Disinvestment panel soon

By Sushma Ramachandran

NEW DELHI, MAY 28. The Disinvestment Minister, Mr. Arun Jaitley, said a new Disinvestment Commission would be appointed very soon to provide input for the privatisation process.

In an interview to The Hindu, he said the new management structure of the Air India could only be finalised after the global advisor is appointed

The Government is likely to appoint a new Disinvestment Commission ``very soon'' according to the Minister for Disinvestment, Mr. Arun Jaitley.

He said an advisory body was needed to provide inputs for the disinvestment process. Reports of the earlier commission were now out-dated as market conditions had changed considerably since they were submitted, he pointed out. In the case of Air India, for instance, the broad parameters of the commission's recommendations had been accepted with modifications to suit the changed scenario.

The Minister told The Hindu that the entire process of disinvestment or privatisation was being carried out keeping market conditions in mind. The aim was not merely to raise a set target of funds during one financial year but to improve the health of the public enterprises, raise government revenues and increase job opportunities.

On Air India disinvestment, Mr. Jaitley said it was too early to make any comments on the new management structure. The decision taken by the Cabinet Committee on Disinvestment was an ``in principle'' clearance for sale of 40 per cent equity to a strategic partner. It was now for the global adviser to assess the market and invite bids from interested parties. The shareholders' agreement would then have to be finalised and financial bids invited. He pointed out that in Air India's case, the disinvestment had the potential to correct the employee- aircraft ratio. Besides employees would also benefit from the employees stock option (ESOP) scheme built into the disinvestment formula approved by the CCD.

Regarding Indian Airlines, he said the appointment of a global adviser was likely to be announced shortly. In this case, he said involvement of foreign airlines in the shareholding was ruled out unlike in Air India where up to 26 per cent foreign equity was being allowed.

Mr. Jaitley said the disinvestment plans of many PSUs were being kept on hold because of market conditions. In some PSUs, share prices were extremely volatile. The Government was unlikely to disinvest merely to meet resource mobilisation targets in the Budget unless share prices stabilise for the concerned PSUs.

He stressed that PSU shares would not be sold at a discount as in the past. At the same time, he was categorical that companies making huge losses need to be dealt with appropriately rather than spending tax payers' money merely to ensure that these keep running at a loss. The production costs of just one such company was higher than the market price of its output, resulting in a drain of thousands crores of rupees on the exchequer. The disinvestment process, he said, was meant to stem this continuing drain on the country's resources.

Mr. Jaitley objected to the term ``sell-off'' for the disinvestment process. ``It is actually a process of reviving public sector undertakings.'' Ultimately, he said, it meant that instead of the Finance Minister using tax-payers' money to pay salaries of workers in sick units, those companies were turned around and jobs actually saved rather than lost. ``I regard disinvestment as a positive pro-labour policy,'' he said.

Explaining this concept, he said keeping inefficient unprofitable units meant workers' jobs were being threatened and salaries may not be paid. If disinvestment could prevent labour insecurity, than surely it was a pro-labour policy, he contended. Besides, it was possible to ensure job protection for PSU workers by including provisions in the shareholders' agreement as had been done in the MFIL case.

He pointed out that the sale of profit-making public sector units to strategic partners meant infusion of more funds and technology. As a result, the financial performance of such companies would improve, ensuring higher dividend and taxes to the Government. Expansion of capacities in such units also meant creation of more jobs, he said.

Citing the example of Modern Foods, Mr. Jaitley said all 2,200 workers of the company had been retained by Hindustan Lever. With the capacity likely to be raised in the next few years, he said employment would actually rise in the company which had been operating at only 15 per cent capacity utilisation prior to the sale.

Mr. Jaitley strongly defended the sale of Modern Foods against criticism its assets had been undervalued. He noted that companies were sold based on share values and not property values. The share valuations take into account the assets of the company along with the production prospects for future. In the MFIL case, he said at least two leading multinationals opted out of the bidding as they felt the company was not worth more than Rs. 60 crores.

Despite this perception, he said it had been possible to sell the company's shares valued at Rs. 1000 for Rs. 11,490. In this context, he explained that the global adviser for the sale had given a valuation of only Rs. 78.55 crores for the entire equity. As for the market value of assets, these were pegged at Rs. 109 crores while the price offered ultimately for the shareholding was higher.

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