Given how the UPA quickly reversed the NDA’s policies of privatisation, not too many hoped for any great reform in the manner PSUs were run. Indeed, other reforms that were linked with the freeing up of PSUs have also taken a back-seat. So, for instance, the move to link petroleum product prices to global crude prices (initiated under the NDA) was also given up. Under-recoveries this year are estimated to be R1,21,571 crore. Although the UPA-1 and UPA-2 have had high disinvestment targets, since there is no change in control, there is no change in the way PSUs are run. Last heard, there were 250 posts of independent directors vacant; as were 60 board positions in 43 PSUs (including 20 posts of the heads of PSUs). And as we’re seeing in the case of Air India, PSUs continue to be micro-managed, right down to ordering $11bn worth of planes with no comprehensive plan/strategy to turn the airline around.
But what is being proposed by the finance ministry is a shocker by any yardstick. Economic affairs secretary R Gopalan has indicated that, while the government will stick to its 4.6% fiscal deficit target, it will do so in unconventional ways. While it can’t meet this year’s R40,000 crore disinvestment target—just R1,100 crore has been raised so far from the divestment in Power Finance Corporation—it may possibly meet this by asking cash-rich PSUs to buy back government shares. All without disturbing the existing government shareholding. So, NTPC can pay the government for its shares in Coal India, and Coal India can pay for the shares in ONGC … Since Coal India has R45,000 crore of cash, NTPC R18,000 crore, SAIL R18,000 crore, and so on, getting the R40,000 crore won’t be a problem. But think of what it will do to the PSUs, all of whom need the money and a lot more to add capacity to be able to compete in the market.
The second article on this page, by Subhomoy Bhattacharjee, has interesting facts, and Mr Gopalan would do well to examine their implications. When UTI went bust in 2001, the government tried to salvage the situation by creating two UTIs: one Asset Management Company and another, SUUTI, that held the old UTI’s shares in various companies. Those holdings are today worth around R30,000 crore. Why not sell the assets owned by SUUTI to meet the disinvestment target? That way PSUs won’t be burdened any more than they already are.