BOMBAY, 1 October — It is said that every cloud has a silver lining and looks like this is currently the perfect idiom for the Indian economy. The dark clouds of war and the resultant world recession has been looming large, casting a shadow of gloom on the entire Indian subcontinent. But now it looks like it is these clouds which have propelled the government into action, motivating it to take steps which it had hitherto pushed back for “later”.
India has a big white elephant, the Public Sector Undertakings (PSUs) and this has been eating into the entire country, threatening to make it bankrupt. A white elephant looks good but it takes tremendous amount of resources to merely maintain it, especially when it does not even churn out any gains.
For quite some time now, India had decided that it would soon disinvest its stake in the strategic PSUs. This is good news but the bad news is that somehow this never seems to happen. Political pressures, bad market conditions and lack of a consensus within the government for a proper guideline has always put this disinvestment of the PSUs on the backburner. And now the attacks on the US had made everyone conclude that PSU disinvestment was merely a myth, it was never going to happen. The government has drawn a lot of flak for its slow progress on the disinvestment front, which is seen as a key indicator of corporate growth and economic progress. The government’s first major divestment in Balco to Sterlite Industries was fraught with labor problems and accusations that the government had short-sold. In the case, of Air-India, all major bidders have withdrawn from the fray leaving only that Tata group, which, itself, is on the look out for a strategic partner after Singapore Airlines withdrew.
Only last week, the A V Birla group withdrew its bid for state-run computer maintenance firm CMC. And probably in a bid to diffuse any more accusations, the government of India pulled a fast one of everyone by doing the unpredictable. The Cabinet Committee on Disinvestment (CDC) announced last week that it has short-listed a total of 13 PSUs for divestment in fiscal 2001-02. Not only that, this disinvestment was to be done within a given timeframe. It has placed the divestment of Bharat Heavy Plates and Vessels, Computer Maintenance Corporation (CMC), Hindustan Zinc, Hotel Corporation of India, IBP, Indian Petrochemicals Corporation of India, Indian Tourism Development Corporation, Instrumentation Control and Valves, Jessop and Company, Maruti Udyog, National Newsprint and Paper Mill and Videsh Sanchar Nigam Limited, for this fiscal.
A group of ministers has been formed to see to it that the divestment schedule is stuck to. The ministers are to report to the CCD every month regarding adherence to the timeframe of the divestment of the 13 PSUs. Coming to specific PSUs, for National Aluminum Company (NALCO) which is not a part of these 13 PSUs, the CDC has recommended that 30 percent of the government’s 57 percent equity be divested to the public.
Moreover, the government’s equity in the Hotel Corporation of India is also to be offered in the market and the divestment of Air-India, till now handled by the Civil Aviation Ministry, would be handled by the CDC ministry. It was also decided and announced that cash reserves of Rs.9.00 billion in STC and MMTC would be transferred to the government before the disinvestment of these companies.
Disinvestment of VSNL is expected to take place by the end of November. It is expected that DoT will finalize its guidelines by then. CCD also decided that the employees of VSNL will be offered 1.97 percent of the total shares of the company as employees’ stock option. The employees of CMC will be offered 6.2 percent of the shares as stock option.
But what came as a disappointment was that the government had left out Air-India from this list, saying it was waiting for the response of the Tata group before taking a final decision. India had earlier decided to put the airline’s privatization on hold till the airline industry stabilized following the deadly Sept. 11 attacks in Washington and New York. But this was seen in the cooperate circles as merely a ruse to hide the failure of finding a buyer for the 40 percent stake in Air-India.
There is also news that the Arvind Mafatlal group company Nocil is in talks with PSU Bharat Petroleum Corporation Ltd. (BPCL) about selling off equity in its petrochemical project at Thane in Maharashtra. But it is not clear whether BPCL will acquire the equity against the money that Nocil owes it.
