Chalk out sell-offs

With the commencement of the reforms process in 1991, the government had also embarked on a programme of privatisation/disinvestment of public sector enterprises PSEs. Disinvestment has progressed, but it has not resulted in complete privatisation, or handing over of management of any PSE to a private stakeholder. The disinvestment in as many as 39 PSEs also did not result in changes either in the boards or in the management of those companies. This was also one of the reasons for the poor response from the market for the subsequent offers of disinvestment.

The United Front government appointed a Disinvestment Commission in August 1996. Even though it is a recommendatory body, the Commission has studied several PSEs referred to it and has given wide-ranging recommendations through nine reports covering more than 40 PSEs. In fact, the respective administrative ministries have shown considerable reluctance in processing the recommendations. The entire disinvestment process from the beginning has been drivenby the need to raise resources rather than the desire to improve the performance of PSEs or get better return for public investment. In the process, the government could not always get the best value for the equity of the blue chip PSEs so far sold. Partial disinvestment not exceeding 49 per cent, in fact, means double jeopardy for many PSEs. Apart from procrastination, the proposals mooted by some ministries have been at variance with the recommendations of the Commission. Meanwhile, the present government had indicated its mind to retain in public sector only those enterprises which are of strategic value and privatise the rest. A proposal for creating a Special Purpose Vehicle SPV for faster disinvestment was suggested. Oil companies bought each other8217;s equity from the government and proposals for a few other companies are on the move in order to raise Rs 10,000 crore in the current fiscal year.

Of the 240 PSEs surveyed and reported by the Department of Public Enterprises for 1997-98, 100 PSEs aresick. Many of these companies could have been saved from terminal sickness had there been any clear cut policy regarding disinvestment and if timely decisions were taken to either close or revive them. It is interesting to note that the aggregate profits earned by profit-making enterprises rose from Rs 5,304 crore in 1990-91 to Rs 20,267 crore in 1997-98. This consistent improvement was displayed in spite of withdrawal of support systems and exposure to competitive environment. This speaks of efforts made by the PSE managements and their inherent strengths.

It has taken nine years to reach the present level of disinvestment. The way forward still does not appear to be clear and we are trying to muddle through from year to year fixing targets for raising money by selling the family silver. Such a wobbly process of disinvestment has caused considerable damage to PSEs, particularly those whose continued government ownership was in doubt. While the government is hesitant to invest additional resources, banksare extremely reluctant to provide credit on account of pronouncements of intentions of privatisation. All this has also had an adverse impact on the morale of PSE employees. In some cases, qualified and talented employees have left for private enterprises. Disinvestment did not lead to enlargement and empowerment of board of directors. Most companies continued to be administrative ministry-governed rather than being Board-governed. It is therefore, necessary for the government as an owner to chalk out clear cut plans for each company and announce them in a transparent manner.

The author is Secretary General, Standing Conference on Public Enterprises