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PSU privatisation only way out, says G V Ramakrishna

The privatisation of public sector understandings under the National Shareholding Trust, a proposed non-government professionally managed body, is the only way to bring reforms in public sector undertakings and create growth in the economy, according to Disinvestment Commission Chairman G V Ramakrishna.

He was in Bombay on Saturday to address a session on PSU privatisation organised by the Confederation of Indian Industry. Ramakrishna said that only through the reform of PSUs, economic development could be accelerated which in turn would improve the capital market sentiment and confidence of the small investors.

According to the latest proposal from the Disinvestment Commission, the NST would get the government holding shares of selected PSUs at certain prices and then offer these shares at say 20 per cent discounts to intermediaries like financial institutions, mutual funds, merchant bankers and foreign institutions in order to create a healthy retail markets for these PSUs for further disinvestment in future.

While the top ten PSUs have a net worth of Rs 720 billion as against the top ten private sector units' network value of Rs 290 billion, the return on assets is comparatively very low among PSUs mainly because of excessive government control and demotivated large workforce with less productivity. There are about 30 PSUs in non-core sector which can be put for strategic sales procedure for revival, Ramakrishna said.

Ramakrishna said that the strategic sales policy can be undertaken after creating a new class of companies managed by professionals under the national trust so that the confidence of investors could be enhanced through better transparency. The National Shareholding Trust would be incorporated under Section 25 of the Company Act and will have a board of management comprising nominees from IDBI, SBI, LICc and members from public.

Talking on the special purpose vehicle as suggested by the finance ministry for PSUs disinvestment, Ramakrishna said that it was an unrealistic approach as to from where the SPV would get Rs 100 billion worth of funds to acquire the government holding shares in PSUs.

Participating at the session, Disinvestment Commission member and chairman of Stock Holding Corporation of India Dipankar Basu said that there was a need to change the mindset of the bureaucrats and political leaders to address the problems of PSU management.

There must be administrative freedom and accountability among the managers of PSUs. The commission had so far submitted eight reports on PSU disinvestment in the last two years of existence. Of the 43 PSUs studied by the commission, 19 companies were suggested for strategic sales, four cases for closure, six cases for 100 per cent disinvestment.

So far, all these reports did not attract the attention of the government which mostly gets involved in exchange of words and letters with the Commission, Basu observed. Basu also highlighted various constraints related to the existing labour policy and exit policy for the PSUs.

He said that the successful privatisation of PSUs was largely depend on right-sizing public sector organisations with an effective voluntary retirement scheme schemes aided by advisory cell for residue labour force.

Leading merchant banker Nimesh Kampani opined that the privatisation of PSUs must be undertaken, whatever may be the procedure, after creating public opinion on the issue. In fact, blue chips PSUs could be disinvested at the retail markets with proper mandate and timing without any interference from the authorities. At present, the market has sufficient money but is suffering from absence of good corporate issues, he said.

Summing up the session, he said that the privatisation of PSUs would not only enhance the shareholders' values but create wealth for the nation and finance the government fiscal deficit.

UNI

Interview with G V Ramakrishna

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