Until
a couple of months ago, the Congress-led UPA government was struggling to meet
its disinvestment target of Rs 40,000 crore for 2013-14. Thanks to a financial
jugglery, letting some central public state enterprises to pick up government
shares in a few public sector companies, the government has earned the dubious
distinction of not only meeting its much-reduced target of Rs 16,027 crore but
also exceeding it by about Rs 1,000 crore.
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The
sale of Maharatnas (the biggest jewels), Navratnas (nine precious jewels) and
Miniratnas (small jewels) has always been a matter of debate since the
government announced its disinvestment
policy in the early 1990s. Though the categorisation of public sector
undertakings (PSUs) provides an idea of their enormous wealth, it is also a
pointer to why the government has been reluctant in pushing its disinvestment
plans.
·
Ministers do not want
to lose control of these white elephants for political and pecuniary reasons.
·
Disinvestment targets
and decisions are announced in advance, leading their stock prices to fall,
providing a strong reason for delaying the much-hyped sale of stake.
·
Hence, every year the
receipts fall short of their budgeted targets. Besides, the government also
gets a pat on its back for not selling at lower prices. Small wonder that the
government’s disinvestment programme has been an outright failure.
Nehruvian Era
Nehru
viewed the PSUs as temples of modern India. True, they played a vital role in
the country’s development. They were engaged in manufacturing a variety of
products, processing raw material and providing services, besides offering
employment to millions. But, it gradually became difficult to manage their
affairs. The bureaucrats vested with the responsibility of running them adopted
unfair and corrupt practices to serve selfish ends. The “temples” also started
taking a toll on the public exchequer as many of them were running into huge
losses.
The times of 80’s -
For
the first time in the mid-eighties, the government’s revenue account turned
negative. Since then fiscal deficit has risen unabatedly. The government was
not even able to meet the basic expenses for running the PSUs, making ground
for privatisation and disinvestment to ensure their smooth functioning and
management.
·
The disinvestment
policy has witnessed many ups and downs.
·
The earliest
recommendation for disinvestment came from the Estimates Committee of the first
Parliament in 1955.
·
It recommended that
at least 25 per cent shares of government companies should be subscribed by the
public.
·
Unfortunately, its
recommendation was not accepted as the government did not want to lose its
control on the PSUs.
Post 90’s
For
a change, the Chandra Shekhar government took a bold stand on disinvestment,
thanks mainly to circumstances that led to the shameful shifting of
government-owned gold bars to a new vault in Britain. The IMF also forced the government to raise `2500 crore through
disinvestment in 1991. Thus, the government began selling its stake in
a few PSUs to institutions like Unit Trust of India that had no obligation to
retain the holding and could sell it in the secondary market.
The process came to a halt, when stock markets were hit by the
Harshad Mehta scam.
Disinvestment
could take off again only when the new government formed a disinvestment
commission in 1996. The commission was given the responsibility of advising the
government on the ways and means of disinvestment. On its recommendation, a few
PSUs were given greater financial and managerial autonomy. The fate of
disinvestment was again in limbo even as India faced numerous scams like the
teakwood plantation scam and the vanishing companies scam.
The Vajpayee government -
The
Vajpayee government that came to power in 1998 created a separate ministry to
speed up the process of disinvestment. The government sold stocks in selected
PSUs to strategic partners through bidding based on stock valuation, without going
by stock market prices, which remained low. Strategic sales during the period
were criticised because of alleged corruption involving under-pricing of
assets, favouring certain buyers, breach of employment agreements and contracts
pertaining to sale of land.
The UPA regime -
Disinvestment
slowed down considerably when the UPA government came to power for want of
consensus and lack of support from the Left, which was ideologically opposed to
it. The agenda was again taken up when UPA-2 came to power in 2009 as the Left
was no longer its part. The present government preferred partial disinvestment,
rather than strategic sales.
Despite serious discussions in these 23 years, the disinvestment
proceeds were largely used to reduce fiscal deficit rather than to create
assets.
·
The proceeds were
credited to the National Investment Fund and 75 per cent of the amount so
credited was used to meet India’s financial and socio-economic needs and the
balance for the capital expenditure requirements of the PSUs.
The
main agenda of widening the equity base and improving performance by giving
managerial control to private parties has taken a backseat. If one goes by
official figures declared by the department of disinvestment, one can make out
that less than 5 per cent of the total disinvestment proceeds of around Rs 1.50
lakh crore came from the privatisation of PSUs. In other words, disinvestment did not lead to privatisation as was
expected.
The Singaporean Model of Disinvestment and lessons for India !!
Countries
like the UK and Japan also faced similar difficulties. The difference, however,
lies in managing the issues. It is pertinent to mention that Singapore managed
its PSUs by establishing a separate fund during the early years of its
independence. The fund, an investment company, looks after the Singapore
government’s investment portfolio and its assets and is managed by a separate
board responsible for taking strategic investment decisions without sacrificing
the national interests, keeping intact the commercial and non-commercial
considerations. Since its inception in 1974, the fund value has grown manifold.
The Indian government can also form a separate holding company
on similar lines with an efficient board, independently responsible for
decisions but accountable to government, embracing corporate governance
practices and transparency. The entire
assets and investments the government holds in PSUs can be transferred to the
company, which shall switch in and out appropriately in view of the national
interests.
Who
knows all the ratnas the country hold may turn out to be a trillion-dollar
enterprise over a period of, say, 15 years. Does it seem like a dream? Yes,
dreams do come true if right decisions are taken at the right time.
