Markets worried about divestment pace

But fund managers did not see the sale as privatisation because IOC is government owned. It also decided to invite fresh bids for IPCL8217;s two otherplants at Gandhar and Nagothane. The planned IBP sell-off is expected to go on the similar lines.

The committee, which dropped plans to privatise Mahanagar Telephone Nigam Ltd and Videsh Sanchar Nigam Ltd, decided to set up a panel of bureaucrats to oversee the disinvestment of India8217;s largest car maker, Maruti Udyog Ltd.

Fund managers said the decisions will hit market sentiment already worried that the government is not doing enough to speed up reform. quot;The sale of IPCL8217;s Baroda unit to IOC is not privatisation. IOC is also a public sector company. How can the government say this is privatisation? This kind of reforms in the name of avoiding monopoly will not serve any purpose,quot; said BSE broker Pawan Dharnidharka.

It may be recalled that two years ago, the government sold part of its stake in oil sector PSUs among themselves in the name of disinvestment. As a result, investors hammered down PSU shares and market capitalisation of oil PSUs might have fallen by at least Rs 20,000 crore. Since then, the only realprivatisation was the sale of Modern Foods to Hindustan Lever Ltd. quot;The government sold IPCL unit to IOC saying that it would have created monopoly if the private sector had taken over the unit. But now by selling it to IOC it is still creating a monopoly,8221; said another analyst.

quot;The government has messed up a golden opportunity by not taking concrete decisions. The market will definitely react negatively to this move,quot; said URBhat, chief investment officer at Chase JF Asset Management, with nearly Rs 3,100 crore under management.

The markets had expected the meeting to discuss the sale of stakes in other government firms, which did not happen. The biggest disappointment was the postponement of equity sale in MTNL and VSNL. Marketmen feel that the government is facing stiff opposition from some partners in the ruling front and trade unions.

There is only one consolation. Disinvestment Minister Arun Shourie has made it clear that equity sell-off in Air-India and Indian Airlines will be completed by March 2001. quot;The government will face several hurdles in Maruti sell-off as well. The government did not do anything when its market share fell from over 72 per cent to 50 per cent in the last one year. At that time it would have got a higher price,quot; said Dharnidharka.

Bharat Petroleum Corporation rose 7.25 per cent to Rs 207.70 last week while Hindustan Petroleum Corporation gained 18.58 per cent to 140.10 on expectations that the meeting would discuss the sale of government stakes inthem.

quot;I think shares of state-run firms in particular will be hit as a result of this delay,quot; said Ajit Ambani, a Bombay Stock Exchange broker. The government has not yet taken any decision to divest its holding in the auto joint venture Maruti Udyog and the issue will come up for discussion at theDecember meeting of Cabinet Committee on Disinvestment, Heavy Industry Minister Manohar Joshi said on Sunday.

Joshi said, quot;CCD has not taken in-principle decision to disinvest government equity in MUL.quot; Similarly, it8217;s not clear whether Communications Minister Ram Vilas Paswan is fully supporting the disinvestment plan in MTNL and VSNL. Ditto is the case with Petroleum Minister Ram Naik when it comes to BPCL and HPCL.

The government is unlikely to raise Rs 10,000 crore as targeted earlier. More than that, massive disinvestment would have given a boost to the stockmarket sentiment. But the government needs to tackle vested interests blocking the divestment plans before going ahead with any concrete move.