IDBI Bank sale: Who is EAS Sarma? Activist & former civil servant asking President to reconsider lender's privatisation
Former civil servant and activist EAS Sarma in a letter to the President of India, has urged her to reconsider the Centre's divestment of IDBI Bank, stating that the social cost of this decision, “far exceeds the perceived social benefits”, the Hindu BusinessLine reported.
Sarma noted that since it is the President who holds equity shares in Central Public Sector Enterprises (CPSEs) on behalf of the people, “I seek your intervention in directing the government to review CPSE disinvestment in general and IDBI disinvestment in particular,” the letter said, as per the report.
Notably, the President of India holds ₹4,50,740 crore of equity holdings in 475 CPSEs that employ 7,81,552 individuals, the report said, adding that these companies earn a net profit of ₹3,08,674 crore annually and declare dividends annually of the order of ₹1,38,503 crore.
In his letter, Sarma, urged the President to order an independent inquiry examining “the legality and prudence of disinvesting IDBI”, findings of which “should be placed before Parliament for a discussion”. He made the argument not only for the IDBI sale, but also on the desirability of disinvestment of other CPSEs, as per the report.
“Pending such an inquiry, the government should keep in abeyance the decision to hand over IDBI’s ownership and management control to Fairfax,” Sarma's letter proposed. He had earlier written the same to the Union Finance Minister.
According to Sarma, “justification that disinvestment helps raise additional fiscal resources is fallacious”, he feels that private firms who acquire CPSEs, go on to “raise borrowings from the same pool of national savings that the state can readily access on far better terms, without having to lose ownership control”.
“The excuse that privatisation leads to better management of an undertaking is equally questionable, as there are several CPSEs that have been functioning efficiently and have withstood global competition,” he added.
Sarma also pointed to the Constitution, where under Article 12, CPSEs are state instruments that aim to fulfill the welfare role and the Directive Principles mandate CPSE ownership and control “are so distributed as best to subserve the common good … does not result in the concentration of wealth and means of production”.
He also stressed the “crucial role” CPSEs play in promoting self-reliance in strategic areas of the economy. “The model of disinvestment presently adopted for disinvestment is inherently flawed, as the government has precluded other CPSEs from taking part in bidding, thereby severely restricting competition and proper price discovery,” Sarma stated. He said this flaw has led to “underselling of valuable public assets”.
Particularly for the IDBI stake sale, Sarma said similar concerns have been raised. He added strategic sale of IDBI in favour of Fairfax, a Canadian company, for a consideration of ₹52,878 crore, leaves both the Centre and LIC as minority shareholders having little say in decisions on the future of IDBI.
“… There has been no transparency in the disinvestment process. Names of agencies that valued IDBI, methodology adopted for valuation, and inputs that went into valuation have not been disclosed either to Parliament or to the public… It is ironic that competent, highly professional public sector undertakings were excluded but foreign entities were allowed to bid for IDBI,” Sarma said in his letter.
The activist added that privatising IDBI Bank closes the chapter on its role as a development finance institution and “co-partner in the Centre’s flagship welfare schemes”.
A 1965-batch Indian Administrative Service (IAS) officer from Andhra Pradesh, EAS Sarma has served as Secretary to the Government of India in the Ministries of Power and Finance. He remained a civil servant till 2000, and during his 35-year tenure was transferred 26 times due to differences over policies.
Sarma is now an activist after opting for early retirement in November 2000 from the finance ministry due to differences in public policy issues with then government. After stepping down from civil service, he headed the Administrative Staff College of India in Hyderabad and was nominated as a member of the Indian Council of Social Science Research for a period of three years in April 2005.
This is not the first time that Sarma has championed a public cause. He has earlier spoken out on a number of public issues such as data centers in Visakhapatnam, demonetisation, development related displacement, environmental issues like thermal plants, mining in agency areas, and transparency.
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