The government, at last, has embarked on its stake sales programme in public sector undertakings (PSU) for 2014-15, with more than eight months of the fiscal gone by. The delayed start — total disinvestment receipts are budgeted at Rs 58,425 crore, including Rs 15,000 crore from the sale of minority stakes in non-PSUs — is inexplicable, particularly in a bull market where the Sensex has risen over 15 per cent since the swearing-in of this government on May 26. That the BSE’s PSU index has fallen by some 2.2 per cent during the same period is itself indicative of how markets view the current disinvestment exercise. When investors know the government is suddenly desperate for money, with its fiscal deficit during April-October already touching 90 per cent of the full year budget estimate, they are bound to hammer down PSU shares. This may not have happened had the stake sales been staggered.
But that isn’t the only reason. For all its reformist claims, the new government is yet to come out with any strategic vision for PSUs — be it clearly defining their role in a globalised market economy or allowing them to become genuinely professional board-managed entities. Instead, it has done worse. Many PSUs today are operating without even full-time chairmen. As a result, there is little market appetite for PSU stocks, though many of these firms — banks are an exception — are cash-rich and not overleveraged, unlike quite a few private corporate houses. No wonder the first disinvestment offer, of a 5 per cent sale in steel major SAIL on Friday, saw subscriptions at barely above the floor price set by the government.
The current government needs to think big on PSUs; it has the political legitimacy for that. What stops it, for instance, from listing a Life Insurance Corporation or Hindustan Aeronautics? These are companies that would truly attract investor imagination, rather than pure commodity players such as SAIL or Coal India. But beyond the immediate term, the government must also consider reducing its holdings in all PSUs to below 50 per cent and transfer these to a separate state-owned holding company similar to Singapore’s Temasek. Once this happens, the PSUs will cease to be “government companies”, making them relatively immune to political and bureaucratic interference. The holding company’s job, in turn, would essentially be to protect the government’s (that is, taxpayers’) financial investments as the dominant (even if not majority) shareholder. A mere announcement of intention on these lines would go some way in reviving investor interest and the overall fortunes of the nation’s crown jewels.