Click on to the website pbdisinvest.nic.in. What do you find? It is the site of a ‘‘Directorate of Disinvestment.’’ It has sections for: officials who are in charge of disinvestment in the Government; the allocation of work among them; the procedure the Government is following in privatising its enterprises; the rationale for doing so; the guidelines that bidders and advisors have to meet so as to qualify for participating in the Government’s offers; the Government’s disinvestment policy, the disinvestments that have been completed thus far; the public sector units that have been approved for disinvestment; accounts of units that have been privatised; advertisements inviting expressions of interest, and thereafter bids; leads on how to contact the Directorate of Disinvestment for further information; and the email addresses etc. that the interested party will need.
That website is not ours—ours is divest.nic.in. It is the website of the Directorate of Disinvestment of the Government of Punjab. That Government happens to be run by the Congress Party. The previous Punjab Government—led by the Akalis—had set up a Disinvestment Commission two years ago. Now, to actually privatise the state’s enterprises, the new Government has set up a Directorate of Disinvestment. Yet another illustration of the actual state of affairs: whatever its affiliation, every Government is today confronted by the same problems, and it is adopting the same solutions.
It is just as telling that the structure the Punjab Government has set up for the purpose, the procedures it has settled on, the guidelines for qualification it has formulated are as close as any set can get to the structure, procedures, guidelines we have evolved at the Centre.
We appoint advisors through competitive bidding to carry through each transactions. They are doing the same. In our case, the recommendations of the advisors are processed by an inter-ministerial committee, and then by the Core Group of Secretaries. The Core Group is headed by the Cabinet Secretary.
In Punjab the recommendations of the Advisors are to be examined by a Core Group of Officers. This Core Group is headed by the Chief Secretary. At the Centre, the recommendations of the Core Group go to the Cabinet Committee on Disinvestment. In Punjab, the recommendations of the Core group will go to—you guessed it, the Cabinet Committee on Disinvestment (CCD). At the Centre, the CCD is headed by the Prime Minister. In Punjab it is headed by the Chief Minister.
The point here is not that Punjab has used the same template. Quite the opposite: that among state governments, the new Government headed by Captain Amarinder Singh has taken the lead, it deserves congratulations. The Government of Punjab has already taken in hand the privatisation of four state undertakings: Punjab Tractors, Punjab Alkalis and Chemicals, Punjab Communications, and Conware. The advertisement inviting expressions of interest for appointment as advisors for the privatisation of Punjab Alkalis and Chemicals appeared in newspapers on July 31. The one for Punjab Communications appeared on August 5; the share of this company shot up by a record 12% in a single day as a result. And for Punjab Tractors on August 7.
There is a related point. Punjab Alkalis and Chemicals has been incurring losses for the last four years: it lost around 70 crore in this period. By contrast, Punjab Tractors is the bluest of blue chip companies: it earned an operating profit of Rs 186 crore in 2000/01, and its profit for 2001/02 is estimated to be Rs 168 crore. In Delhi, Congressmen heckle us for selling profit-making enterprises. And in Punjab where they are in power?
‘‘Bhai is mein gila kya hai?,’’ exclaims a friend from Bihar. ‘‘Jab voh karen to chamatkaar. Jab tum karo to balatkaar!’’
Advertisements and announcements for the privatisation of Optel appeared as long ago as January 22, 2002. Now, Optel is not a public sector undertaking of the Central Government nor is it that of the Punjab Government. It is an undertaking of the Madhya Pradesh Government—which also is a Congress Government. SBI Caps were selected as the advisors: and you can access the detailed Preliminary Information Memorandum about the Company at optelindia.com.
The memorandum shows that Optel has a state-of-the-art plant for manufacturing fibre optics. It was making impressive profits till three years ago—it made a profit of Rs 2.6 crore in 1997. Not privatised in time, it is now haemorrhaging: it lost 70 crore in 2001. In Delhi we are continually heckled, ‘‘Why don’t you first restructure the loss-making enterprises before selling them? That is the way you will maximise value for the Government.’’ But in Bhopal, no talk of restructuring and turning Optel around!
And Optel is just the beginning. MP has been wading its way to privatisation for some time: as it did not have funds for paying VRS as a prelude to privatisation, in 1999 it took a loan of Rs 100 crore from the Asian Development bank so as to kick start the process. And if we in Delhi had taken a World Bank loan to fund VRS for enterprises so as to make them more attractive for bidders – what would the politicians not have alleged? ‘‘Shame, shame. The Government is bending to the dictates of the World Bank, IMF…’’
Steps such as these had been heralded with admirable candour in the policy paper that the state Government issued last year, titled ‘Policy Thrust for Economic Development of Madhya Pradesh’. Describing the state’s enterprises, it said, ‘‘Many of the organisations are in fact on life support systems, through continual budgetary support from the Government in the form of subsidies, guarantees, waiver of dues, and conversion of loans into equity.’’ A little later in the paper, the Government observed, ‘‘The deteriorating performance and condition of some of the public enterprises have forced the Government to consider withdrawing from undertakings where it has failed to run operations profitably and finance them on a sustained basis. Unviable units, which are a constant drain on the Exchequer require to be shut down at the earliest while some which are capable of being managed more efficiently by the private sector need to be divested and the proceeds used to retire the high cost debt of the Government.’’
The Government proceeded to list several enterprises ‘‘for closer examination,’’ and observed, ‘‘This process of closing down selected PSUs has been implemented in the case of some PSUs. It has to be implemented in the case of remaining PSUs, viz. … PSUs for which VRS has already been approved must actually be closed down and wound up within a strict time frame.’’
Karnataka also has a Congress Government. Chief Minister S M Krishna has described that Government’s policy towards the public sector succinctly: An important part of the economic reform programme is the recognition that the private sector should be the primary engine for growth of industry. We have constituted the Public Sector Restructuring Commission which has evolved a pragmatic policy on State PSUs. Its primary focus is to privatise those PSUs that we can and to close those that cannot be privatised.
When BALCO was privatised, influential persons in Chhattisgarh declared that they would break the legs of any representative of Sterlite—the company that had won the bid—who dared step into Chhattisgarh. Now that very Government has signed a Memorandum of Understanding with the same Sterlite to facilitate the plans of the latter to invest Rs 6,000 crore for the expansion of BALCO.
In Kerala, the Chairman of the state’s Enterprise Reforms Committee cites a telling figure: the state’s PSUs are losing Rs 40,000 per worker every year. In its Approach Paper for State Level Public Enterprises, the Kerala Government declares that it shall no longer continue to prop-up loss-making PSUs. Releasing it, the Industries Minister of the state of course maintained that privatisation is mot the only option. I see an opening in that—for no one has said that privatisation is the only option! In its initial pronouncement, the state Government has declared that it will focus on restructuring the enterprises – that this will be a ‘‘time-bound operation’’, that it will restructure 25 such enterprises by June 2003. Given the dismal results that have attended such ‘‘restructurings’’ all over the country, I am certain that what is being begun will turn out to be just a first step—and the state will soon get over the inhibition and begin talking of privatisation per se.
Similar information comes from state after state, and it has been compiled in a publication, Disinvestment in States that our Ministry released last month. Information in that publication relates to 835 state PSUs. The total investment in them has been a staggering Rs one lakh sixty seven thousand, seven hundred and eighteen crore. The accumulated losses of these enterprises exceed Rs twenty thousand six hundred and ninety one crore. Even to keep them comatose too is an expensive affair: a study puts the implied subsidy to these enterprises at about Rs. eight thousand crore a year.
Of the 835 enterprises, 67 have been formally closed. Another 166 are reported to be ‘‘non-working’’, though not closed—an important category: it signifies that the enterprise is producing nothing, but, as the Government concerned has not had the courage to close it, workers and managers are receiving salaries, chairmen and members of boards are availing of perks—cars, furnished, airconditioned offices, the lot. Another 337 are incurring losses: but to assess that number, recall what the CAG has observed about the number of such units that inflate their incomes and assets, and understate their dues and liabilities.
But the important point is another one: according to the information that we have received, 25 of the units have already been privatised, and in regard to 121 more the process of privatisation has commenced. Silently. But it has commenced. A consensus in practice.
(Tomorrow: West Bengal also starts disinvesting but don’t tell anybody)
Based on an August 18 lecture delivered by the Disinvestment Minister to the Indian Chamber of Commerce in Kolkata