Mar 27, 2000|
Centre falters on disinvestment drive. Will it ever meet the target?
One of the key highlights of the economic reform measures undertaken in India during the 1990s has been the decision to exit a large number of business that the government is currently involved in. However, ten years after the initiation the government has little to boast.
* achieved by creating cross holdings among PSUs
The chart above clearly carves out the performance of the government on the disinvestment front. Save for FY99 when the government created cross holdings among PSU’s to meet the target, the disinvestment drive has been failure since FY96. The latest debacle is the disinvestment of the government’s 25% stake in Indian Petrochemicals Corporation Limited (IPCL).
IPCL (FY99 Net Sales: Rs 31.1 bn) is India's second largest integrated manufacturer of polymers, fibre and fibre intermediaries and chemical products. It has two integrated petrochemical complexes and is in the process of setting up a third one.
The decision to divest a 25% stake in IPCL was lauded by all. First, the disinvestment would have raised resources for the cash starved government. Secondly, the advent of a new partner would have made IPCL more competitive as it would have got access to an experienced management and cutting edge technology (an area where the company is falling behind). Also, with Reliance emerging as a dominant player in the markets, the company's viability itself became a subject of speculation. The entry of a new partner would have given the company financial and technical muscle to take on Reliance.
The rationale for disinvestment is understood by all save the labour unions and they are not to be blamed for it. This is due to the fact that the government has failed to come out with a concrete plan for sharing the wealth from disinvestment by providing alternative employment and other benefits.
The need for disinvestment has become more urgent in view of the sharp deterioration in the financial health of the government. One hopes that this will serve as a trigger for the disinvestment process in public sector units.
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