Tags:
Journalism of Courage
Disinvest the core group first
Unlike some of the opposition parties, it8217;s difficult for anyone who has ever invested money on the stock exchange to actually accuse the government of consciously selling the Gas Authority of India8217;s GAIL shares cheap.
Though it is true that the United Front government had refused to sell GAIL8217;s shares at even Rs 120 two years ago saying this was too low 8212; the government has now sold them at Rs 70. The fact is that there is no way of knowing what is a good price to sell at on the stock market. A good price today may look low if the market rises immediately, and vice versa.
Former Finance Minister P. Chidambmbaram is absolutely right when he points out that he did not sell GAIL8217;s shares at even Rs 120 in October 1997 8212; Jairam Ramesh of the Congress who echoed this viewpoint a few days ago was in fact one of Chidambaram8217;s trusted aides at that time. A point which neither Chidambaram nor Jairam points out is that they were also responsible for the fact that GAIL8217;s shares couldn8217;t be sold at the highest price. So if the government has lost a few thousand crore by not selling at the high prices of 1997, they are also equally responsible.
In January 1997 the Disinvestment Commission had recommended that GAIL8217;s shares be sold, and in his budget speechChidambaram announced the government had accepted this suggestion. Immediately, GAIL8217;s prices shot up and by July top foreign brokers such as HSBC, Natwest and SBC Warburg were recommending to their clients that GAIL was a steal at a price of anywhere between Rs 145 and Rs 150. By August, prices on the Bombay Stock Exchange reached Rs 180 per share. The government, however, decided to sell only in October by when prices fell to 150 and then to 120. And it was Disinvestment chief G.V. Ramakrishna8217;s opposition which played a big role in Chidambaram deciding not to sell GAIL8217;s shares. At that time, of course, Ramakrishna8217;s powers to volunteer advice to the government had still not been clipped they were later, in January, 1998. It is, of course, ignored by the opposition that at no time after that, in the subsequent years, did GAIL8217;s price ever touch anywhere near this. It is also true that between October 1997 and October 1999, the government just fell asleep. So when, for example, GAIL8217;s prices touched Rs 100a little over a year ago, it never occurred to anyone to try and sell sh-ares. Or to get back to HSBC or Natwest and say that the government would not disinvest in GAIL unless it got a minimum price of Rs 145 8212; incidentally, a recommendation arrived at after comparing GAIL8217;s profits with other global gas firms.
Similarly, huge losses have been made in selling MTNL8217;s shares the market prices were around Rs 275 in October 1997, but the final sale of 70 million shares was done only four months later when the price was Rs 40 less per share. Now it8217;s no one8217;s case that predicting price movements on the stock exchange is easy, but surely it8217;s criminal if periods of booming prices are just allowed to slip by because no one is monitoring things properly.
Or take the issue of allowing GAIL8217;s competitors Enron and British Gas to mop up large chunks of its shares. For one, with such a small disinvestment planned 8212; at Rs 70 or so, the government was looking at getting just Rs 1,200 crore 8212; the same shares couldbe sold to retail investors in the domestic market. And if the idea was to allow competitors to pick up stock, why not negotiate to get a higher price for a strategic block of shares? Today, the government8217;s shareholding in MTNL, to cite another example, is down to a little over 56 percent, while that of GDR holders and foreign institutional investors is around 28 percent. Theoretically, therefore, it is possible for telecom companies to act in concert, corner 26 percent of this shareholding, and hold MTNL to ransom. In which case, did it really make much sense for the government to be planning a GDR issue for MTNL at this point? Or did the foreign merchant bankers just suggest this to the core group which didn8217;t even realise the import of what was being suggested.
This highlights one crucial problem with the disinvestment process which is today controlled by a core group of secretaries and/or ministers who meet regularly to take stock of the programme. Now the problem is that the Core Group is just notable to monitor prices effectively, to be able to take decisions on wh-en to sell shares acirc;euro;ldquo; to say they sell when prices are the lowest, of course, would require the kind of definitive proof which no one has. Nor, it appears, does this group have any great strategic vision.
Obviously then what is needed is a full-time professional body, maybe a revitalised Disinvestment Commission or even a cell in the Planning Commission or wherever, which actively monitors such matters. Immediately, what8217;s needed is the disinvestment of the Core Group!
