The Hindu Business Line : Unlock the wealth

For more than three years, private industry in India has been able to use the stock market to enhance its value in more ways than one, raising capital for expansion plans as the economy boomed and benefiting their shareholders with rising share values. Some public sector undertakings, fortunate enough to be listed, have also enjoyed similar benefits, without losing their public sector character, for instance, Bharat Heavy Electricals Limited (BHEL) and ONGC. But it is indeed unfortunate that a large number of PSUs with considerable potential to enhance value for themselves and create wealth for shareholders, including the government, have not had that privilege. Opposition from the Government's Left allies, which think that divestment, regardless of the size of equity sold, is tantamount to selling the family treasure, has prevented many a PSU from realising the full benefits of the current equity boom.

Just how much wealth listed PSUs have created for the government alone as majority shareholder was reported in this paper on Monday and it should serve as a lesson for all those who see listing as an evil to be eminently avoided. At current stock prices, the value of government holding in Indian companies, mainly PSUs, stands at Rs 5,26,200 crore. That notional wealth is a third of the government's domestic debt. While it is inconceivable that the government will encash its holdings to pay off some of its debt, it is possible, and perhaps prudent, for New Delhi to consider doing so to meet its social obligations or fund part of the Eleventh Plan. Reaping profits to finance capital or current expenditures enables the government to adhere to its fiscal prudence norms by reducing the burden on tax revenues or foreign exchange reserves. Admittedly, that would mean some more dilution of its stakes in listed PSUs and there will be howls of protest at this. But given the fact that so many PSUs are still unlisted, the lessons to be drawn from the possibilities of wealth creation through the equity market are manifold and need to be considered more soberly than they have been so far. Last weekend, the Finance Minister stressed the importance of listing PSUs to enhance their true enterprise value and most PSUs would be only glad to do so.

But listing alone will not unlock the value of human resource in PSUs. Granting them freedom from ministries in enterprise management will. Over the past three years some listed PSUs have had far too many masters scuttling the initiative for risk taking. While the private sector is in full flight, they are yet to find their feet after falling from the commanding heights.