Offloading is on

It is a healthy sign that proposals for disinvestment, privatisation and closure of PSUs are being floated despite the Left and its veto powers. After all, all that the CMP promised was that profit making PSUs will not be privatised. If loss making PSUs are shut down it is not contrary to the CMP. If a private company is willing to take over a loss making one to revive it, the government should go for it. Some PSUs have been making losses for years, have negative net worth and it may be difficult to find buyers for them. In such cases, assets such as land may be sold, claims settled and the company wound up, rather than allowed to continue consuming taxpayer8217;s money.

The proposal to sell minority stakes of up to 49 per cent in profit making PSUs is also welcome. It will not dilute the public sector character of the PSU, while at the same time it would raise money for the government. The government should, however, make sure that the money raised goes towards retiring government debt and not into current expenditure. This will bring down the share of tax collections that go into paying interest on past debt and free resources for public goods. In addition to reducing public debt, the sale of minority share will lay the ground for further privatisation of PSUs through a wide dispersion of ownership.

The 8216;strategic sale8217; route to privatisation 8212; when a public company was sold to a private one that already had interests in that industry 8212; it ran into trouble not surprisingly. It is not merely issues of transparency in the bids that are a source of suspicion in strategic sales, there are genuine problems if the deal ends up in moving an industry from a public monopoly to a private one. The regulatory framework must be significantly improved to make sure that consumer interests are looked after. The case of a wide dispersion of ownership of a public company is similar to having a collective rather than a state farm, a concept quite acceptable even to the Left. The privatisation of HDFC and ICICI, which happened slowly and through this route, have not only been politically acceptable, but have provided far better models for management and governance than have family-run companies. Other PSUs must follow these models to improve performance and efficiency.