The Hindu Business Line : Nettlesome dilemma of disinvestment

On July 21, the Prime Minister, Dr Manmohan Singh, put all disinvestment decisions and proposals on hold `pending further review'. This was in apparent deference to the DMK's strong objection to the selling of 10 per cent of the stake, amounting to Rs 1,100 crore, in the Neyveli Thermal Corporation (NLC).

Earlier, too, the Government used to be taken to task by the Left parties whenever it came up with any move to disinvest. The Prime Minister apparently found the experience frustrating and simply called it a day.

The word — disinvestment — has since July gone completely out of the official lexicon. There has been not one reference to it by any of the Ministers. There is also no sign of any review being undertaken.

Obviously, it is too late in the day to go into the merits of the policy of disinvestment itself, as that would lead to the pulling down of the entire edifice of economic reforms, put together so painstakingly over the past 15 years.

In the event, India's credibility would suffer a beating in the estimation of economic players, raising apprehensions about the dependability, continuity and durability of its policies and about its stamina to stay the course. A reversal of the disinvestment policy is, therefore, ruled out.

Non-starter

If it is a question of reviewing the list of the public sector undertakings (PSUs) that had been considered suitable for total, partial or graded disinvestment as per the various past recommendations, here again, commissions and committees have comprehensively covered the ground and a very sensible approach had been evolved over a period: While PSUs vital to security and Defence will not be opened up, and those identified as `Navaratnas' will not also be touched, there should be a phased reduction of the Government's stake in the rest of the PSUs.

An issue that has hitherto remained unresolved pertains to profit-making parastatals. (According to the latest report of the Comptroller and Auditor General of India, as many as 164 out of the 276 PSUs under the Central Government made profits in 2004-05.)

The Left parties want such undertakings to be retained, on the reasoning that, with better management and determined marketing efforts, they have the potential to become `ratnas' too.

The problem is that disinvestment confined to loss-making companies will be a non-starter, as there will be very few who would be venturesome enough to get involved in such companies in the hope of turning them around as sound commercially-paying enterprises.

Mixed-up economy

Visualising disinvestment as a way of getting rid of unwanted or unviable entities is at the root of the one-step-forward-two-steps-backward syndrome.

The rationale for disinvestment is actually founded on the fundamental axiom that it is no business of any government to be in business, simply because it is a field for which it is not equipped.

By freeing itself of the managerial, operational and financial burdens on this account, it will be able to do greater justice to its legitimate domain: Poverty elimination, social and physical infrastructural development, reaching basic amenities and services to people, and looking after security and law and order.

One of the reasons why India is close to the bottom in the human development index may be the mixed-up economy going in the name of mixed economy.

The Prime Minister should renew his efforts to persuade dissenters to give up their opposition to something that will increase job opportunities and bolster the economy, and restart the disinvestment process in time for the new Budget.

B. S. RAGHAVAN

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