Our politicians seem to discover their liberal selves only when they go abroad. Prime minister I K Gujral, who has thus far not distinguished himself by offering any kind of coherent economic thought for liberals to take heart from, suddenly found his tongue in Nepal.

In what must go down clearly as a public rebuke of his own cabinet minister, Gujral said he was totally dissatisfied with the country's civil aviation policy. The author of the policy, C M Ibrahim, will certainly be wondering what prompted a normally mild-mannered Gujral to ridicule him from foreign soil. For, Gujral's was no off-the-cuff remark. He made it a point to tell the civil aviation secretary, who was also present, to note his observations for further action.

Gujral's eloquence could do with some repetition. "Unless our skies are open, we cannot go in for globalisation. Without open skies we cannot modernise our civil aviation sector to meet the present requirements. Without it we cannot even implement fully our commitment towards the establishment of Safta. Because, without an open sky policy, you cannot expect resource inputs and business from abroad." That's quote, unquote from The Times of India.

Great sentiments, these. One didn't know Gujral had an economic mind of his own. His Nepali audience is reported to have given him a thunderous handclap, but back home there are fewer chances of that happening. Reason: this sudden attack of liberal conscience does not wash. Gujral has never said he is for an open door in any other sector. So what's special about aviation? Why not follow an open door in the insurance sector, too?

One cannot take Gujral's statements in Nepal at face value because they appear to have been prompted by his party's internal political compulsions. The Janata Dal is now fighting bitterly with itself, with factions headed by Laloo Prasad Yadav, Sharad Yadav and Deve Gowda trying to prove a point or two to one another. Gujral seems to want to put Gowda in his place by taking a potshot at his lieutenant Ibrahim, who is widely seen as the author of India's aviation policy.

The point here is not to defend Ibrahim, whose irrational policy allows everybody—except foreign airlines -- to invest in domestic aviation. That's like saying steel or infotech companies from abroad can run an airline in India but not airline companies themselves.

Gujral, moreover, is absolutely right in his views. There can be no question of going global without opening up the economic borders of the country. But sound economic policy cannot be built on the sand of transient desires to put political rivals in place. Even assuming that aviation is the right place from which Gujral wants to begin his liberalisation drive, he should be thinking about getting the sequence right.

The reality of the aviation sector is that the government uses Air India and Indian Airlines as its private property for doling out patronage. The airlines may be mismanaged, but part of the reason has to do with the government's own unwillingness to let them function without interference. Managerially, there is no level field for IA and Air India, and they cannot therefore compete with any Tata-Singapore Airlines venture suddenly. Any government that wants open skies should first free Indian Airlines and Air India from its clutches so that they can learn to compete. Gujral can start here before he moves on to other areas of liberalisation.

Here's a checklist of some ideas Gujral must grapple with before he can earn for himself the honour of being a genuine liberaliser:

The entire public sector needs to be freed from the clutches of bureaucracy. This can be done in one of two ways: by immediately giving public sector chieftains total freedom to make day-to-day management decisions without ministerial or bureaucratic interference. Or by taking a policy decision to bring government equity down to 49 per cent in all but strategically important government companies. This will at once free state-run companies from the clutches of parliamentary and vigilance intrusion in basic commercial decisions.

More important than foreign money or investment is the need for competition, foreign or domestic. The government seems to have forgotten this. In several sectors, foreign companies have been allowed to buy brands or sew up joint ventures without any hindrance even though some of the deals they have entered into are prima facie competition-restricting. For example, the Coke takeover of several Parle brands and Hindustan Lever's Tomco and Kwality capers are all competition-reducing manoeuvres. The government has no machinery in place to thwart such takeovers—or even scrutinise them before the damage is done.

The finance ministry's powers need to be curtailed in the new era of greater freedom to Indian companies. Currently, the Reserve Bank kowtows to the finance ministry, and so does the market regulator Sebi. Whether it is in nudging monetary policy towards cheap money or restricting the market regulator's ability to impose tougher discipline, the ministry has too large a say in what happens.

As mentioned in this column a fortnight ago, the finance ministry also plays the role of rationing officer for foreign credits by artificially restricting companies' right to borrow from the cheapest source anywhere. It is time to clip the finance ministry's wings apart from those of the other ministries as well.

If Gujral can do this, he would have evolved a sensible economic doctrine to back up his diplomatic one. His Nepal eruption against the civil aviation policy would also carry much greater credibility in India. u

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.