The Hindu Business Line : Build consensus on divestment

Once a consensus is achieved, political logjams can be averted and petitions in court that lead to delays and derailment of the development process reduced, if not eliminated. It will also improve India's image internationally.

IN A democratic country such as India where several political parties have different ideologies, agendas, and viewpoints, there is a need to have consensus on economic issues.

Such a policy finalised by the major political parties will provide long-term direction for corporates. It will also help public enterprises in their reform and restructuring process, and enable them to compete in a globalised competitive environment. Once such a consensus is achieved, political logjams can be averted and petitions in court that lead to delays and derailment of the development process reduced, if not eliminated. It will also improve India's image internationally.

India's journey towards open market economy started in July 1991. However, the liberalisation policy brought little solace to the public sector. In the name of reform and restructuring, emphasis was laid on disinvesting public sector units. Further, in the absence of a clear roadmap, privatising profit-making PSUs and oil sector companies gave rise to differences within the NDA leaders, as also the Opposition. This also left most officers, employers and stakeholders dissatisfied, and resulted in the filing of several Public Interest Litigations (PILs).

On several earlier occasions too legal hurdles had almost derailed economic development and reforms. Had there been a consensus on the disinvestment policy, the situation would have been different.

Here an introspection of PSU performance is a must to say which path should be taken. During the past decade, central PSUs have consistently improved their performance in spite of several constraints, including lack of autonomy, and step-motherly treatment. They have registered an increase of 696 per cent in their net profit, which was Rs 3,271 crore in 1992-93, and zoomed to Rs 26,045 crore in 2001-2002. This shows that these PSUs as a whole have registered a nearly 70 per cent rise annually in their net profit.

Similarly, their turnover has risen from Rs 147,266 crore to Rs 478,728 crore during last decade. The net worth of central PSUs has improved by Rs 55,596 crore during 2001-02 to reach an all time high of Rs 232,265 crore, proving that they cannot be wished away. The profits of profit-making PSUs have shot up by about Rs 8,000 crore to Rs 36,432 crore by the end of the fiscal 2001-02. The losses of loss-making PSUs have also come down to Rs 10,387 crore from Rs 12,841 crore last year.

So, the question arises whether the PSUs should be privatised at all? If yes, which ones? The profit-making PSUs have been generating internal resources and also contributing to the central exchequer by way of duties, taxes, dividend and so on. During 2001-02, 128-profit making PSUs generated Rs 52,545 crore of gross internal resources. Besides, the PSUs contributed Rs 62,753 crore to the central exchequer in 2001-02. Their last three years' contribution of Rs 1,79,947 crore exceeds the total Central investment of Rs 1,43,205 crore by 25 per cent.

The profit-making PSUs are not candidates for privatisation. They should be given maximum autonomy by professionalising their boards so that they can further improve their productivity and profitability. Only those PSEs that are not in a position to turnaround should be privatised. There are a large number of such companies also.

Now, if we try to analyse the objections by some NDA allies or major Opposition parties, it would be seen that they almost agree to the stand taken by Standing Conference of Public Enterprises, the apex body of public enterprises.

Broadly, SCOPE's stand has been that it favours disinvestment if the objective is to restructure and reform the PSUs. It should not be merely to bridge the Budget deficit. The disinvestment proceeds should be used properly for training and redeployment of employees who lose their jobs or take VRS. The apex body of the PSUs has stressed the need to draw a road map for disinvestment to avoid uncertainties and misunderstandings; and to adopt a transparent and positive policy. Suggesting first the divestment of sick, non-profit making, non-core organisations, which cannot be revived, SCOPE has advocated the enhancement of public participation in profit-making, globally competitive and marginally well-performing PSUs which can be revived or turned around by way of Initial Public Offering (IPO).

In the interest of providing a level-playing field, each PSU should be allowed to bid for other PSUs on the disinvestment block.

Since SCOPE's views have been emerged after several rounds of interactions and brain-storming sessions with former and working chief executives, executives and staff members of many PSUs, academicians and government officials, the same have been favoured by almost all.

It is time the government gave serious consideration to these. It is also time to build consensus on not only the disinvestment process but on all economic policy issues so that the country can compete in a globalised environment.

(The author is Director- General Standing Conference of Public Enterprises — SCOPE.)

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