Ananth KumarUrban Development MinisterPoint: Valuation of PSUs sold low, doubts over methodsReason: About 31 sales made so far, of which 16 involved Ananth Kumar yet he cribs. He raked up the ITDC hotels sale at meeting and then crowed about it The stock markets were the first to realise that the economy would be in trouble post 3-month delay. Stocks of public sector undertakings (PSUs) crashed, dragging the total market capitalisation of 35 PSUs on the Bombay Stock Exchange (BSE) down by around Rs 11,286 crore — or 8.2 per cent — on a single day, as market players went on a ‘sell’ binge in PSU stocks. Investors were obviously angry with the government move to reverse its own plans in HPCL and BPCL. ‘‘This is certainly a setback to the entire programme. In how many countries do you see a part of government fighting with the other part and derail the decisions taken earlier?’’ asks a merchant banker.Everyone agrees that politics has derailed sound economics. From credit rating agencies to financial think-tanks, the judgement is unanimous: ‘‘Forget about big ticket disinvestment till the next elections are over.’’ Whether it’s profit-making companies like HPCL or BPCL, or chronically sick companies like Air-India and Indian Airlines, various lobbies are working at cross purposes to see that disinvestment does not take place.Says the Institute of Economic Growth (IEG): ‘‘The decision to defer oil sector divestment by three months may lead to downgrading of India’s economic outlook, and also the current year Budget target of Rs 12,000 crore from the disinvestment proceeds may not be achievable.’’ Experts say divestment would help the government to bring down borrowings which in turn would help in reducing interest payments and fiscal deficit. ‘‘The achievement so far in disinvestment is extremely impressive. It would be prudent for the government to continue disinvestment to lower market borrowings,’’ said Naval Bir Kumar, managing director, Standard Chartered Mutual Fund.Rating agencies are getting worried. According to Crisil managing director R Ravimohan: ‘‘The disinvestment plan was crucial to retain the fiscal balance of the government finances. This kind of public outbursts by various ministers are like taking one step forward and two backwards.’’ Before the HPCL-BPCL fiasco, the government did privatise 16 companies and raised Rs 11,079.49 crore in the last two years.Investors were the first to get hit after the September 7 meeting of the Cabinet Committee on Disinvestment. ‘‘This (indecision) has not only reduced the value of all the PSUs but plays havoc in the stock markets. This has hit almost every market participant whether it is retail investors, mutual funds of even the big players like government institutions investing in the market and the FIIs,’’ Ravimohan said. Please understand, you’re not just stopping the sale of Hindustan Petroleum and Bharat Petroleum, this will have big repercussions on overall disinvestment’, Arun Shourie is believed to have said on September 7, when it became clear that most of his Cabinet colleagues had ganged up behind Lal Krishna Advani, to scuttle Shourie’s plans to sell off oil major HPCL and BPCL. Even the special meeting called by Prime Minister Atal Behari Vajpayee to try and sort out the issue on the morning of the crucial Cabinet Committee on Disinvestment hadn’t helped, as there were no takers for Vajpayee’s plaintive ‘why are you derailing the only thing that’s really working?’. If anything, the morning meeting only strengthened the resolve of the anti-privatisation brigade — that it helped show up the weakness of the Vajpayee faction was perhaps an added bonus.Well, Shourie’s predictions are already beginning to come true, as minister after minister are already beginning to flex their muscles. S.S Dhindsa, minister for fertilisers, has already begun the process of opposing the sale of National Fertilisers Limited (NFL) on the grounds that it makes more sense to wait till the new fertiliser policy is finalised — but since no one really knows when Shourie’s neighbour, planning commission deputy chief K.C. Pant, will complete this task, NFL’s privatisation could well be put off for a long time. Taking advantage of the confusion in the BJP’s ranks — Coal and Mines minister Uma Bharti who is believed to be opposing the privatisation of aluminium giant Nalco told the Express she had various fora to express her view — the Congress party called for a big bandh in Orissa, where Nalco’s main facilities are located.And while the CCD had planned to come out with some big reforms in order to counter the fallout of their decision on killing Shourie’s disinvestment plans, this is also facing resistance from emboldened ministers. The N.K. Singh panel, for instance, had recommended that investment limits be raised for foreign airlines, and that they be allowed to fly some domestic routes in India as well. Well, without openly raising the banner of revolt, here’s what Civil Aviation Minister Syed Shahnawaz Hussain had to say to the Express: ‘‘all the decisions regarding raising the cap or allowing foreign airlines on domestic routes will be announced in the civil aviation policy.’’ When will the policy be finalised? Hussain says the proposals are expected to be sent for Cabinet Approval in a month’s time. When they’ll get approved is another matter.The huge shortfall in disinvestment proceeds this year, of course, is not the only casualty of Saturday’s decision. The petroleum ministry, for instance, is very keen that HPCL and BPCL invest around Rs 15,000-20,000 crore in setting up new refineries in Punjab and MP. This when, it is well known, there is excess refining capacity all over the world, and when, at Rs 10,000 per tonne, the cost of setting up the Bathinda refinery, for instance, is double or triple that of the existing refineries.Besides, let’s not forget that the Cabinet Committee on Disinvestment had first cleared and ‘approved in principle the proposed disinvestments of BPCL and HPCL through strategic sale’ in its meeting of February 27 this year. So, if a six-month old decision can still be opened up for further debate, and eventually be debunked, it’s quite clear the disinvestment process isn’t really going anywhere. It’s been disinvested.
