The cabinet, on Wednesday, approved stake-sale plans for three blue-chip public-sector behemoths worth Rs 45,000 crore — 10 per cent of Coal India Ltd, 5 per cent of ONGC and 11.36 per cent of National Hydroelectric Power Corporation are to be offloaded. Coupled with its intention to sell its residual stake in Hindustan Zinc and Balco, the government’s total disinvestment target for 2014-15 — Rs 58,425 crore — is 269 per cent more than last fiscal’s receipts of Rs 15,819 crore. The proposal is well timed to take advantage of the buoyancy in markets and global investor enthusiasm. Together with the fact that global crude prices are at a two-year low, which will significantly reduce the government’s subsidy burden, the stake-sale plans will greatly help it to meet the 4.1 per cent of GDP fiscal deficit target.
But there’s many a slip. The UPA had to abandon the CIL stake sale last year because of trenchant opposition from the unions, which have, once again, launched a stir. There are also other questions that need addressing first. The outcome of the long-pending gas pricing issue, for one, will determine ONGC’s subsidy overhang, important for its valuation. Similarly, there is lack of clarity in the coal sector. Much will become clearer after the court’s judgment in the allocation case, though the attorney general’s suggestion that mines whose licences are cancelled could be handed back to CIL is disappointing — the government should, instead, use this moment as an opportunity to open up the sector.
Most importantly, disinvestment isn’t about fund-raising alone. It’s about improving competitiveness and efficiency, and reducing government interference — the Centre’s removal of independent directors of major PSUs doesn’t inspire much confidence on this count. The cabinet’s disinvestment plans veer away from the earlier NDA government’s mantra of strategic disinvestment, whereby shareholder value was sought to be maximised by bringing in controlling-stake partners with domain-relevant expertise. While the stake-sale plan aims to include retail investors, strategic disinvestment would not only greatly improve efficiency, it would also maximise the value of the government’s holdings. The Modi government’s mandate enables it to be bolder while taking such politically sensitive decisions. For now, it has stopped too short.