CURRENT EVENTS – JUNE 18

Corporatisation of Ordnance Factory Board (OFB)

Context:

Addressing a long pending reform, the Union Cabinet approved a plan to corporatise the Ordnance Factory Board (OFB), which has 41 factories, into seven fully government owned corporate entities on the lines of Defence Public Sector Undertakings (DPSU).

Relevance:

GS-III: Indian Economy (Privatization and Commercialization, Fiscal Policy, Budgeting), GS-III: Industry and Infrastructure

Dimensions of the Article:

1. Basics: What is Public Sector and Private Sector?
2. What is Privatization?
3. What is Corporatization?
4. Privatization and Corporatization in the Economic Survey 2020, Volume 1 Chapter 9
5. Lack of traction for privatisation in India
6. Ordnance Factory Board (OFB)
7. About the Current Major decision regarding OFB

Basics: What is Public Sector and Private Sector?

• In general, two main sectors compose an economy: the public sector and the private sector. Government agencies generally run operations and industries within the public sector.
• Enterprises not run by the government comprise the private sector. Private companies include the majority of firms in the consumer discretionary, consumer staples, finance, information technology, industrial, real estate, materials, and healthcare sectors.

What is Privatization?

• Privatization occurs when a government-owned business, operation, or property becomes owned by a private, non-government party.
• Note: This is NOT to be Confused with “corporate privatization” that describes the transition of a company from being publicly traded to becoming privately held.
• It generally helps governments save money and increase efficiency, where private companies can move goods quicker and more efficiently.
• Privatization is considered to bring more efficiency and objectivity to the company, something that a government company is not concerned about. India went for privatization in the historic reforms budget of 1991, also known as ‘New Economic Policy or LPG policy’.
• Critics of privatization suggest that basic services, such as education, shouldn’t be subject to market forces.

What is Corporatization?

• Corporatization refers to the restructuring or transformation of a state-owned asset or organization into a corporation. These organizations typically have a board of directors, management, and shareholders.
• However, unlike publicly traded companies, the government is the company’s only shareholder, and the shares in the company are not publicly traded.
• The main goal of corporatization is to allow the government to retain ownership of the company while allowing the company to run as efficiently as its private counterparts. Government departments are often inefficient due to internal bureaucratic conventions.
• Additionally, the government may consider that joining the private sector might improve a company’s performance. If this is the case, the government might conduct an offering on the stock market to divest the organization.

Privatization and Corporatization in the Economic Survey 2020, Volume 1 Chapter 9

Evolution of Disinvestment Policy in India

• The liberalization reforms undertaken in 1991 ushered in an increased demand for privatization/ disinvestment of PSUs.
• In the initial phase, this was done through the sale of a minority stake in bundles through auction. This was followed by a separate sale for each company in the following years, a method popularly adopted till 1999-2000.
• India adopted strategic sale as a policy measure in 1999-2000 with the sale of a substantial portion of government shareholding in identified Central PSEs (CPSEs) up to 50% or more, along with transfer of management control. This was started with the sale of 74 % of the Government’s equity in Modern Food Industries Limited (MFIL).
• Thereafter, 12 PSUs (including four subsidiaries of PSUs), and 17 hotels of Indian Tourism Development Corporation (ITDC) were sold to private investors along with transfer of management control by the Government.
• Another major shift in disinvestment policy was made in 2004-05 when it was decided that the government may “dilute its equity and raise resources to meet the social needs of the people”, a distinct departure from strategic sales.
• Department of Investment and Public Asset Management (DIPAM) has laid down comprehensive guidelines on “Capital Restructuring of CPSEs” in May 2016 by addressing various aspects, such as payment of dividends, buyback of shares, issues of bonus shares and splitting of shares.

Privatization in 2019

• In November 2019, India launched its biggest privatization drive in more than a decade. An “in-principle” approval was accorded to reduce the government of India’s paid-up share capital below 51% in select Central Public Sector Enterprises (CPSEs).
• Among the selected CPSEs, strategic disinvestment of the Government’s shareholding of 53.29% in Bharat Petroleum Corporation Ltd (BPCL) was approved which led to an increase in value of shareholders’ equity of BPCL by INR 33,000 crore when compared to its peer Hindustan Petroleum Corporation Limited (HPCL) and this reflects an increase in the overall value from anticipated gains from consequent improvements in the efficiency of BPCL when compared to HPCL which will continue to be under Government control.

Lack of traction for privatisation in India

• Typically, privatisation policy in India has been motivated by the need to raise resources in tough fiscal conditions. This is evident in the choice of the word ‘disinvestment’, as opposed to ‘privatisation’, which implies that the ownership and management of companies or assets move to private hands.
• In sectors such as defence and national security, which could be the termed ‘strategic’, the government may continue to play a role. However, in areas where there are private players and where there is already a competitive market (such as steel, pharmaceuticals), or where the market has a few dominant players but is regulated (such as telecom), it makes sense for the government to exit.
• Past efforts at privatisation through strategic sales — when it was attempted by the first NDA government in the early 2000s — have faced several hurdles. One reason is endless litigation, sometimes by the labour unions, and sometimes on account of valuation of government assets and the prices at which they were sold.
• Concerns on valuation have also got officials in charge of privatisation tangled in legal battles, even well past their retirements. This has made civil servants risk-averse and unwilling to sign off on any sale at any price.

Ordnance Factory Board (OFB)

• Ordnance Factory Board (OFB) consisting of the Indian Ordnance Factories is a Government agency under the control of department of defence production (DDP) Ministry of Defence (MoD), Government of India.
• OFB is the world’s largest government-operated production organisation, and the oldest organisation in India.
• It is engaged in research, development, production, testing, marketing and logistics of a product range in the areas of air, land and sea systems.
• OFB comprises forty-one ordnance factories, nine training institutes, three regional marketing centres and four regional controllerates of safety, which are spread all across the country.
• OFB is the 35th largest defence equipment manufacturer in the world, 2nd largest in Asia, and the largest in India.
• Ordnance Factory Board predates all the other organisations like the Indian Army and the Indian Railways by over a century. The first Indian ordnance factory can trace its origins back to the year 1712 when the Dutch Ostend Company established a Gun Powder Factory in Ichhapur.
• The Indian Ordnance Factories have not only supported India through the wars, but played an important role in building India with the advancement of technology and have ushered the Industrial Revolution in India starting with the first modern steel plant of India much before Tata Steel, first modern electric textile mill of India, first chemical industries such as smokeless propellant plants of India, established the first engineering colleges of India as its training schools, played key role in the founding of research and industrial organisations like ISRO, DRDO, BDL, BEL, BEML and SAIL.

About the Current Major decision regarding OFB

• This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialisation in the product range, enhancing competitiveness, improving quality and achieving cost efficiency.
• Currently, the Kolkata headquartered OFB functions as a department under the Department of Defence Production. There have been several recommendations by high-level committees in the past for corporatising it to improve efficiency and accountability.
• All employees of the OFB (Group A, B and C) belonging to the production units would be transferred to the corporate entities on deemed deputation initially for a period of two years without altering their service conditions as Central government employees.
• The 41 factories would be subsumed into seven corporate entities based on the type of manufacturing.
• The new structure would also help in overcoming various shortcomings in the existing system of the OFB by eliminating inefficient supply chains and provide these companies incentive to become competitive and exploring new opportunities in the market, including exports.

Cabinet nod for Inland Vessels Bill, 2021

Context:

The Union Cabinet gave the nod to the Inland Vessels Bill, 2021, which will replace the Inland Vessels Act, 1917.

Relevance:

GS-II: Polity and Governance (Government Policies and Initiatives), GS-III: Industry and Infrastructure

Dimensions of the Article:

1. Inland Canals and Waterways in India
2. Inland Waterways Authority of India (IWAI)
3. Legislations regarding Inland Waterways in India
4. Inland Vessels Bill, 2021

Inland Canals and Waterways in India

• India has an extensive network of inland waterways in the form of rivers, canals, backwaters and creeks. The total navigable length is 14,500 km (9,000 mi), out of which about 5,200 km (3,200 mi) of river and 4,000 km (2,500 mi) of canal can be used by mechanized crafts. About 44 million tonnes (49,000,000 short tons) of cargo are moved annually through these waterways using mechanized vessels and country boats.
• Cargo transported in an organized manner is confined to a few waterways in Goa, West Bengal, Assam and Kerala. Inland waterways consist of the Ganges-Bhagirathi-Hooghly rivers, the Brahmaputra, the Barak river, the rivers in Goa, the backwaters in Kerala, inland waters in Mumbai and the deltaic regions of the Godavari-Krishna rivers.
• As per the National Waterways Act, 2016, 111 water ways have been declared as National Waterways (NW) and these National Waterways pass through 24 states and two union territories, with an approximate total length of 20274 km.

Inland Waterways Authority of India (IWAI)

• Inland Waterways Authority of India (IWAI) is the statutory authority in charge of the waterways in India, constituted under IWAI Act-1985 and headquartered in Noida, UP.
• It does the function of building the necessary infrastructure in these waterways, surveying the economic feasibility of new projects and also administration.
• The Authority primarily undertakes projects for development and maintenance of Inland Waterway Terminal infrastructure on National Waterways through grant received from Ministry of Ports, Shipping and Waterways, Road Transport and Highways.

Legislations regarding Inland Waterways in India

1. The Inland Waterways Authority of India Act, 1985: The Act provides for the constitution of an Authority for the regulation and development of inland waterways for purposes of shipping and navigation and for matters related to it (IWAI). The Inland Waterways Authority of India was formed in 1986.
2. Indian Vessels Act of 1917 (amended in 2007): It deals with the survey and registration of inland vessels, removal of obstructions in navigation, carriage of goods and passengers, prevention and control of pollution etc.
3. Inland Water Transport Policy 2001: Policy talks about IWT being economic, fuel-efficient and environment friendly mode of transport. It advocates large-scale private sector participation both for creation of infrastructure and for fleet operations.
4. National Waterways Act 2016: The Act declared 111 rivers or river stretches, creeks, estuaries as National (inland) Waterways. It enables the Central Government to regulate these waterways for development with regard to shipping, navigation and transport through mechanically propelled vessels.

Inland Vessels Bill, 2021

• A key feature of the Bill is a unified law for the entire country, instead of separate rules framed by the States.
• The certificate of registration granted under the proposed law will be deemed to be valid in all States and Union Territories, and there will be no need to seek separate permissions from the States
• The Bill provides for a central data base for recording the details of vessel, vessel registration, crew on an electronic portal. It requires all mechanically propelled vessels to be mandatorily registered. All non-mechanically propelled vessels will also have to be enrolled at district, taluk or panchayat or village level.

China tries to Sinicise Tibetan life without the Dalai Lama

Context:

Tibetan groups talk about China’s leader Xi Jinping and his Communist party as seeking to imprint on virtually every aspect of life across the vast county which has lately increasingly encompassed religion, both in central China and on its fringes, such as Tibet.

The party is pressing a programme to Sinicise Tibetan life to separate Tibetans from their language, culture, and especially, their devotion to the Dalai Lama, Tibet’s traditional spiritual leader who has lived in exile since 1959.

Relevance:

GS-II: International Relations (India’s Neighbours, Foreign Policies and Developments affecting India’s Interests)

Dimensions of the Article:

1. About Tibet
2. India and Tibet
3. Sino-Indian Conflict Over Dalai Lama
4. What is Sinicization?
5. Modern examples of Sinicization
6. Concerns of Tibetan population

About Tibet

• Tibet is a region on the Tibetan Plateau in Asia, spanning to nearly a quarter of China’s territory.
• It is the traditional homeland of the Tibetan people as well as some other ethnic groups.
• Tibet is the highest region on Earth, with an average elevation of 4,900 metres. The highest elevation in Tibet is Mount Everest.

History of Tibet

• From 1912 until the founding of the People’s Republic of China in 1949, no Chinese government exercised control over what is today China’s Tibet Autonomous Region (TAR).
• Many Tibetans insist they were essentially independent for most of that time and have protested what they regard as China’s rule imposed after the People’s Liberation Army occupied TAR in 1950.
• The Dalai Lama’s government alone ruled the land until 1951. Tibet was not “Chinese” until Mao Zedong’s People’s Liberation Army (PLA) marched in and made it so.
• The 14th Dalai Lama fled to India in 1959 following a crackdown on an uprising by the local population in Tibet.
• India granted him political asylum and the Tibetan government-in-exile is based on Dharamsala in Himachal Pradesh since then.
• Since 1959, Tibet has been witnessing periodic incidents of violence, unrest and protest against Beijing.
• China asserts that Tibet has been its part since the 13th century and will remain so forever.

India and Tibet

• Apart from the border disputes, another major irritant for China has been over the Dalai Lama, who enjoys a spiritual status in India.
• China considers Dalai Lama a separatist, who has great influence over Tibetans. It must be mentioned that Dalai Lama gave up his support for Tibetan independence in 1974, and only wants China to stop repression against the community.
• The Government of India has built special schools for Tibetans that provide free education, health care, and scholarships. There are a few medical and civil engineering seats reserved for Tibetans.
• While India’s role in the rehabilitation of Tibetan refugees has been criticised by China, it has drawn praise from international bodies and human rights groups.

Sino-Indian Conflict Over Dalai Lama

• Apart from the border disputes, another major irritant for China has been over the Dalai Lama, who enjoys a spiritual status in India.
• China considers Dalai Lama a separatist, who has great influence over Tibetans. It must be mentioned that Dalai Lama gave up his support for Tibetan independence in 1974, and only wants China to stop repression against the community.
• Former Prime Minister Jawaharlal Nehru agreed to provide all assistance to the Tibetan refugees to settle in India until their eventual return.
• The Government of India has built special schools for Tibetans that provide free education, health care, and scholarships. There are a few medical and civil engineering seats reserved for Tibetans.
• While India’s role in the rehabilitation of Tibetan refugees has been criticised by China, it has drawn praise from international bodies and human rights groups.

What is Sinicization?

• Sinicization, sinofication, sinification, or sinonization (from the prefix sino-, ‘Chinese, relating to China’) is the process by which non-Chinese societies come under the influence of Chinese culture, particularly Han-Chinese culture, language, societal norms, and ethnic identity.
• Areas of influence include diet, writing, industry, education, language/lexicons, law, architectural style, politics, philosophy, religion, science and technology, value systems, and lifestyle.
• In particular, sinicization may refer to processes or policies of acculturation, assimilation, or cultural imperialism of norms from China on neighboring East Asian societies, or on minority ethnic groups within China.
• Evidence of this process is reflected in the histories of Korea, Japan, and Vietnam in the adoption of the Chinese writing system, which has long been a unifying feature in the Sinosphere as the vehicle for exporting Chinese culture to these Asian countries.

Modern examples of Sinicization

Xinjiang

• The Hui Muslim 36th Division (National Revolutionary Army) governed the southern region of East Turkestan (named Xinjiang by the Chinese government) in 1934–1937. The administration that was set up was colonial in nature, importing Han cooks and baths, changing the Uyghur language-only street names and signs to Chinese, as well as switching carpet patterns in state-owned carpet factories from Uyghur to Han.
• Strict surveillance and mass detentions of Uyghurs in the Xinjiang re-education camps is a part of the ongoing sinicization policy by the Chinese Communist Party (CCP). Since 2015, it has been estimated that over a million Uyghurs have been detained in these camps. The camps were established under CCP General Secretary Xi Jinping’s administration with the main goal of ensuring adherence to national ideology.
• Critics of China’s treatment of Uyghurs have accused the Chinese government of propagating a policy of sinicization in Xinjiang in the 21st century, calling this policy a cultural genocide, or ethnocide, of Uyghurs.

Taiwan

• After the Republic of China took control of Taiwan in 1945 and relocated its capital to Taipei in 1949, the intention of Chiang Kai-shek was to eventually go back to mainland China and retake control of it. Chiang believed that to retake mainland China, it would be necessary to re-Sinicize Taiwan’s inhabitants who had undergone assimilation under Japanese rule.
• Examples of this policy included the renaming of streets with mainland geographical names, use of Mandarin Chinese in schools and punishments for using other regional languages (such as the fāngyán of Hakka and Hokkien), and teaching students to revere traditional ethics, develop pan-Chinese nationalism, and view Taiwan from the perspective of China.

Tibet

• The sinicization of Tibet is the change of Tibetan society to Han Chinese standards, which has been underway since the Chinese regained control of Tibet in 1951.
• In present-day Tibet, traditional Tibetan festivals have “been turned into a platform for propaganda and political theater” where “government workers and retirees are barred from engaging in religious activities, and government workers and students in Tibetan schools are forbidden from visiting local monasteries.”
• According to president of the Central Tibetan Administration, Lobsang Sangay, with the ongoing expulsion of monks and nuns from monasteries and nunneries, and destruction of the Larung Gar monastery, Tibet’s largest Buddhist institution, “unfortunately what is happening is that the Chinese government is reviving something akin to cultural revolution in Tibet.”

Concerns of Tibetan population

• China is investing huge sums of money for infrastructure investments in Tibet Autonomous Region (TAR) albeit at the cost of its environment.
• Tibet’s downtown Lhasa has all the trappings of a modern city. But this is by destroying the unique Tibetan culture and mainstreaming Chinese culture into the region and also notably leading to significant demographic shift.
• The outflow of refugees from Tibet has been curtailed by the Chinese authorities by convincing Nepal to close a popular route.
• Many third generation Tibetans settled in India have no idea about their motherland and India’s attitude towards giving them citizenship has been stern.
• In recent times there is also a rise in the younger and more radical “Rangtsen” (freedom) groups demanding an independent Tibet.
• The primary concern that looms over the community is that of its future leadership.
• This is because the present Dalai Lama is getting older and there is no firm announcement about their next leader.