PSU stake sale: Step in the right direction

The Union Cabinet’s approval for what is billed as the biggest disinvestment and strategic sale of public sector units, including sick units, must be commended. When the Narendra Modi government took over, there were hopes that he would change the leadership of PSUs and revive them under efficient management. But nothing happened, nor was any explanation forthcoming. Now that it has decided to disinvest, it is welcome as the government shouldn’t be in the business of running businesses. It should concentrate on its reform agenda, that must be implemented at a faster pace. The World Bank index on the ease of doing business has just ranked India near the bottom. The government could easily disinvest some of its stake in banking and oil PSUs. In the case of oil PSUs, it needs to offer incentives to attract buyers like better pricing options.

For too long taxpayers had to foot the bill for the upkeep of loss-making PSUs while getting nothing in return. It was a case of good money chasing bad in the mistaken notion of adhering to so-called socialism. It was helping no one except keeping employees in their jobs. The earlier Congress government hesitated to sell these sick PSUs due to arm-twisting by the Left, that was supporting them from outside. It was also terrified of workers’ protests as privatisation meant accountability, something that they aren’t used to. But the times have changed. Unions aren’t as strong as they used to be in PSUs, and this is evident in the way their protests against amalgamation of State Bank of India subsidiaries with itself led to nowhere, and the process is now under way.

Now that the Narendra Modi government has bitten the bullet, it is hoped not much time is lost in getting on with the process. Finance minister Arun Jaitley has said he will not be pushed just to keep the calendar date, but would sell at an opportune time. The people of India will now have an opportunity to buy shares of government-owned public sector units, some of which are navratnas. For too long they have been denied this privilege.

The last time a strategic disinvestment programme had been initiated was under Atal Behari Vajpayee’s NDA government, and it was partially successful. The Centre got a total of Rs 6,334.35 crores over five years. The target for the Modi government’s disinvestment this time is Rs 20,500 crores for this year, with another Rs 36,000 crores coming from minority sales and buybacks if they work according to the plan (Rs 56,500 crores in all).

This is an ambitious target, but the Modi government, which walks the talk, has reportedly already mopped up Rs 21,000 crores through stake sales and buybacks in the first six months, according to reports.