Sham disinvestment

Disinvestment is generally seen as a reforming measure. When Arun Shourie was disinvestment minister in the Atal Bihari Vajpayee government, he privatized many public sector enterprises (PSEs), and the move was hailed in tune with the belief that the business of government is not business.
But there is little related to liberalisation in the United Progressive Alliance (UPA) Government’s decision to offload equity up to 10 per cent in all profitable Central PSEs, including fresh listings. The Government decision puts 12 PSEs on the anvil as in these government stake is over 90 per cent; there are scores of PSEs which will get listed. This is expected to yield Rs 28,000-32,000 crore.
The authentic rationale of disinvestment is cutting down reduction of state intervention in the economy. Only privatization—that is bringing down government stake in PSEs below 50 per cent and handing over management control to private parties—is genuine disinvestment; for it means the exit of politicians and bureaucrats from the functioning of a business entity.
In the present instance, nothing of this sort is going to happen. Neither the Government will hand over PSEs to private companies, nor the money accrued by equity sale be used to retire public debt.
At the Cabinet meeting in which the decision was taken, Finance Minister Pranab Mukherjee is said to have made a case for generating funds from divestment and diverting it for expenditure in various social sector schemes. “I need this for at least three years,” the Finance Minister told his Cabinet colleagues.
What this means that the Government exercise has nothing to do with the rationale of disinvestment: the role of politicians and bureaucrats in PSEs will not be reduced; and the money generated by minority stake sale will be used to increase the size of government.
But there can be yield if and when the decision is carried out. It is not just the Left—which, fortunately, is not in the reckoning—that is screaming. The Trinamool Congress (TC), an important ally, has already resisted the move. “It is clearly stated in our party manifesto that there should not be any disinvestment in profit-making PSUs. If the Central Government’s desired objective is to use this money for the social sector, we are against it. Our party believes that it is the Government’s job to look after the social sector and earmark funds for the purpose,” TC’s Leader of the Opposition in the West Bengal assembly, Partho Chatterjee, said.
Then there is the DMK, which is also known for its anti-disinvestment stance; earlier, it had successfully opposed the UPA I decision to sell stake of Neyveli Lignite Corporation. It has been silent so far, but you never know with allies.
Reformists in the Government are happy, though. Planning Commission Deputy Chairman Montek Singh Ahluwalia was “delighted at the decision.” So were the capital markets, which became bullish after the Government announcement. Perhaps this is the only way to stay happy in a world where state intervention in economy is increasing by the day. Let appearance make you happy, even if the reality can’t.