Delay on disinvestment in PSUs past sell-by date is bad economics and poor politics too
Plans for the disinvestment of Scooters India Ltd (SIL) stand abandoned precisely when investors and corporates are looking for a sign that the change of guard in the finance ministry would improve the economys weather forecast. Manmohan Singh is back at the helm and the government proposes to disinvest in 75 PSUs 15 in the current fiscal year. SIL should have been sold off already,having diligently made losses for 35 of its 40 years in business. Its failure to return profits is remarkable since it produces three-wheelers,for which demand is consistently high. The cabinet cleared the sale of the 95 per cent stake held by the government in May last year,despite the reservations of Rita Bahuguna Joshi,president of the Uttar Pradesh Congress Committee. But the process was stalled in August as the party geared up for state polls. That may have been a credible electoral compulsion at the time but it is no longer valid.
The SIL sale should have been revived this year. Instead,it was written off in favour of a new revival package that will probably fail to resuscitate the company,which has been declared clinically dead by reconstruction agencies. The government is sending out conflicting signals on disinvestment. On the one hand,it is organising roadshows in the Persian Gulf,Japan,Singapore and Hong Kong to attract investment in PSUs. On the other,it is holding on to PSUs past their sell-by date. It dragged its feet on selling 10 per cent stake in NALCO from March 2010 to June 2012,when the disinvestment department moved a cabinet note. In the last fiscal year,the government had committed to raising Rs 40,000 crore from PSU disinvestment but collected a third of that figure. This years target is Rs 30,000 crore,but lack of clarity and commitment could again cause a shortfall.
The government has been constantly putting off sales pending better market conditions. But it is futile to wait for a bull run in a period when global markets are confused,jumpy and unpredictable. The government should rather focus on getting the best value under current conditions,since bridging the fiscal deficit is a priority. Besides,there is political urgency. The UPA also needs funds for its social sector spending,which,by its reckoning,could be a decisive factor in the 2014 elections. Both economic and political imperatives urge that it should move fast on disinvestment.