The proposed statement in Parliament of the Union Minister for Disinvestment Arun Shourie on the government’s policy towards the public sector will be eagerly awaited by investors at home and abroad. The minister’s statement on Thursday night merely signals the end of an internal debate within government on whether or not the government should proceed with disinvesting its share-holding in two public sector petroleum companies. However, there is need for greater clarity on the government’s overall policy towards the public sector. As the largest shareholder in scores of public sector undertakings, the government owes an explanation on the question of its future plans with respect to the companies it owns. There are two fundamental issues that have come up in the recent debate which Shourie must address in his proposed statement. First, is there clarity within the government on whether it wants to stick to the half-house strategy of disinvestment or go the full way and facilitate privatisation of public enterprises. There are too many voices on the issue and some clarity will help. Here the prime minister must stand up and take a view so that some of his noisy colleagues, both within the government and the sangh parivar, are made to put up or shut up. A second question pertains to what is strategic and what is not. The minister for petroleum and natural gas has claimed that petroleum retailing is a strategic industry that should not be privatised. This is hogwash. If oil prospecting and refining can be in the private sector, why not petroleum retailing? Is civil aviation strategic? Most industrial economies have no public sector airline, so why should civil aviation be regarded strategic in India? The Union finance ministry has clarified an important point with respect to disinvestment and has made a useful contribution to the debate. The ministry’s mid-year review categorically states that disinivestment should not be viewed purely from the revenue perspective. It is being undertaken essentially to unlock the productive potential inherent in the public sector undertakings. This is an important guide to policy. In fact it makes the distinction between disinvestment and privatisation all too clear. Disinvestment was always viewed as a revenue measure aimed at reducing the government’s fiscal deficit. Without change of management reducing the government’s stake does very little to ‘unlock the productive potential’ of PSUs. It is privatisation that enables this. Hence, the preference of Shourie and his supporters for privatisation. Most ministers seem to prefer disinvestment because it still allows them to retain control over the enterprise and distribute patronage. The private enrichment of public servants at public expense can only stop with the outright sale of PSUs and not with disinvestment. Finally, the point must also be made that such PSUs as are regarded ‘strategic’ and not privatised do deserve managerial autonomy and infusion of funds so that their productive potential is also unlocked.
