Date:08/01/2003 URL: http://www.thehindu.com/2003/01/08/stories/2003010805651200.htm

National

FICCI opposed to strategic sale route

By Sushma Ramachandran and P.K. Bharadwaj

NEW DELHI Jan. 7. Corporate India appears to be opposed to the strategic sale of profit-making public sector "navaratnas" with the new FICCI president, A.C. Muthiah, suggesting that they be converted to autonomous corporations run by professional management. Instead of divesting government equity to a single partner, he advocates that the companies be allowed to disinvest shareholding to the public and be listed on the U.S. based Nasdaq or domestic stock exchanges.

Clearly opposed to disinvestment through the strategic sale route for the "jewels" of the public sector, Mr. Muthiah feels that the value of their assets is so huge that it cannot be properly estimated or evaluated. For instance, the Oil and Natural Gas Corporation (ONGC) is a giant whose wealth cannot be assessed, he says.

Commenting on the current controversy over the disinvestments, he said the strategic sale of the "navaratnas" would end-up creating monopolies in the private sector. By making the PSUs autonomous and enabling the public to buy shares in these blue chip companies the problem could be avoided. FICCI would be making suggestions on these lines to the Disinvestment Ministry shortly. "These are already well-managed companies which are making profits," he said.

Referring to the proposal for ONGC or other profit making oil PSUs to bid for Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL), he felt there should be no problem if these become autonomous corporations. In contrast, he said the strategic sale route should be adopted in cases either where the companies were not making profit or where there were strategic interests. For instance, he cited the case of Paradeep Phosphates Limited, which had been bought by a producer of phosphoric acid, who was taking over units making the finished product. China, he noted, was already planning to take the IPO route for selling up to $20 billion of public sector equity.

On broad economic issues, Mr. Muthiah, however, felt that the Vajpayee Government had "good intentions", but its performance was inhibited by the compulsions of coalition politics. On whether there was a political consensus on reforms, he felt this existed on a broad level, but there was divergence on specific issues.

Generally upbeat about the economy, he expects a 6 to 6.5 per cent GDP growth for the current fiscal, but feels a higher growth is possible in the long run. As for the eight per cent growth target for the tenth plan, he did not think it was over-ambitious and could be met. But efforts had to be made to improve the performance, especially in agriculture and food processing, which could become a strength of the country in the long term.

Regarding FICCI's agenda on non-resident Indians, in view of the forthcoming conference, he said a special cell would be set up for non-resident Indians to churn the funds available from the Indian diaspora, and invest them in the right direction. He said the Government was proposing to set up a special NRIs Commission, where FICCI would function as a facilitator.

On the current investment climate, he felt that "confidence building measures" were needed to boost foreign direct investment inflow. Largely discounting the impact of fears over terrorism, he said potential investors were more deterred by the past experience of investors, especially in the power sector, where commitments were not honoured by the Government.Similarly for domestic investment, he said steps were needed to enable the corporates to get development finance. He recalled that it was such finance that enabled huge projects to be set up and create the country's existing industrial infrastructure. "We must build wealth," he said.