support to Insurance Laws (Amendment) Bill.
The global insurance scenario is not very happy. Since the financial crisis in 2008, the advanced industrialized nations are experiencing stagnation in premium income. The annual growth rate in North American is (-) 2.9%, Oceania (-) 3.7% and Western Europe (-) 0.6%. (Sigma Report 3/2014). Moreover the demography has made insurance a difficult business to operate in these markets. Therefore, it is natural for the multinational companies to demand further opening up of the insurance sector in India which is very promising with a young population. But we need to carefully analyse the consequences of higher FDI limit and the benefits or otherwise to our national economy. Today there is a consensus world over that domestic savings play a large role in capital formation and economic development and therefore it is not prudent to allow the foreign capital greater access and control over the domestic savings by increasing the FDI limit.
The two major arguments in favour of increase in the foreign equity limits are:
(1)  The private insurance companies are starved of funds and it has become inevitable to increase the FDI limit; and
(2)  The increase in the FDI limits will help deepening the insurance market and increase the levels of penetration.  The resources so generated will help funding of long term infrastructure projects.
We are not in a position to agree with both these arguments on the basis of the existing realities. The reasons for our disagreement are:
a)     Insurance Sector unlike manufacturing is not capital intensive. In many countries the start-up capital for an insurance company is much lower than in India. The high solvency margin and other regulations are so framed as to make it look that an insurance company cannot do business without FDI. (FDI in insurance – R.Ramakrishna – Actuary).
b)   There are around 50 joint venture companies operating in the country both in life and non-life segments. The Indian promoters of these companies are big industrial and financial houses. They have enough resources including easy access to funds for deployment in case of need.  They also have the option of raising resources through initial public offerings.
It is not possible to accept that they lack resources for investment in their insurance ventures.
c)    There is no relationship between the capital employed and the business procured. The following table justifies our argument. The data is as on 31st March 2013.
Slno
Name of the Company
Total Capital & Reserve (in Crore)
Total Premium Income earned (in Crore)
1
Bajaj Alliance
4844
6893
2
SBI lIFE
2710
10450
3
Bharathi AXA
1999
745
4
HDFC Standard
2204
11323
5
LIC
100
208000

d)   The above table clearly points out that higher capital does not mean higher mobilization of premium income. What bring increase in premium income is a better trained agency force and other efficient channels of distribution.
e)    Insurance penetration and density depend upon the growth of the national economy and the disposable income in the hands of the people. Despite poor incomes and very little disposable incomes, India has done extremely well in insurance. The World Economic Forum gave Indian Life Insurance industry the top global ranking and it ranked India number 3 in general insurance business in terms of density. India’s global ranking is 11 in volumes of life insurance premium in 2013. (Sigma Report.)
f)     The criticism on insurance penetration is unnecessary, though there is a great possibility for improvement. Life insurance penetration in India at 3.1% compares favourably with 3.2% of United States, 2.9% of Canada and 3.1% in Germany. India has a higher level of penetration than all the Latin American countries and many of the developed nations. We can improve upon this if the incomes levels and disposable incomes increase.
g)    The argument that entry of private sector has deepened insurance market needs close scrutiny. We may point out that LIC recorded compound annual growth rate of 19.5% in the nineties. We strongly believe LIC would have continued to grow at this rate had the sector not been opened. With a 19.5% CAGR the total premium of LIC would have been Rs.337256 crore for 2013-14. Interestingly the combined TPI of LIC and the private companies is the same figure for 2013-14. This again makes it clear that the entry of private companies did not result into expansion of the market. Rather the private companies tried to capture a share of the market created by the public sector. It is also a fact that the private companies concentrated on the big ticket policies with no social obligation for the poor and disadvantaged.
We are, therefore, convinced that opening up the sector did not benefit the economy nor did it benefit the insuring public. The claims that opening up of insurance sector would open the floodgates for the foreign capital to benefit infrastructure remain unsubstantiated. The insuring public with high lapsation ratio and high rate of claim repudiation by the private companies has suffered. In the face of these realities, it is imprudent to give the foreign capital a greater space and control over the domestic savings.  We have real apprehension that FDI hike will only succeed in hastening the process of mergers and acquisitions which would have serious impact on the public sector and consequently the national economy itself. The claim that even when the foreign equity limit is raised to 49%, the management and control will remain with the Indians is unconvincing. You are aware that with 26% equity participation the foreigners are now controlling the functioning of many of the joint venture companies.

We, therefore, request you to review your support to the FDI hike. We will be very happy to answer any clarification required on our assessment. We will also be happy to meet you personally to explain our stand if it so required.

Thanking you,

Yours faithfully,
                                                                                       
 Sd/-
(Amanulla Khan)
     President