Financial Daily from THE HINDU group of publications
Tuesday, Mar 23, 2004
Industry & Economy - Disinvestment
Market offering route a better bet: LSE Director
LIBERAL TALK: The Minister for Disinvestment, IT and Communications, Mr. Arun Shourie, with (from left) Lord Meghnad Desai, Mr. Howard Davies, Director, London School of Economics, and Mr. N. K. Singh, Member, Planning Commission, during a meet on `Challenges and opportunities for managing liberalisation in India' in New Delhi on Monday.
New Delhi , March 22
IF the Disinvestment Ministry was looking for advice on how to take the privatisation process forward, it could ask the London School of Economics Director, Mr Howard Davies, who believes that the public offering route is the way to go.
"We tried out all possible routes in the UK, and the conclusion drawn was that generally, the market offering route is better to privatise profit-making Government companies," Mr Davies said after signing a memorandum of understanding with the Confederation of Indian Industry (CII) for collaborative effort in knowledge exchange programmes.
Mr Davies, who has been associated with the Confederation of British Industry, said that the strategic sale route should be adopted only when the company would not be viable on its own and would be better off as part of a larger conglomerate of industries.
"The choice basically depends on what the Government wants. It does not depend so much on the sector, the decision has to be taken on the basis of the viability of the company post privatisation. If it can stand on its feet, it is a better idea to have its equity dispersed across the population as it would ensure greater accountability from the board," he said.
Mr Davies said there was no dearth of buyers of quality Government stock. "The Government went against the advice of its investment bankers who said that the market would not be able to absorb so much stock. But we realised that there was enough demand for a good company and British Telecom is an example," he pointed out.
For niche companies, like a couple of shipyards, Mr Davies said, the strategic sale route was preferred as that ensured their viability.
He said that the British experience had also allayed fears of rising unemployment due to privatisation. "We have been more aggressive and gone further than other European Union members. But still, our unemployment rate is 4.5 per cent while France and Germany are at about 9 per cent," he said.
On outsourcing, Mr Davies said that there was very little opposition in the UK and even trade unions accepted the fact that such job movements were bound to happen in a free economy.
Priority to tackle deficit: Shourie
Earlier, speaking at a seminar on `Challenges and opportunities for managing liberalisation in India,' the Disinvestment, Communication and IT Minister, Mr Arun Shourie, said that economic liberalisation has taken off and the Government's priority now was to tackle the fiscal deficit by cutting subsidies and devise new formulae for distribution of funds between the Centre and States.
For that, Mr Shourie said, the country would have to look 5-10 years ahead in time and not be too preoccupied with the problems of the day. The key challenge of liberalisation in India was to create more job opportunities, which would require more projects like the Golden Quadrilateral and Sagarmala to upgrade highways and ports respectively.
The MoU with CII entails exchange of ideas to learn from the experience on new innovations in business practices in the two countries. The programme would respond to the needs of Indian business and enterprise and to the research and educational needs of the LSE. The chamber and the business school would also identify areas of research collaboration drawing upon resources and strengths of each organisation. The two organisations would also explore development of jointly branded executive education offerings to be delivered by CII member companies.
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