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‘Disinvestment: new age thinking is needed to age-old process’

G Balachandar Chennai | Updated on October 26, 2021

Prakash Seshadri

Any PSU can be turned around to be made as profitable, if the government is ready to listen and change tact in the interest of the nation, says Prakash Seshadri

The disinvestment of debt-laden national carrier Air India, the first PSU sale in the last 18 years, is reported to signal the start of big-ticket privatisation and strategic sale of some PSUs. The Centre has already indicated that the way forward will be to have minimum government-owned enterprises even in strategic sectors. Does the disinvestment policy require tweaking? Are there alternative solutions? Prakash Seshadri, Business Strategist, Author and Founder, SEE CHANGE Consulting, spoke to BusinessLine about the current policy, the need for a revamped approach and alternative solutions, among others. Excerpts:

How would you describe the Air India disinvestment?

While upfront it might look to be a strategic disinvestment, thanks to the inordinate bureaucratic and policy level delays, this is a loss-loss situation for all. While for the Tatas it is an emotional bid, for the government it is a dead-end. I see it as a face-saving formula when everything is going down the drain. While public money to the tune of ₹1-lakh crore (or more) has been wasted, the way to build back the carrier is a long winding one for the Tatas.

Does the AI disinvestment signal the start of a new PSU-disinvestment era in India?

The way I see it is like this. The government hasn’t made it clear, in terms of an official roadmap or policy guideline, what is in store with the existing PSUs. While some of the profitable PSUs will be easy to disinvest, the real challenge will be when the government moves into the sale process of loss making PSUs. The Air-India type of deals will be the way (though not the best option) the government chooses at a heavy cost to the exchequer.

Is there a need for a change in disinvestment policy to make it more effective?

Yes. A mere look at the Disinvestment Policy will give you a clear message. The government still wants to keep control (51 per cent) of the PSUs and that doesn’t make business sense for anyone to come forward to run the sick / underperforming PSUs. While there are many ways of ensuring profitable disinvestment, it needs a “Business Mindset” approach to the situation. The bureaucracy is not completely aligned to this kind of thinking. When you have the right tools in the wrong hands, or in this case “No tools or inefficient tools” in the wrong or right hands, the results are predictably disastrous for all concerned. It would be a miracle if the sick/ under-performing PSUs make any headway in this current process of disinvestment.

Does the present era provide any opportunity for turnaround of loss-making PSUs?

Absolutely. Opportunities are plenty and any PSU can be turned around to be made as profitable, if the government is ready to listen and change tack in the interest of the nation. Holding on to clichés and age-old thinking is not likely to get us there.

What are the alternative solutions to disinvestment of loss-making PSUs?

Let me answer this with a different question. If a unit is sick in the private sector, what would they do? They would look at multiple ways of making the unit profitable before moving into the stage of stock liquidation or dilution. In short, government. should stick to governance and not running businesses. They are enablers but not “Business Owners” for sure. Even with seasoned brains and professionals, privately owned (or listed companies with better capital reach) organisations find it difficult to be profitable. When you have PSUs which are run more on social causes alone, what else can one expect? You might find some brilliant individuals who make exceptions, but that can or will never be the rule.

Published on October 26, 2021

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