January 28, 2000
Nostalgia of a party faithful
Mani Shankar Aiyar’s tirade, "Disinvestment, saffron style" (IE, January 11) befits a party faithful, but not an analytical columnist. He uses snootiness in place of facts and logic. He drops Das from the surname of his CPI colleague in the Rajya Sabha, Gurudas Dasgupta, takes potshots at Hindutva and shows off that he knows better English. This is schoolboy harangue, not informed debate.
He says `Modern Bread’ has not been up for sale. He obviously disdains as vulgar reading the headlines in the business pages that very week: Hindustan Lever close to acquiring 74 per cent of Modern Foods (that should have been the right term to use, Mr Aiyar)! He claims that using disinvestment proceeds to reduce budget deficits is converting stocks into flows, calling it "completely wooly-headed". Well, the government has long done the reverse, a practice perfected by his own party, converting flows into stocks, by its budgetary support of precisely the same public sector losses henow bemoans. Is the long-suffering ultimate shareholder in these wealth-destroyers, the taxpayer, not entitled to some relief by being spared taxes to the extent of disinvestment?
Aiyar says, rightly, that there are no buyers for public sector rubbish. One paragraph later, he says "Disinvestment should begin with the…most inefficient and wasteful PSUs." without being at all aware of the contradiction! He regrets the likely sale of the navaratnas, yet admits that these very units account for 80 per cent of all public investment. If the inconsequential units were to be disposed off first, assuming there were any buyers at all, would that generate any significant resources?
Aiyar’s advocacy of freeing PSUs from their responsibility to Parliament and letting them decide like any private sector undertaking, whether and when and on what terms to sell off their shares, betrays a total innocence of corporate governance and responsibility. The assets of a company belong to its shareholders. The management cannotdecide without their concurrence any alteration to the asset base, leave alone its disposal. PSUs belong to the Indian public, and Parliament acts as its surrogate. How can their shares be sold, no day-to-day matter, without parliamentary consent? Lest we forget, many rogue public sector managers had connived with bankers and brokers in the 1994 share scam through the ruse of portfolio management schemes.
The cold logic of our times is that the government should not be in any business, without exception. That a PSU is profitable or is efficient is no reason for its retention. Investors cannot be attracted without control of the enterprise. Under the Companies Act, 50 per cent plus one share is no different from 75 per cent less one share. Why not then offer 74 per cent of those units which have a buyer as a first step towards complete divestment and simply close all the others?
Such thinking does not appeal to those who take recourse to nostalgia associated with terms such as family silver. The erstwhileprinces of India survived through such means. Our democratic polity which did away with them, surely has no use for such princely mode of thinking about its assets either! What Aiyar really laments is the divestment of power from PLU (people like us), not PSU disinvestment.
The writer is a Pune-based management consultant
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