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Govt eyes fast-track sell-off of large PSUs

Amberish K Diwanji in New Delhi

The Cabinet Committee on Divestment, or CCD, is expected to meet on June 23 to take some hard decisions, including a fast-track package to divest some of the larger public sector units, or PSUs. The idea of getting CCD to accept and announce the fast-track divestment is to ensure that all the recalcitrant ministers are brought in line and relent to the divestment of PSUs that come under their purview.

Meanwhile, a top government official said that some big Indian business houses had shown keen interest in picking up a stake in Air-India and Indian Airlines. Reliance Industries Limited, ITC, Tata Sons and Jet Airways are likely to be the bidders for the government's stake in the two airlines.

The chairman of the Department of Divestment, Minister of Information and Broadcasting Arun Jaitley, is apparently peeved at the way various ministers have been opposing the sale of PSUs that come under their respective ministries.

The June 23 meeting is expected to finalise the divestment process for 22 PSUs, according to the sources.

"Tragically, the ministers see the PSUs as a show of their strength and power and think that selling them off means reducing their powers. Hence, all the ministers -- who in public support the divestment plan -- are against divestment of the PSUs under their ministries," said sources in the Department of Divestment.

It is a situation that has irked Jaitley, the Prime Minister and the Finance Minister, who form the core of the CCD. The other members of the CCD are the various ministers in-charge of the ministries under which come the PSUs that are to be divested such as the ministries of petroleum and natural gas, chemicals and fertilisers, heavy industries, steel, mines, and so on.

Most of the ministers have voiced their concern at the move to divest the PSUs. For instance, Civil Aviation Minister Sharad Yadav was very reluctant to the divestment of Indian Airlines and Air-India, which was agreed upon recently.

Similarly, Petroleum and Natural Gas Minister Ram Naik has opposed the move to divest the government's share in Indian Oil Corporation, India's largest company and a 'Fortune 500' listed company. He has claimed that oil is a 'strategic industry' and, hence, the government must retain control.

Even Heavy Industries Minister Manohar Joshi is opposed to the government divesting its stake in Maruti Udyog Limited.

In both the above cases, the government has stated that it will divest its stake.

It is to overcome this apparent volte face that the various ministers show that the government decided to convene the CCD on July 23. The CCD, chaired by Prime Minister Atal Bihari Vajpayee, is likely to agree upon a fast-track divestment of key PSUs. At the CCD, the ministers concerned will be asked to voice their support for the fast-track plan.

"The idea is that once the CCD and all the ministers concerned agree to the fast-track divestment, then it becomes the collective decision of the cabinet members. This should then make it difficult for the individual ministers to go back and later oppose the sale of PSUs that come under their respective ministries," the sources said.

The government has set a target of raising Rs 100 billion through sale of government equity in the public sector units, most of which run at a huge loss that is met by the government. It is this massive subsidisation that has been keeping the fiscal and revenue deficit wide and making it difficult for the government to reduce its expenditure.

However, the divestment of PSUs has so far had limited success. From 1991, divestment has raised only Rs 183.94 billion against the set target of Rs 443 billion.

The government is keen to push-start the second generation of reforms, with a clear focus on pro-poor policies such as education and primary healthcare. To raise the huge resources required and to curb the country's yawning fiscal deficit, the Prime Minister's Office and the finance ministry have been keen to push the divestment process through in haste.

Incidentally, at a meeting in Calcutta, special secretary in the PMO, N K Singh, had said that the next thrust of reforms would be on education and health care and said the government was committed to raising the necessary funds for it.

The government has been eyeing the funds that will be saved annually, estimated tens of billions, from the divestment of loss-making PSUs, and which can then be put to other uses.

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