No more sensible PSU disinvestment

At the same time, the mere announcement of its scandalous new divestment proposals were wiping out 20 times that amount in shareholder value since January 11 this year, just six companies which were targeted by the government to use their reserves to either buyback their shares or cross-hold those of other PSU’s have lost a stupendous Rs 24,000 crores in shareholder value. The governments’ proposal to loot the reserves of these blue chip PSUs to bridge the budget deficit led to a barrage of selling by investors in all six companies MTNL, BPCL, HPCL, IOC, GAIL and ONGC. So why has this not snowballed into a major controversy?

The charitable view would be that politicians are ignorant about markets and have failed to observe the colossal destruction of share value through foolish policies. However, the fact is that every political party is equally hypocritical about public sector disinvestment. What they will do when in powerwill be directly contradictory to what they would say when out of it when they are not lording it over rich PSUs. Without going into the Congress governments’ games like auctioning jumbled-up little packets of PSU shares or their listing on bourses without disclosures, let’s go directly to the UF government which set up the DC. Having announced the DC without so much as monetary assistance, the finance minister P. Chidambaram and chief aides and the industry ministry were probably dismayed at the quickness with which the DC began to produce a series of concise reports on divestment in specific companies and the fact that it took its advisory role seriously as well. The government initially announced the acceptance of several of the DC’s recommendations but made little attempt to implement any of them. And, finally, it quietly clipped its powers without any announcement or even informing it.

Ironically, once out of office, the minister and his aides have all turned zealously in favour of an independent DC.The first sign of this change of heart was the Congress party’s election manifesto which promised statutory status to it. The most open `revision of views’ come from former FM Chidambaram himself. In the latest issue of Business World, he says nothing of having clipped the DC’s powers, but says that the original idea too did not go far enough. He is now in favour of a "completely autonomous Disinvestment Commission which will, on its own authority, disinvest and use the proceeds to retire debt and to restructure the public sector”. He also now favours statutory backing for the DC. Obviously, the power of office and the temptation of handing out largesse to a host of foreign investment banks had impaired the clarity of Chidambaram’s thinking.

The DC recommended different divestment modalities to suit specific groups of companies — every set of them has been mothballed, though none have been rejected as unworkable. These include recommendations to wind up certain companies, restructure others and grant themautonomy, strategic divestment in a third set and the creation of the National Shareholder Trust to divest the blue chip companies at the best price. The BJP pretended to be serious about the DC and even talked about restoring its powers. Nothing happened; instead it pursued even more foolish policies.

It is amazing how, every party across the political spectrum, while actively sabotaging all reform measures through mindless opposition is unanimously silent about the colossal destruction of national wealth through silly and ham-handed divestment proposals. Trade unions are also part of this hypocrite set up. Vocal and militant when it comes to grabbing the benefits of public listing through cheap preferential share allotments, they are silent when PSUs are deliberately weakened by looting reserves and wiping out share values through forced buyback and share swaps. When it comes to bankrupting public sector companies and perpetually bankrolling a callous labour force, there seems to be rare support andunanimity in India.

The author’s e-mail is: suchetadalal@yahoo.com