The 5 formula

The decision taken by the Cabinet Committee on Economic Affairs on Monday,to move ahead on disinvestment of the National Thermal Power Corporation or NTPC,is the first such move by the second avatar of the United Progressive Alliance and,if only as such,deserves closer scrutiny. It takes on more significance when it is paired with a reading of Prime Minister Manmohan Singhs speech at Scopes excellence awards,a function to recognise government-run enterprises and their employees that have done exceptionally well; the PM spoke then about how listing public sector companies on stock exchanges had served the government and consumers well in the past. The divestment of NTPC announced was of 5 per cent,through a follow-on public offer; 10 per cent has already been sold off. This is a little less than what was expected expectations were of another 10 per cent,and is limited to NTPC and another power-generation utility,the Satluj Jal Vidyut Nigam,which is co-owned by the government of Himachal Pradesh,rather than across a broad swathe of such public-sector utilities,as many had hoped. But it nevertheless serves as a useful signal of the governments continued commitment to the privatisation process,half-hearted though it might appear.

If UPA-II has taken a decision to defer big-ticket privatisation,for whatever political or ideological reason,then that is an error. However,even within these parameters,there are steps that can be taken. Lowering government holding in certain public sector companies,especially those that are doing well and are properly valued by the markets,will aid in increasing efficiency. Yet others need to be listed for the first time,which is in itself a method of instilling some market-related discipline to their operation. Other small road-blocks have already been removed: for example,a debate that helped delay earlier such moves on whether the proceeds should stop going,as has been the practice since 2004,to the National Investment Fund appears to no longer be seen as sufficiently problematic.

The way ahead is clear,even if the government wishes to be excessively cautious. Progressive listing of state-controlled enterprises,strategic sales of those doing badly,and uncomplicated,if small,reductions in government holding of those doing well. This helps consumers,the market,the companies,and is likely uncontroversial enough to be pushed through without push-back from the more prehistoric wings of the Congress party. This is a good start,but more should be expected in the next few months.