The disinvestment minister has had more difficulty selling what he did nothing to create than those poor socialist sods whose toil and sweat built those assets. One could have understood all the trouble Shourie went to finding buyers had he been marketing public sector duds. But, no, Shourie is selling equity in the very top range of our most world-renowned public enterprises, whose profits are legion and whose reputation is legendary. Then why does Shourie have to “read the riot act” to his fund managers, as one newspaper headline colourfully put it? After all, when Brazil (before it reverted to post-Shourievian socialism) collected 19 billion dollars when they did what Shourie is now doing. How — and why? Two main reasons — both associated not with the economics of disinvestment but with issues of good governance. First, the Brazilians did not make a panic sale on the eve of an election. It was note-banks not vote-banks that guided their disinvestment. Second, the foreign direct investor (as distinct from fly-by-night foreign institutional investors) trusted the integrity of the Brazilian disinvestment process. So opaque is the process which Shourie touts as transparent that not one single cent of FDI has found its way to our treasury through Shourie’s disinvestment. Not that the world’s giants did not come. BALCO, for example, had the both largest French company and the largest American aluminium manufacturer among the bidders — until they discovered that “strategic sales” was a cosy deal between Sterling, Hindalco and the NDA government. So they then just melted into the night. Shourie’s favoured “discounted cash flow” route has been so pot-holed that he is less trusted by foreign majors than even Sukh Ram. So, the very FDI investors who poured $19 billion into Brazil are hesitant about putting 19 cents into Shourie Shining. Leave alone the FDI investor, the ordinary domestic investor is so wary of the opacity of disinvestment a la Shourie that extreme scepticism greeted his big ticket entry into the primary capital market. At this point, at his express instructions, Shourie’s fund managers muscled in on government-owned financial institutions and mutual funds to get them to pick up what the market was shying away from. They did so because the minister was seeing ghosts in every corner, darkly warning of a “bear cartel” deliberately hammering down prices. Now, if Shourie does indeed believe in the golden virtues of the market, as he has been trumpeting ever since his Master’s at Syracuse blew away the cobwebs of his undergraduate Stephanian Nehruvianism, then why did he not let the market well alone? What gives him the right to throw the whole weight of his ministerial office into reversing market sentiment? His answer is that a “bear cartel” was illegitimately beating down prices. And so his solution was to set up a bull cartel of government enterprises to push up prices! How can it be Vice for unnamed business houses (whose names Shourie claims he has) to form a bear cartel but Virtue itself for Shourie to push government enterprises (whose names everyone has) into forming a bull cartel — all for the purpose of pulling Shourie’s irons out of the fire? If Sebi can investigate a bear run, then why is Sebi, an allegedly “independent” regulator (ha!ha!), not investigating an equally bogus bull run — engineered by a minister no less? The 1999-2001 stock market scam was, at bottom, the consequence of the total dissonance between a stagnant primary capital market and a booming secondary capital market. Exactly the same dissonance has been in evidence since April 2003: the Sensex shooting above the 6,000 mark while the primary market marks time at the pace of a tortoise. Through the whole of the “boom” year of 2003, there were only a measly 15 Initial Public Offerings (IPOs) in the primary market. They raised a grand total of a miserable Rs 2,000 crore of fresh investment, Rs 1,000 crore of which came from the Maruti Suzuki disinvestment. It was that which gave Shourie his clever, clever idea of disinvesting not through his hitherto preferred route of negotiated strategic sales but through the alternative route of IPOs. This is a perversion of the purposes of a primary market. The primary capital market exists to mobilise new investment. Shourie’s IPOs are, however, not investment but disinvestment. They do not add to the stock of capital in the economy. They merely transfer government holdings of existing investment into holdings by the so-called “general public” of existing investments. I say “so-called” because the general public has not got a look-in at all. In this vast country of a billion people, only the favoured ones who could reach the 20-odd counters opened by Shourie’s men could even dream of picking up an equity or two. As Shourie will discover if he does indeed contest the Lok Sabha elections from Mangaldoi in Assam, as rumoured, not one Mangaldoi voter has got one share of Shourie’s disinvested wealth. It is the same public sector financial institutions and mutual funds who were pilloried by Shourie for listening to Manmohan Singh when he off-loaded government holdings to them who are now being praised to the skies by Shourie for jumping into the market the minute he cracked his ministerial whip. Is this liberalisation? Shourie has only validated the essential correctness of the discreet Manmohan way of disinvestment: transferring government-owned assets from the books of government into the balance sheets of government-owned financial institutions and mutual funds. Therefore, notwithstanding the “success” of Shourie’s six IPOs, the economy has gained no additionality of investment. Only the fat cats have made a bomb. This is crony capitalism at its ugliest. The genuine primary capital market — that is the market which mobilises fresh investment — continues to stagnate while the secondary market booms, making it a field day for the acolytes of Harshad Mehta and Ketan Parekh to rob the small investor blind while making him “feel good”. We are not, as Shourie claims, all feeling good; we are all being had good.
