DISINVESTMENT SHOULDN'T BE POPULAR IN PSEs

Prime Minister Narendra Modi’s continuance of the disinvestment policy appears like the tailing of UPA government’s policy. Previously, the last NDA government had a disinvestment portfolio under Arun Shourie and it went on to pull the disinvestment throttle in full swing. The government’s plan of decreasing its share in public sector banks (PSBs) to conform to Basel-III norms by 2018-19 is just another instance of showing eagerness to disinvest in even profit making enterprises.

As per the earlier Cabinet decision, the government is to dilute its stake in three of the major profit-making public sector enterprises (PSEs) - Oil and Natural Gas Corporation (ONGC), Coal India Limited (CIL) and National Hydroelectric Power Corporation (NHPC) Limited- to garner an estimated total of around Rs. 45,000 crore based on the current market prices.

The government claims that from a budgetary point of view the sale of equity reduces the need for borrowing from big financial institutions, like World Bank and IMF, which increases the interest burden in future years. But this rationale for preferring disinvestment of stock in profit-making companies to borrowing to finance budgetary expenditures that are in excess of revenues is not clear from accounting point of view. Making provisions of little extra expenditure in budgetary support can save huge payment in dollars to overcome the debt.

The Union government’s reasoning that the profits of some PSEs have gone down over the past few years are true. But many in these companies and independent experts feel that the government itself is to blame for it. What happened during the 2010 Cairn India-Vedanta deal in Rajasthan smacks only of corruption. The Mangala oil rig was the largest onshore discovery of crude oil in India. But on the withdrawal of Cairn, the partner in business, ONGC, was to be the inheritor of the oil rig. However, the rig went to Vedanta under spurious arrangements.

Instead of putting more in infrastructural assistance, the government has always taken a back seat. Even after all this, the PSEs have shown a positive growth, slightly slow may be. PSEs have played a major role in devising strategies to absorb tough economic times like recession, inflation. It seems privatisation has become an easier way for private industries to work in fields developed by the PSEs.

Perhaps, the PSEs are first victims of the economic climate fostered by neo-liberalism. Huge creation of crony capitalistic market is only a tragic aftermath along with the drawing of lines among those who can spend and those who can’t. Banks and other PSEs are just the cases in point.