The Hindu Business Line : Hurdle to disinvestment

THE Supreme Court's judgment last Tuesday on the disinvestment of Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited is a stricture on the disinvestment procedure adopted by the Government and is not a comment on the policy of disinvestment itself.

By now, this has become a well known fact, but the problem is that those who have ranged themselves against the selling off of the public sector oil giants are now making it appear as though the judgment of the highest court in the land has frowned on the Government's general policy on PSU disinvestments as such, the intended inference being that the official policy should now be changed, preferably along line which would avoid such disinvestments in the future.

To take an example, the Swadeshi Jagran Manch has now begun to argue that, in the light of the Supreme Court judgement, the Government should revise its chosen policy of disinvesting its stake in PSU oil units, oil no longer being considered a "strategic" sector as far as the official disinvestment policy is concerned.

To quote reports, "the SJM feels that oil is a strategic sector and disinvestment in the sector should be stopped". They added that the Manch felt that the Court' order "amounted to endorsing its view that the process lacked transparency". Be that as it may, it should be agreed that the process must be differentiated from policy, and that it would be unfair on the Court if its judgement was construed as a comment on the policy itself.

The Union Petroleum Minister, Mr Ram Naik, has of course been more cautious in his response to the judgement which, clearly, represents a victory for him in his campaign to prevent the privatisation of the oil companies concerned. In fact, he has gone on record as saying that "The market price of the two companies may now fall, but disinvestment will take its own course. We are committed to it".

But he has also described the decision as "historic", which means that he accords a lot of importance to it, specifically to the judgement's focus on the requirement (on the part of the executive) to go back to Parliament to effect a change in a "structure" which has been sanctioned by none other than an Act of Parliament. On his part, the Disinvestment Minister, Mr Arun Shourie, in his first reactions from Berlin, described the judgement as a "body blow", adding that it will have "far-reaching ramifications for India's disinvestments programme".

Looking ahead, there are two points of interest. First, how does the Government go about tackling the lacuna in its PSU disinvestment policy identified by the Court?

Second, will there be any sizable impact on the projected fiscal deficit because of the decision? Both issues are critical for the future of the national economy, and it is to be expected that political interference will be kept to a minimum in the attempt to find durable solutions.

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