A vision for disinvestment

SOME OF THE broader and more vital contours of the public sector disinvestment programme clearly require refinement. Arguably the most contentious of the economic issues which every Government since the early Nineties has had to grapple with, the public sector share sale programme comes into sharp focus at the time of every Union Budget presentation. Apart from being part of the financial stock-taking - which the budgetary process evidently is - the disinvestment policy's conceptual details are articulated in the Finance Minister's Budget speech.

This time too the pattern has been repeated. Despite a massive 75 per cent shortfall in the targeted realisation for the current financial year, the Finance Minister has stuck to the same target of Rs. 10,000 crores from the public sector disinvestment programme for the next year. To achieve a greater degree of success than ever before he outlined a four-point action plan: restructure and revive potentially viable public sector units; close down units which cannot be revived; bring down the Government's stake in all non-strategic units to 26 per cent or less; protect the interests of the workers. As concepts, those are hardly radical or capable of threatening specific interests. But the difficulty with the disinvestment programme has been in its execution.

Therefore it is not surprising that even the constituents of the ruling NDA should fault the Government for even contemplating a stake reduction in three steel plants - at Salem, Durgapur and Visakhapatnam. Reports indicate that the Government is considering a strategic sale as part of a larger plan to infuse working capital into SAIL. However justified from a strict commercial standpoint, the moves to privatise the steel plants will meet with opposition and not merely because of narrow regional or sectarian considerations. For instance, there is a justified allegation that one or two of these units have been starved of funds in the past. Consequently their current viability is threatened. Since - in the event of its sale - that should result in a lower valuation for the unit, the interests of the Government-owner will naturally suffer.

The vicious cycle can be broken only if the focus shifts from specific grounds of disinvestment to certain broad parameters that should primarily determine its success or failure. There are a few major unresolved issues here. One major point of contention lies in the appropriation of the receipts from the sale process. There is one view that the existing practice in India of treating the proceeds as capital receipts in the Budget should be given up. Instead, a more transparent method through which the end use of these receipts can be easily identified should be evolved. The advantage then would be to demonstrate that the privatisation programme can work for the common good. Other countries which have made a success of the programme have created social utilities such as water works and drainage out of the disinvestment proceeds and even more importantly shown where the money has gone. These have made the disinvestment programme more acceptable.

In his Budget speech, the Finance Minister has said that about one tenth of the anticipated receipts will be used for retiring Government debt and the rest for expenditure in social sectors and restructuring of public enterprises. But for now at least there is no delinking the disinvestment programme from the Budget. The debate will have to continue until most of the broader non-controversial aspects are accepted as articles of faith.

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