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PSU disinvestment - An embarrassing record

May 6, 2000

Public sector disinvestment has been one of numerous sticky issues facing governments since the start of the liberalisation process. However, given the quantum of funds that are involved, it is nevertheless one of the more important issues. Central public sector units (PSUs) alone employ capital in excess of Rs 2,200 bn. The disinvestment exercise has been mired in controversy ever since the process was initiated in its current form. Successive governments have had to tackle questions pertaining to the prospects of employees in the PSUs, method of disinvestment and of course, why disinvestment (the ‘swadeshi’ brigade). Not surprisingly the process has been a non-starter.

Rs bn Budgeted Actual Actual as %
of budgeted
FY92 25.0 30.4 121.5%
FY93 25.0 19.6 78.4%
FY94 35.0 -0.5 -1.4%
FY95 40.0 50.8 127.0%
FY96 70.0 3.6 5.2%
FY97 50.0 3.8 7.6%
FY98 48.0 9.1 19.0%
FY99* 50.0 58.7 117.5%
FY00 100.0 26.0 26.0%
FY01 100.0   NA
* achieved by creating cross holdings among PSUs

The numbers speak for themselves. They also seem to put a question mark on the incumbent government’s target of raising Rs 100 bn from disinvestment of holdings in PSUs. Already the signs are not good. The much hyped strategic sell off in Indian Petrochemicals Limited (IPCL) has been delayed by over five months and yet there are no signs of the process moving ahead.

An alternative for the government is to appoint a fully autonomous non-political body, with adequate powers, to conduct the process of disinvestment. This will bring in transparency and an end to the political bickering. Whether the mandarins will let the issue of strategic importance (and influence) pass over to a non-political professional body seems unlikely. Until wisdom prevails, let’s hope the government will meet its target. Else it could imply higher taxes to support the inefficiencies of the system.

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