NEW DELHI, APR 6: The Cabinet has cleared a policy which states that only public sector units manufacturing defence items such as arms and ammunition or those relating to atomic energy and railway transport will be considered to be `strategic'. The rest are to be considered as `non-strategic' and hence the Government will be free to reduce its stake to 26 per cent in these on a case-by-case basis. The move represents a quantum jump in the Government's thinking on PSU divestment, and follows the Government's earlier decision that it would reduce its stake in `non-strategic' PSUs to 26 per cent.While Finance Minister Yashwant Sinha had stated in his Budget speech last year that the Government would go down to 26 per cent in non-strategic PSUs, the actual definition of strategic and non-strategic was not cleared till recently.While the actual process of reducing Government stake will still not be automatic, the Cabinet approval paves the way for sweeping PSU reforms. The new classification is even more broad-based than that approved of by the Disinvestment Commission in its first report. After this, the Core Group of Secretaries endorsed this recommendation.While both these bodies included `minerals specified in the schedule to Atomic Energy Order of 1953' in this list of strategic industries, the Department of Atomic Energy pointed out that since March 1995, the Government had allowed exploitation of beach sands to foreign investment up to 74 per cent and that this provision could be relaxed somewhat.Under the new classification approved of by the Cabinet, the decision on whether to reduce Government equity to 51 per cent or 26 per cent would be based on whether the public sector is needed to ensure that monopoly power does not pass on into private hands. In case there is no proper regulatory mechanism to protect consumer interests, then the process of disinvestment could be slowed till such a mechanism is in place.
