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Red letter day

Business Standard  |  New Delhi 

The West Bengal government needs to be complimented for reinvigorating moves for privatising the state-owned Great Eastern Hotel.
A report in this newspaper quotes the state minister in charge of industrial reconstruction and public enterprises as saying that he expects a deal to be finalised by the end of this financial year.
Under the proposal, the state government will transfer the assets of the hotel to a new company in which the majority stake will be sold to the winning bidder. Bidders don't seem to be in short supply right now, thanks to the pragmatic policies being pursued by the state's chief minister, Buddhadeb Bhattacharya.
He has clearly got the message that political posturing will get you only so far; real investments and jobs will not materialise unless West Bengal starts reassuring industry by creating the right climate for investment.
Thanks to the state government's investor-friendly policies and easy availability of an educated middle class amongst the bhadralok, several IT and ITES companies have set up shop in the state in recent months. More look likely to follow suit in the near future.
Against this upbeat backdrop, the sale of the hotel may seem like a minor development, but it will actually be a test case for proving that the state is finally abandoning the tired shibboleths of the past.
It is worth recalling that this is not the first time the state has tried to rope in private parties to rescue the moribund and even decrepit Great Eastern Hotel.
An earlier attempt to form a joint venture to run the hotel foundered on the rocks of union opposition. Vested interests in the labour lobby scuttled the move by drumming up an anti-privatisation agitation. Given this history, the state government cannot afford to be seen as backtracking on privatisation yet again because of labour pressure.
In fact, it would be even better if the state abandoned its move to sell only a majority stake to the chosen private sector bidder: it should sell the whole firm. No promoter will want as partner a state government with formal links to trade unions""especially since labour rationalisation may be called for.
The state should thus commit itself to full privatisation""perhaps in one or more stages. If the hotel starts doing good business, the government can then extract a better exit price for its remaining shareholding.
While the proposed sale of the hotel certainly shows the pragmatic instincts of a Leftist party in power, it must be hoped that this will trigger a wider rethink. While the CPI(M) and the CPI have reduced, to some extent, the vehemence of their opposition to some reforms (such as increasing FDI in areas like telecom and airports), their formal position on privatisation is that only loss-making companies will be sold.
If Britain's Labour party can redefine itself as New Labour under Tony Blair and socialist and communist parties all over Europe can reformulate their core positions in a market-oriented global economy, it is time India's red brigade to also did some soul-searching.

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First Published: Fri, December 24 2004. 00:00 IST