Gathering pace

THE FLURRY OF announcements by the Minister for Disinvestment indicates that the public sector sale (PSE) programme is finally gathering steam. As many as eight Government-owned hotels have recently been sold off either on an outright basis or handed over to the private sector for a consideration. The Government stands to get less than Rs. 200 crores from those transactions. It will be tempting but incorrect to call those inconsequential even on purely financial considerations. After taking into account the two completed divestments in CMC and HTL, the Government has till date managed to mop up just over 3 per cent of the annual target of Rs. 12,000 crores. However, inferences on the basis of pre-set financial targets are hardly illuminating and, at times like this, misleading as well.

Budgetary target-setting for PSE sales has been as controversial as the overall programme itself. A major plus point in its favour is that it gives a sense of urgency. On the debit side, there could be an unseemly haste in disposing of valuable assets at bargain basement prices solely to meet the targets. Looking at the track record of the PSE sale programme in its entirety, it is evident that even while there have been charges of short-selling - especially when the stock market prices were benchmarked - there has been no specific allegation of bowing in to budgetary pressures. So, while the larger issue of gross fiscal deficit - and the relatively negligible role played by the disinvestment programme in bridging it - will remain in focus, it is time to evaluate the programme on some entirely different yardsticks.

In the latest round of divestments, the Government has undertaken an outright sale of seven hotels and disposed of one more on a lease-cum-structured-contract basis. To obviate any likely criticism of opaqueness in these, the Government, in consultation with the chosen advisers, has evolved an elaborate procedure that would ensure both transparency as well as a decent realisation for itself from the sale. The need for such an approach became obvious in the wake of the sharp controversy after the Balco sale. The fact that the current year's two strategic sales of CMC and HTL passed off without a whimper of protest showed that the Government has learnt its lessons and that it can act proactively. That view will get further reinforced after the latest set of disinvestments. Another likely criticism of pushing ahead with the sale of hotel properties at a time when the whole hospitality industry is in the doldrums is easily countered: after all, in all the concluded cases the Government gets much more than the respective reserve prices. Those properties that did not fetch worthwhile bids or no bids at all have been taken off the block for the time being. Obviously, there are some more lessons to be learnt in structuring these transactions and in dealing with issues such as urban land.

There has been a commendable resolve to push ahead with the strategic sale of IPCL within a time-bound range of 90 days. The petrochemical major has been the first candidate chosen for strategic sale and a successful conclusion this time would also blunt the frequently levelled criticism of dithering that had accompanied it for almost three years. As for Hindustan Zinc, there was no option but to invite fresh bidding as even the sole bid did not measure up to the reserve price fixed for the company. The latest round has shown that different outcomes are possible when dealing with diverse companies and methods of sale. An important and lasting gain is that valuable precedents are being set every day. Big ticket sales can now be taken up with greater confidence.

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Section  : Opinion
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