Among the four objectives, only the fiscal objective of resource generation through disinvestment and the consequent budgetary support have caught the attention of the state and the private investors, thus, making disinvestment an end in itself. This is hardly desirable.

Contrary to popular perception, disinvestment should be seen as a step in the continuum of economic development. It should be more appropriately viewed as a logical part of the process of infrastructural build-up whereby the state, just as a venture capital fund does, exits from mature undertakings and establishes new start-ups. This conceptual clarity on disinvestment as a means (rather than as an end in itself ) will define a new paradigm for the state.

State as super VC

Discussing the State-as-super VC- paradigm, four points may be noted:

First, the disinvestment process is hardly complete as of now. Eventually, it should result in virtual 100 per cent private ownership of all non-strategic (that is, non-defence-related) undertakings. It will also need to be extended to public utilities. The process by which this gets done is extremely important to unlock more value from the disinvestment.

Second, and more important, the disinvestment process is only a facilitating step for the state to unleash a second wave of investment in industrial and economic infrastructure.

Under the ambit of continuing disinvestment, the state should not assume an extreme posture of either an `elder brother or a `passive investor'. It should, instead, facilitate more efficient leveraging of its role and resources to help the new privatised undertakings. In this context, the hurried dismantling of monopoly positions or undue drawal of cash reserves ahead of privatisation do not support either good front-end valuations or rapid growth of privatised entities.

A transitory window period of two years should be provided whereby the residual advantages of being a PSU or PU subsist to an extent. At the end of such a period, wherein the new private management with its more aggressive managerial intent and the residual policy support would rapidly drive up the business of the privatised undertaking, total disinvestment at significantly higher valuations can be accomplished.

Privatisation should simultaneously be extended to various public utilities, such as road transport corporations, electricity boards, public works departments, airlines, shipping lines, railways and state departmental undertakings.

The state also needs to address the second, and more challenging, aspect of driving up a new wave of infrastructure. India has to take major strides in this area. Look at the transport sector. While today the state is content maintaining a railway system, the challenge is to at least partly privatise it and use the proceeds to develop a futuristic and far more efficient network of bullet trains.

As for roads, the challenge is to privatise the normal intra-city, State and National Highway projects and use the resources released to set up a PSU to drive such mega projects as the golden quadrilateral.

In pharmaceuticals, the need is to move from the residual manufacturing presence to establishing a world-class institution for disease- and drug-evaluation.

In education, the current focus on general universities should be minimised by seeking corporate support, and setting up institutes of frontier sciences and technologies.

There are some traditional areas where the government has withdrawn rather prematurely. The state should reinvest in such areas more aggressively.

Establishment of more super thermal and hydel power stations and world-class mega and mini airports are two areas that call for immediate action. Corporatisation of subsisting public utilities, such as public works departments and government hospitals with major investments would result in a more efficient public participation in these vital areas.

The proceeds of the disinvestment process should be directed to a state corpus venture capital fund to direct this new wave of public sector investment into infrastructure upgradation and technology development.

These ventures should be established with composite packages of overseas investment technology and management expertise.

For instance, collaboration with the famous Japanese Shinkansen will be ideal for a bullet train venture.

Partnership with the US National Institutes of Health would be appropriate for disease and drug evaluation effort.

Tie-ups with the top 10 universities in the US, Japan and Germany would help establish new institutes for cutting edge science and technology.

On the other hand, in roads, power and airports, adequate domestic capability already exists which only needs to be leveraged with selective induction of overseas resources (technical, financial or managerial).

To give shape to this vital initiative, the Disinvestment Ministry may also include reinvestments in its portfolio.

It would be appropriate for the Government to draw up a strategic plan, if necessary with inputs from the Indian Institutes of Management or reputed consultancy organisations to develop an appropriate business model for a new wave of infrastructure build-up in frontier areas.

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