Can “Privatization” and the principle of “welfare state” can go together?

Or to
be more accurate, can a State like India which steadily perusing the process of
privatization able to perform the function of the welfare state?

First, discuss what is privatization and what are its consequences? The short
answer is privatization is referred to the process of transfer of the business and
ownership of the public traded company to private sectors (to some individuals).
Through the process of privatization state gradually losing its regulatory control
over the economy and hand it over to the market forces, and this will shrink the
area of scope of state to perform the function of the welfare state.

In developing countries like India which have a large number of people below
poverty and other complication such as socioeconomic inequality, high density
of population with limited resources, lack of education and infrastructure. In my
thought, India cannot adopt the principle of laissez-faire even the constitution of
India does not suggest the same.

The constitutional conceptual of the welfare state. Undoubtedly, the maker of

the constitution of India does not want India to adopt the state of laissez-faire.
In fact, if we look at the preamble which secures not only political and social
justice but also economical justice and directive principle of state policy which
is not enforceable by the court but impose an obligation on the government to
achieve socio-economic justice and perform the function of the welfare state, it
is evident in the different articles under DPSP, article 38(1)

“The state shall strive to promote the welfare of the people by securing and
protecting as effectively as it may a social order in which justice, social,
economic and political shall inform all the institution of the national life.”1

And in addition, there are other various welfare policies that states are required
to discharge such as articles 39, 39A, 41, 42, 43, 44, and 47 of the Indian
constitution.

These provisions are inserted in the constitution to take measures to mitigate the
inequalities in income and provide opportunities and facilities to every citizen
of India. These principles though not enforceable but nevertheless provide goals
and directions under which government should work. The lay down the
direction towards the progress of the country

The constitution of India imposes a certain obligation on government but if the

government continue perusing with the process of privatization the scope of
1
ARTICLE 38(1)
fulfilling certain obligation is to get shrank. Privatization is not illegal or
unconstitutional per se but in my opinion, there is a contradiction between the
concept of the welfare state and privatization at least in context with India.
Concerned expressed by V.R Krishna Iyer J:2

“We have new democracy run from afar be strong capitalist proprietors
influencing the political process and humouring the glitterati and wining parties
Right, left and Centre through a monoculture of globalization, liberalization,
and marketization plus anti-socialism. Herein lies the contradiction between the
constitution and the election held under the constitution.”

The socio-economic, political, economic inequality condition and density of

population in India are different from other countries we can they are present in
exaggerated form.

It is worthwhile here to mention that the constitution of India defines state under
article 12. and this definition is applicable to part 3 as well as part 4 of the
constitution
 
 Article 123 “the state” include the government and parliament of India and the
government and the legislature of each of the state and all local and other
authorities within the territory of India or under the control of the government
of India. 

Initially, the word “other authorities” used in this article is ambiguous but the
supreme court of India gives its liberal and wider interpretation from time to
time in certain landmark cases

In the case of Sukhdev vs Bhagat ram, the supreme court of India held that the
public service undertaking like Oil and natural gas commission, Life insurance
commission, and Industrial finance corporation are authorities under the ambit
of “State” under article 12.4
 
In another case of Ramana Dayaram Shetty vs The International Airport
Authority of India, the supreme court of India held that the International Airport
authority which was created by an act of a parliament was held to be a “State”
under article 12 of the constitution.5

2
 V.R Krishna Iyer, rhetoric vs reality: Essay on human right, justice, democratic values 51(2004)
3
Article 12 of the constitution
4
Sukhdev vs bhagat ram, AIR 1975 SC 1331
5
Ramana Dayaram Shetty vs The International Airport Authority of India, AIR 1973, SC 1628
And again, in the case of S.P Rekhi vs Union of India, the court held that Bharat
petroleum cooperation is also a “State” under article 12 of the constitution6

The word “other authorities” under article 12 has been interpreted by the
supreme court of India as per need and circumstance. In my opinion, the reason
the supreme court has given a wider interpretation to the word “other
authorities” is to ensure that Part 3 and Part 4 can be applied to a larger extend.
But by adopting the policies of privatization government again narrowing down
the interpretation of the word “State”

This approach is also evident from the statement made by N Santosh Hegde J.
in the case of zee telefilm ltd. 7

Because of the need of the day this court in Rajasthan SEB and Sukhdev Singh
noticing the socio-economic policy of the country thought it fit to expand the
definition of the term “other authorities” to include bodies other than statutory
bodies… it is to be noted that in the meantime the socio-economic policy of the
government has changed … and the state is today distancing itself from
commercial activity and concentrating on governance rather than on the
business. Therefore, the situation prevailing at the time of Sukhdev Singh at
least for the time being, hence, there seems to be no need to further expand the
scope of “other authorities” in article 12 by judicial interpretation at least for the
time being

I believed that transfer of public entities to the private owner will impact the
constitutional obligation imposed on the government. The socialist agenda and
welfare policies envisaged in the constitution are getting diluted in the process
of privatization 

I felt the need for the government should take pause at least for some time and
think and rethink that it is well-founded to sideline the socialism mentioned in
the preamble of the constitution and compromising with public welfare policies
provided under part 4 of the constitution. If the government continues to pursuit
privatization endlessly and adopting the policy of liberalization and give free
hand to the private player without having any watchdog it will lead to a
situation of chaos in the economy.

Yes, privatization is not unconstitutional yet has several benefits like it reduces
the burden on the government and helps in concentrating on governance,
promotes efficiency and technology, allows the private player to participate in
the economy, allows policymakers to steer.
6
S.P Rekhi vs Union of India, AIR 1981, SC 212
7
Ibid para 35
Policymaker bodies should adopt policies that maintain a balance between both
economic development and the welfare state. But privatization of PSUs will
have an adverse effect on society as well as on the economy, through which the
government fulfilled the obligation mandate by the constitution and perform the
function of the welfare state. The private sector gives less attention the welfare
policies and focuses on profit maximization. Privatization and inflation are
walked together.

 The debate on privatization and public welfare is open-ended. But I believed

that privatization and public welfare can go together but to achieve this the
policymaker bodies need to consider the changing circumstance and situations
depending upon the various factors while framing policy regarding reforms.
Reforms are necessary for every sector. But the process of reform should be
done in such a way that it will achieve welfare policy and development of the
economy.
 In the end, India is a dynamic country with lots of challenges we cannot depend
on the government to run the economy while performing the welfare schemes.
The private sector should also step in the development of the economy, but at
the same time, the government should hold its regulatory control over the
economy and promote overall public welfare.
                                                                                            

                                       
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            ID: LLM/980/2021