Divestment pace needs to be quickened: Baijal

Pointing out that the Centre’s direct involvement through holding companies was of the order of Rs 78,484 crore and it had sold less than one per cent of its total equity during the last two years, Baijal said at this pace it will take 200 years for disinvestment of its total equity. The pace needs to be quickened if the benefits of privatisation are to be realised by the tax payers, the economy and the employees, he said. Baijal said the government had recovered Rs 7,164 crore from these sales some of which also led to an annual revenue.

The central government’s borrowing rate being ten per cent, this realisation would lead to a benefit of Rs 721.96 crore to the country every year in perpetuity, he said adding that the dividends received by the government on its equity which had been sold averaged Rs 23.17 crore during the last eight years. The colloquim was jointly organised by the state government and the Orissa chapter of CII. A host of senior bureaucrats and experts from the Adam Smith institute particpated in the deliberations.

Arguing in favour of disinvestment, Baijal said two companies, Jessops and Paradip Phosphates Ltd (PPL) in Orissa led to an average annual outgo of Rs 126 crore which meant the government lost Rs 102.83 crore every year due to its majority equity presence in these companies. When sale of 24 properties in 14 companies could result in an annual real benefit to the economy to the tune of Rs 824.79 crore, there could be no justification for maintaining the public sector character of these industries, he said.

Replying to the argument that profit making companies should not be sold, Baijal said Balco was one such company which earned the government an average dividend (over eight years) of Rs 5.69 crore every year on the equity sold. The government would now get Rs 82.65 crore every year, he said. The government had primarily sold minority shares in public sector companies prior to 2000. But the price realised through the sale of shares in blue chip companies like IOC, BPCL, GAIL and VSNL was low, he said.

Since the public perception of public sector companies was that they would not perform well, the prices of shares fell in a number of cases after sale with the result that the UTI lost Rs 5,056 crore over an investment of Rs 6,403 crore made by it. However, with the market prices of PSU shares picking up after a few major disinvestments, the loss to UTI on PSU portfolio had decreased to Rs 3,673 crore.