Sale Of PSUs Can Be BOOMERANG !

Since 2014, Modi government’s strategic disinvestment approach was to sell minority stakes in public companies to raise revenue, while retaining management control. During the 2014-2019 period, the government raised Rs. 2,79,622 crore from the disinvestment of public sector enterprises (PSEs), compared to Rs 1,07,833 crore collected during 2004-14. However, this has changed now. Recently, five companies were up for 100 per cent disinvestment, including three large profitable companies such as Bharat Petroleum Corporation Ltd. (BPCL), the Container Corporation of India and the Shipping Corporation. The government is planning to sell 53.29 per cent stake in BPCL—a large profitable company—to a strategic buyer, basically providing the management control to a private party. The planned disinvestment of these big three is in addition to the proposed 100 per cent sale of Air India, and Industrial Development Bank of India (IDBI). The move towards divesting ownership in strategic sectors will have long term consequences. A diluted public sector would possibly mean that India missing out on the opportunity to capitalise on the global distrust against Chinese supply lines in the wake of the current crisis. The Life Insurance Corporation (LIC), a largest company in terms of assets, may become the country’s biggest company which serves the pool and re-distributive risks associated with the death of policyholders in millions of households. Many may wonder about the objectives of these sales, particularly the LIC. There is an argument that listing of LIC will bring in better governance and investment decisions and provide more value for life insurers and benefit policyholders. LIC is a very large social conditioner which serves to the pool and re-distributive risks associated with the death of millions of policyholders. As a major collective savings institution, LIC is a dominant financial intermediary in the country, channeling investible funds to productive sectors. Furthermore, LIC is one of the remaining profit entities owned by the state, and the government is trying to get maximum out of its brand value. The process of listing of LIC in stock exchange my take some time as it involves fulfilling of the requirements specified by SEBI and amending the Life Insurance Corporation Act, 1956. The timing of the paradigm shift from the strategic disinvestment policy of the government raises questions on the intention of PSE reforms. Is the shift in policy out of necessity to mop up a good amount of resources by selling both profit and loss-making companies PSEs to meet the widened fiscal deficit targets? There are also wider questions on how much of the resources would be available to restructure and strengthen PSEs. After all, PSEs is not an abandoned concept, they still exist in many countries and have played an important role in shaping the economy. The restructuring of the PSEs needs to have a clear vision and strategy, and definitely have a major role in our our multi-faceted strategy to achieve a $5 trillion economy. The IEG evaluation of World Bank Group Support for the Reform of State-Owned Enterprises (2018) shows an estimated $8 trillion as SOE global revenues, which is equivalent to the combined GDPs of Germany, France and the United Kingdom. Do we have enough expertise both in policy and practice to facilitate positive labour market transitions? The UK is a pioneer in privatisation. Even after a long period of privatisation, there is enough controversy over poor service, high prices and huge pay-outs to shareholders and in many instances muted regulatory bodies too. Although a strong market economy exists in China, the role of the state planning and state-controlled firms are still dominant. Privatisation may be a magic solution to raise revenues, but it is a tamed tiger—the performance depends on how to tame it in accordance to the sectoral policies, strength and presence of the public sector, competency of regulatory agencies and wider political economy compulsion.