The Hindu Business Line : Disinvestment by another name?

THE NEW GOVERNMENT'S initial views on the public sector sale programme were both so strong and negative that many, and not just those in the stock market, had reason to fear that a sea-change in policy was in the offing. Arguably the most contentious of all economic reform measures since 1991, the programme, officially called disinvestment, came to be associated in the last days of the previous NDA government with privatisation, a nomenclature that is not only better understood by economic planners through the world but one that conveys an air of finality about the ownership status of the target company. Unfortunately, in the current Indian context the quibbling over nomenclature has had an unfortunate connotation, with the new United Progressive Alliance initially stressing its opposition to `privatisation', meaning an outright transfer of ownership. With so many statements emanating from the alliance partners and the new ministers rejecting privatisation, one may not have been wrong to conclude that the programme had suffered a grievous setback.

However, subsequent pronouncements do allay the apprehensions. Look at the climbdown from no privatisation of profit-making units. The Common Minimum Programme talked of how "Generally, profit-making companies will not be privatised." Now the President's address on Monday talks of privatisation being considered on a case-by-case basis; there is no outright rejection of any class of public sector units. There could be shackles — and even these might be removed for reasons of expediency — but it looks as if the public sector sale programme will go on. That is how it must be, for it is no one's case that the Government must hold on to business assets that are loss-making or even those that yield returns lower than the rate at which it borrows.

Moreover, it is not as though the public sector programme had a smooth sailing always, either during the NDA days or before. In fact, while the NDA government did notch up an impressive tally of strategic sales (where ownership is passed on along with a chunk of government equity), it was precisely the concerted opposition to that method in the case of the oil sector companies, BPCL and HPCL, that stalled the programme. The Government was then forced to adopt a middle path — a step-by-step dilution in the case of BPCL and a strategic sale for HPCL. The present controversy over the programme is, therefore, actually an old one and essentially involves a re-look at the two methods used so far. After relying heavily on the step-by-step divestment route for some eight years, the government opted for the strategic sale route beginning with Modern Foods. Both methods have their advantages and disadvantages and, ideally, policy-makers should have the freedom to choose one, depending upon the circumstances.

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