Privatisation is back

At ₹24,777 crore, the revenue raised from disinvestment in the current fiscal is not even half of what was originally targeted. But this hasn’t stopped the Centre from being even more ambitious in the coming fiscal. Last week’s Budget targets a whopping ₹69,500 crore as receipts from disinvestment. Interestingly, a sizeable part of this is conceived as coming from strategic sale, of which there has been none for over a decade now; the last deal was put through in 2003-04 by the Vajpayee government. Finance Minister Arun Jaitley has budgeted a grand sum of ₹28,500 crore from strategic sales in 2015-16. Are these big targets, both for overall disinvestment and strategic sales, achievable? Yes they are. But what they require though is well-thought out, systematic action from the beginning of the fiscal rather than desperate make-up moves towards the end of the year, which has been the story of the disinvestment process in this country until now.

Ever since it began in the early 1990s, disinvestment has been seen merely as a revenue-generating exercise for the government — a kind of asset-sale process to help bridge the fiscal deficit. It is — and should be — much more than just that. Disinvestment should be regarded as a means of restructuring the public sector, which boasts of some top companies with excellent technical and human resources, in order to take them to greater heights after they are released from governmental controls and privatised. There are many examples of PSUs that were dominant enterprises in their sectors but now languish for want of finance or technology or both. The examples of Air India and BSNL spring instantly to mind. Privatisation calls for a complete overhaul of the philosophy behind disinvestment. Most governments have been weighed down by the old Nehruvian view that envisaged the public sector at the “commanding heights of the economy”.

The Modi government is not burdened by such ideology. It should, however, learn from the limited experience of privatisation of PSUs such as IPCL, CMC, Hindustan Zinc, Balco and VSNL that was carried out by the Vajpayee government. The biggest concern in privatisation deals is protecting the interests of labour. The fear that the new owner will retrench workers is understandable and the biggest challenge for any government in this respect is getting employee unions on board. Jaitley would do well to undertake a systematic study of all PSUs to identify potential strategic sale candidates, including loss-making ones that might be attractive to private players. He should not be constrained by short-term revenue targets but follow a long-term approach that aims at restructuring the public sector by selling off loss-making units that are draining public finances and supporting PSUs that are strategic to national interest. Luckily, he has time on his side.

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