A difficult exercise

IF THE ANNOUNCEMENT regarding the Bharat Aluminium Company (BALCO) on Thursday came as a pleasant surprise to those who were unhappy with the pace of the disinvestment programme, the sharp criticism - both in and out of Parliament - the next day was entirely predictable. The official policy on sale of public sector enterprises, which commenced during 1991-92, has been controversial. During the past decade political parties of different hues have formed the Government at the Centre. Disinvestment came to be accepted as an official plank, though obviously the emphasis has varied in the implementation. Stringent criticism, not necessarily well informed, has bedevilled the process of sale, no matter what methodologies have been used in each instance. Not surprising therefore that securing a reasonable consensus takes precedence over the attainment of certain goals of divestment. One lesson learnt over the past decade is that it is the procedural parts of the public sector sale, rather than the concept proper, which are contentious.

The above come into sharp focus now even as the Government prepares to transfer 51 per cent of its stake in BALCO to Sterlite for a little over Rs. 550 crores. While the Government takes credit for another Rs. 244 crores and claims that there cannot be a better price, most of the opposition alleges opaqueness in methodology and short-changing of the exchequer. The Government says the price for handing over its majority stake has been determined through an independent and time-tested valuation exercise adopted by its global advisers and that what Sterlite is paying for is much higher than the reserve price fixed, the book value of BALCO and the competing bids. The transparency and openness built into the process by the Minister of State, Mr. Arun Shourie, is indeed commendable.

Given that highly emotive points are involved, with the divergent sides unlikely to arrive at a meeting ground anytime soon, the BALCO sale might well pass off as yet another unhappy disinvestment experience, with little to contribute by way of healthy precedents. That will be most unfortunate. BALCO's has been only the second strategic sale that has come so close to completion, the first concluded one being the sale of Modern Foods a year ago. There have been high expectations from this method which involves a transfer of management control along with a chunk of equity. Theoretically, it has advantages over the piecemeal processes adopted earlier. The buyer would pay more and lift the value of the enterprise. Technical support and managerial decision-making skills will be built into the process of selection of the strategic buyer. All stakeholders of the company - employees, existing government-shareholder as well as new shareholders - ought to benefit over the term. In practice though as the BALCO experiment demonstrates, the strategic route much more than the earlier rounds of disinvestment can be controversial to a point where even at the final stages it can get derailed or postponed.

At a time when more high-profile privatisation programmes involving the two airlines and VSNL are in the early stages any setback will be injurious to the macroeconomic policy at large. The BALCO announcement, coming as it did, barely a few days before the budget can be a shot in the arm for the disinvestment programme. In fiscal terms its contribution is just about 5 per cent of the amount budgeted for disinvestment proceeds for this year, but still very significant because no other divestment has taken place. But there will be even more tangible gains if the Government and the opposition reach a meeting ground so that future decision-making in this vital area is not imperilled.

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Section  : Opinion
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