Thiruvananthapuram: When the Manmohan Singh-led United Progressive Alliance (UPA) government decided to divest shares in all Public Sector Units (PSUs) in 2009, the Left parties condemned the move strongly, saying it would pave the way for full-scale privatisation of the state-owned firms.
Nearly 15 years later, the CPI(M)-led Left Democratic Front (LDF) government in Kerala is itself considering what would once have been considered political heresy: private participation to revive loss-making PSUs.
The ruling party doesn’t see the move as a U-turn but says the revival of the PSUs is part of an “alternative model” of state development presented by Chief Minister Pinarayi Vijayan at a state party conference in Kollam. The initiative, it says, is a response to the Central government’s discriminatory attitude towards the state, denying its rightful share of funds.
Party leaders insist there’s no change in their ideological stand as the LDF government will ensure the autonomy of the PSUs even if private investors come on board. During a public meeting held on the last day of the conference, Pinarayi Vijayan reiterated that Kerala would only accept investments that were aligned with the state’s interests.
The statement comes on the heels of the Invest Kerala Global Summit to woo investors, which saw Expressions of Interest (EOI) worth over Rs 1 lakh crore, according to the state’s industries department. This was followed by over 40 sector-specific conclaves.
“At present, we aren’t inviting any private investments, but the scope of getting investment for their revival will be explored. We will only go ahead with the plan if the autonomy of the entity is unaffected,” V. Joy, the secretary of the CPI(M)’s Thiruvananthapuram district and Varkala MLA, told ThePrint.
He added there would be more clarity on the process in the coming days as the government has yet to start the process.
V. Joy said the state’s industries department would come up with a revival package for each PSU based on the issue it was facing and would start identifying the enterprises soon. “In some cases, we have the scarcity of raw materials. Some need modernisation of technology. The department will analyse and see what needs to be done in each case,” he said.
The Varkala MLA said the plan to revive the PSUs was only a continuation of the LDF’s commitment to strengthening the sector.
He pointed to earlier success stories like the LDF government’s acquisition of Hindustan Newsprint for Rs 149 crore when the Centre put it up for sale in 2019. In 2021, the company was renamed Kerala Paper Products Limited (KPPL).
While the ruling CPI(M) is aggressively pushing for investments in Kerala, the opposition Congress slammed the LDF’s proposed policy shift as insincere, accusing it of previously “branding the state with investor apathy”.
“We are a quarter century behind other south Indian states in this regard. Once they came into power in 2016, they started owning up all the big-ticket investment projects like the Vizhinjam port started by UDF. Once they land back in opposition, they will be the first people to flip from being pro-investment to anti everything,” Congress leader and former Aruvikkara MLA K. S. Sabarinathan told ThePrint.
Also Read: From Davos pavilion to ‘masala bonds’, LDF pulls out all stops to separate ideology from investments
Little political impact seen
As Kerala edges closer to the next year’s elections, political analysts say the change in stance is unlikely to hurt the CPI(M), which is trying to cosy up to the middle class ahead of the polls.
“The party is trying to position itself as the political outfit for the upper middle class. So it’s natural for them to think that the government doesn’t have to facilitate these PSUs,” Joseph C. Mathew, a political analyst, said.
Political analysts believe the CPI(M)’s latest move is a pragmatic attempt to balance ideology with fiscal reality.
Political analyst Sreejith Sivaraman told ThePrint that while the LDF has always opposed the disinvestment of PSUs, its move to invite private partnership in reviving the PSUs is a different approach.
He said that while the state had managed to turn some PSUs profitable in the past few years, many others still require more funding than it can afford amid a financial crisis. “Kerala has always proved that the state can run public entities successfully,” Sreejith said, adding that the recently opened Kochi water metro is an example of a public undertaking.
The pressure to draw investment in state-owned firms in Kerala is real.
The Comptroller and Auditor General (CAG) report on the PSUs for the year that ended in March 2022, submitted in 2024, said that 63 of the 131 working PSUs in the state made a loss of Rs 4,065.38 crore. The rest of the 55 PSUs earned a profit of Rs 654.99 crore as part of their finalised accounts submitted till 22 September.
It said the turnover of the PSUs grew from Rs 33,840 crore in 2019-20 to Rs 35,768 crore in 2021-22, the growth was not at pace with the Gross State Domestic Product (GSDP), which increased from Rs 8,24,374 crore to Rs 9,01,997 crore in the same period.
According to the state Budget 2025, Kerala’s fiscal deficit was 2.9 percent in 2023-2024, while the debt-to-GSDP ratio was 34.2 percent.
The state blames the Central government for the financial strain due to the low allocation of Goods and Services Tax (GST) compensation, grants to local government, and the reduction in its divisible pool. The divisible pool is the portion of gross tax revenues distributed between the Centre and the states.
Disinvestment & the Left
Though post-independent India put its public sector at the forefront of its development, the 1991 economic crisis triggered by fiscal distress, the Gulf war, and the subsequent depreciation of the rupee led to a historic policy shift.
Prime Minister P.V. Narasimha Rao responded to the crisis by throwing open the country’s economic doors and pushing for the disinvestment of public enterprises as part of its broader liberalisation and globalisation agenda.
According to a 2022 paper, History of disinvestment in India: 1991-2020, written by Sudipto Banerjee, Renuka Sane, Srishti Sharma, and Karthik Suresh, researchers at Delhi’s National Institute of Public Finance and Policy (NIPFP), the Indian government realised Rs 3,038 crore after it disinvested stakes in 47 select Central Public Sector Enterprises (CPSEs) in 1991-92.
In August 1996, the government set up a disinvestment commission, chaired by former Sebi chief G.V. Ramakrishna, to advise on the gradual disinvestment of Indian PSUs. This was followed by the formation of a separate department for disinvestment under the finance department or ministry in 2001. It became a full-fledged ministry under the Atal Bihari Vajpayee government.
By 2001, India had partially sold many public sector companies, including Bharat Aluminium Co Ltd (Balco) to Sterlite Industries Ltd. In 2004, the UPA government, formed with the support of the Left parties, converted the ministry back to a department under the finance ministry.
The communist parties always opposed the government’s disinvestment policies. During the Vajpayee government, the CPI(M) issued a statement alleging that in most cases, the enterprises were not valued properly and often given to a single bidder.
“The liberalisation policies being pursued by this Vajpayee government are opening up hitherto unknown routes for large-scale corruption. These relate to changes in policy to favour certain sections and awarding contracts and placing orders with various multinational firms,” said a CPI(M) statement from 2001.
The Left parties opposed the Manmohan Singh government for the same reason. Expressing ‘grave concerns’, the CPI(M) urged the UPA government to engage in discussions or leave the decision to the enterprises themselves to raise resources from the capital market.
(Edited by Sugita Katyal)
Also Read: After investment summit, a ‘New Kerala’ plan. CPI(M)-led LDF eyes a hat-trick in the state
