Friday, November 1, 2002, Chandigarh, India

National Capital Region--Delhi



The mystique of disinvestment: some hard facts & critical issues

The views expressed by Hari Jaisingh in the article "The mystique of disinvestment" (Oct 25) are highly appreciable. No doubt, PSUs have caused a huge drain on the public exchequer and hence they need to be streamlined. However, privatisation should not be considered as the only solution to all problems. Rather granting greater autonomy and reducing bureaucratic and political control, thereby allowing PSUs to run on a sound commercial basis and other measures essential for reviving PSUs are the need of the hour. There should be disinvestment, but in necessary cases.

Profitable companies are now being privatised and loss-making ones are being retained. This has resulted in a situation where "we privatise the profits and nationalise the losses."

Take the case of Air India, which was set for privatisation. However, when all formalities were completed, no bidder came forward. The main problem with the disinvestments process is the under-valuation of assets and shares. Once an enterprise is declared for sale, its share value starts declining. Take the example of VSNL. As against the share price of Rs 168 on the day of sale, the price realised by the government was Rs 202 per share. The government has shown it as a great achievement. But the fact is that one month before the declaration of privatisation of VSNL, its share price was Rs 221.


Therefore, in order to form a proper perspective on disinvestment an understanding of the contribution along with the failings of the public sector is imperative. The government should consider alternative models for disinvestment. One of them is to lease out a public enterprise while retaining its ownership. The government's policy to use the proceeds of disinvestment to finance the fiscal deficit is not a healthy one. The proceeds should be either ploughed back into the PSUs for their upgradation or used for purposes like infrastructure development.

The measures that need to be taken are to ensure transparency in the disinvestment procedure, avoiding politicisation of the process, protection to the interests of workers, using disinvestment proceeds for productive purposes and guarding against selling away profitable PSUs at low rates.

EKTA SHARMA, Punjab School of Economics, GND University, Amritsar

Privatisation no panacea: I share the writer's deep concern about the disinvestment of PSUs. I think that privatisation is no panacea to industrial and economic backwardness. Through privatisation, we can't always have wonderful results. In England, they privatised the Railways six years ago. Now they have reversed that hasty decision, which had increased the problems of British passengers manifold. . A lot of public sector money of India stands lost in the Enron mess. Over Rs 6,000 crore from the SBI, IFCI and IDBI have gone down the drain.

I would like to ask Mr Shourie: how is disinvestment helping the workers and the common people? Is the problem of management no more relevant? Will disinvestment remove poverty and unemployment from India?

I appreciate the nationalist sentiments of Mr Ram Naik, Mr George Fernandes and some other people in the BJP and the NDA, which inspired them to speak against the hasty and thoughtless dismantling of our PSUs. This issue need not be hushed up as it involves vital national and pubic interests.

R.B. YADAV DEHATI, Fatehabad.

Disinvestment policy: Why are the public sector units allowed to run in losses? The deficiencies, if removed in time, can definitely bring improvement, but it will not happen till the economic reforms free the nation from red-tapism. Globalisation and privatisation are being pursued to keep the vested interests in power as moneybags are required for votes. It is doubtful if these interests will remain in power in case of disinvestment to foreign parties and that too at the cost of security of the country.

The disinvestment of sinking public sector units after taking into account all assets is advisable in the interest of the country. The justification of disinvestment of NALCO giving a yearly profit of Rs 300 crore should be well examined while taking any decision. The issue needs to be given proper attention by the Ministry concerned.

It has been appreciably suggested to form an independent board of experts on disinvestment to safeguard the interests of the nation and examine the issue afresh.

R.S. HAMDARD, Hamirpur

Under pressure: A fierce debate on this serious issue is raging in the corridors of power in Delhi. The debate is useless and irrelevant as there is no need to "disinvest" PSUs. The Indian government has been working under the tremendous pressure of America and wants to sell its healthy or unhealthy PSUs to American entrepreneurs. No doubt, it is an age of privatisation. But it does not give a licence to our “dummy-government” to sell PSUs for a song. Basically, the process of disinvestment is a part of a wider conspiracy to colonalise India through economic might.

The government should take remedial measures to revive terminally sick PSUs. Instead of going ga, ga over the disinvestment spree, the sick units should first be dealt with remedial measures.



Loss-making institutions

There are some loss-making institutions-turned-industries which too qualify for disinvestment or at least reduction in investment.

Our democratic setup has become a flourishing industry for the politicians. The investment in institutions like Parliament and state legislatures, which is turning out to be a total loss to the general public, needs to be curtailed drastically. We can make do with just 100 elected MPs and 25 legislators in each state. The Upper House was created for the "lords" and should therefore go en bloc.

Wg Cdr C.L. SEHGAL (retd), Jalandhar


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