Disinvestment: Won't Have to Comply With Reservation Quotas, Centre Tells Potential Investors

The government believes that enforcing job quota is "not desirable or legally possible" if the its share in public sector enterprises is disinvested.

New Delhi: The Central government has informed potential private investors looking to take over state-run firms as part of its strategic disinvestment plan that they will not have to comply with quotas for reservation in employment.

According to a Livemint report, the Centre believes that enforcing job quota is “not desirable or legally possible” if the government’s share in public sector enterprises (PSEs) is disinvested.

Three people with direct knowledge of the matter, requesting anonymity, told the newspaper that the government will “adequately protect existing employees”, including those who belong to Scheduled Castes, Scheduled Tribes and those with disabilities.

State and central government enterprises are mandated to have 15% reservation for SCs, 7.5% for STs and 27% for OBCs.

The Centre will negotiate the terms and conditions in the shareholders’ agreement (SHA) to ensure that “once management control is transferred to a private entity, it adequately protects staff”.

According to the report, one of the officials cited a policy document of the Department of Investment and Public Asset Management (Dipam) to suggest that a “trade off” is possible.

This document says:

“Government, in a welfare state, would like to look after the staff interest. There obviously has to be a trade-off, however, between the protection that the employees can be given and providing to the strategic partner a degree of freedom to run the firm. These competing interests would have to be carefully balanced in drafting the agreements.”

One person told the newspaper, “The reservation issue has been also clarified in the Parliament vis-à-vis BPCL (Bharat Petroleum Corp. Ltd).”‘

William Vivian John, a partner at law firm L&L Partners told Livemint that since the SHA is a document that governs future business, it can “stipulate terms regarding existing employees”.

Manishii Pathak, labour law expert and founder of legal consultancy firm Anhad Law, said under the constitution, only the state has been directed to make provision for reservation.

A January 2020 Hindustan Times report had said that the Prime Minister’s Office had asked Dipam to “examine the issue of job reservations”. The direction came after concerns were raised by various stakeholders about a “sharp fall in job opportunities for SCs, STs and OBCs after the disinvestment of government’s equity stakes”.

However, the report also makes it clear that under the existing laws, the reservation policy will not be applicable to PSEs sold to a private entity through strategic disinvestment.

Earlier this month, the United Forum of Bank Unions (UFBU), an umbrella body of nine unions, issued a call for a two-day nationwide strike to protest against the proposed privatisation of two state-owned banks.

In the Union Budget presented in February, finance minister Nirmala Sitharaman had announced the privatisation of two public sector banks (PSBs) as part of its disinvestment plan.