A Day after Finance Minister P Chidambaram sold dreams to the industry leaders in terms of achieving 12 per cent industrial growth, Prime Minister Manmohan Singh put an abrupt end to the UPA Government'sdisinvestment policy.
Dr Manmohan Singh did not stop disinvestment of the PSUs out of any conviction but compulsion arising from a clear threat from the DMK for pulling down his government, had it gone ahead with disinves-ment.
One of the major suggestions given by captains of the Indian industry to achieve 12 per cent growth was speeding up the reforms. The signals coming out from the PMO indicate how the entire process of economic reforms has gone in for a toss. The Left parties were quite happy realising though that what they could not achieve was done by the UPA alliance partner DMK. Unlike the Left, at least the DMK allies gave a serious threat to the government and the Prime Minister realised how fragile his survival was. Reformists are not happy and aver that the government is quite weak and has no courage to take vital economic decisions on its own. As for the industry, it should forget things like labour reforms and be prepared for loan melas, free electricity as a few more states like Punjab go to polls early next year.
Disinvestment has become a bad word in India, so much so that if a public sector company wants funds for its expansion and modernisation, it has limited choices. It can either go and tap an expensive debt ( interest rates are increasing) or generate enough internal resources for implementing the investment plans. It cannot go to the stock market and sell a minority stake among lakhs of well dispersed public shareholders and mobilise resources at a good premium which it can command.
A company which is owned by the government to the extent of 90 per cent or 100 per cent is not going to see management or ownership change if it sells in the marketplace five or 10 per cent of the its share capital. Its public sector character remains very much in tact, as long the government equity remains above 51 per cent. The government will retain effective control of this unit which will be accountable also to the Comptroller and Auditor General of India.
There are scores of well-managed public sector banks, manufacturing and trading units which are listed and traded in the stock market at hefty premium. What matters is the work culture in a PSU which comes through the quality of leadership.
The Delhi Metro Railway Corporation, running metro service in Delhi is not a private sector company and is run by professional standards matching the best in the world. If the DMRC, tomorrow so decides to sell five or ten per cent shares in the market and capitalise on its goodwill, why should it be denied the opportunity. After all, by selling a minority stake in the market, the management of the DMRC would not go the Bajajs, Agarwals, Tatas or Birlas. It will remain a board-managed company with the biggest shareholding remaining with the government.
In fact, by politicising the disinvestment, the well-managed PSUs are being denied the required level of autonomy and the opportunity to raise resources from the public which will now go only to hands of the private sector. The desperate attempt by the Prime Minister to save his government will have a major implication for the share market where the quantity of quality paper will remain restricted. The result would be extra-ordinary high valuations for the private sector firms, whose owners would figure in the list of billionaires. Well deserved PSUs would work like the arms of the ministries where not only the minister would take interest in the purchase orders of the company ; but also joint secretaries would ensure that the company board is accountable to him. The best of human resource talent would obviously go to the private sector since the scalary scales of the PSUs would be decided by the Babus in the ministries. It would be once in a while that we woudld have a Sridharan giving us a Metro.