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Modern Foods sold, Indian Airlines divestment next

Our Special Correspondent in New Delhi

In an effort to dismiss criticism about its slow progress on the divestment process, the Indian government has decided to step on the gas.

Following the recommendation of the Disinvestment Commission, it has decided to sell its entire stake in Modern Foods India Limited, the largest bread manufacturer in the country, to a private company.

While details of the deal are yet to be known, it is reliably learnt that the Bangalore-based Britannia Industries Limited has bagged the public sector unit.

MFIL and BIL between themselves account for 80 per cent of India's organised bread market. However, the organised market is only a fraction of the multi-million-rupee bread market in India -- unorganised players account for 85 per cent of the total bread produce in India.

Ever since the government dereserved the bread sector and withdrew the supply of the subsidised wheat , MFIL has seen its fortunes go stale. The company has also been facing intense labour problems with most of its units running at a loss.

In another major development, the government has also decided to divest a large part of its equity in Indian Airlines. A note to this effect is to be placed and okayed in the Union Cabinet meeting scheduled for next week. The Cabinet is likely to okay the divestment of Rs 3.50 billion as government equity in Indian Airlines

Apart from the recommendation of the Disinvestment Commission, the move to divest government equity in IA is largely driven by the Ministry of Civil Aviation's need to raise an ambitious $1.5 billion to enable IA to purchase 39 new aircraft over five years.

Meanwhile, for the first time since 1991, the government is to delink the divestment process from the Budget. So, for the first time since liberalisation, Budget 2000 will not set aside a target for divestment.

"What's the point of setting targets when we miss them every year?" asks Arun Jaitley, Minister for Divestment. "This year too we have missed the target of Rs 100 billion thanks to the election process."

Rather than using divestment as means to bridge the budgetary deficit, the government is drawing a plan to make it a year-long continuous process.

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