Financial Daily
from THE HINDU group of publications

Thursday, April 20, 2000



Corporate | Next | Prev

British lessons on privatisation stress speed, transparency

Our Bureau


SPEED and transparency, right legal framework before sale, incentives for the management and employees are only some of the British tips that India can pick up before wholly or partly privatising its public enterprises.

Eventually, only a fair regime can win the confidence of investors and the public, according to Mr. Henry Bush, Deputy Director, Finance Regulation & Industry Directorate, HM Treasury.

He says there is no escape from the heartaches of privatisation that is fraught with financial risks and sentimental conflicts such as labour. The UK also sold too many of its enterprises at one go and offered early incentives that were hard to sustain.

When it raised over $90 billions through sales, the question was whether to use it to repay national debt or for restructuring.

Mr. Bush is part of the British Trade Initiative team of officials and consultants that is currently touring Bangalore, Delhi and Mumbai and talking on the UK experience in privatisation. The team is headed by Mr. David Jefferies, Co-Chairman, Indo-Briti sh Partnership, and former chief of Britain's National Grid.

Starting in the early 1980s, Britain privatised most State-owned sectors including railways and other utilities, amounting to almost 100 big companies. The process is still on, with air traffic control in the next batch to open up. As a result, income fr om PSUs has come down from 10 to three per cent.

Mr. Robert Philips, Senior Partner, CMS Cameron McKenna, says that a protectionist step like the British Government's non-participatory `golden shares' should not be ignored.

The ten big private water companies in the UK have not one but three independent regulators - looking at economic, environmental and quality aspects. Prices rose initially but have begun to show an average 13 per cent reduction a year for the past three years. Sub-standard supply has also meant damages of 1.5 millions to customers from these companies. The regulators have ensured rate incentives for improved efficiency and a price ceiling on water companies.

During the disinvestment process, there was a loss of 50 per cent of the jobs in British PSUs. The bottomline, says Mr. Jim Mowatt, National Secretary, Transport & General Workers Union, is that shareholders and customers benefited enormously while effic iency went up significantly. Their largest power generator alone shed 80 per cent of jobs in nine years.

``Unions today are seeking partnership with employers and understand that job security comes from sustainable competitiveness of the company,'' he rationalises.

The Indian experience has had successes such as cellular phones, airlines, courier, TV, ISPs and the oil sector. But the private investor has still to reckon with lack of legislation, environment-related hassles, nightmares of land acquisition and subsid ies, according to Mr. Pradeep Bhargava, Vice-Chairman, CII, Karnataka, and President & Chief Executive Officer, GE Lighting (India).

He says the right sequence should have been putting the law in place before opening up (as with roads), having the regulator before the operator (as with telecom) and privatising power T&D before generation. Operations and maintenance may be a smart star t to privatisation but first, the enterprise should also be insulated from social obligations. But as long as the customer is happy, nothing else matters, he adds.

Comment on this article to

Send this article to Friends by E-Mail

Next: Fiat sees Palio sales touch 50,000 units every year
Prev: ASK-Raymond to foray into retail broking

Agri-Business | Banking & Finance | Catalyst | Commodities | Corporate | Info-Tech | Logistics | Macro Economy | Marketing | Markets | News | Opinion | Pocket | Variety | Info-Tech | Catalyst | Investment World | Money & Banking | Logistics |

Page One | Index | Home

Copyright © 2000 The Hindu Business Line.

Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line.