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THE LATEST MEETING of the Cabinet Committee on Disinvestment has, on predictable lines run through the range of options such as deferring divestiture in some, and re-tendering in one and identifying a new candidate for the process. The net result is that the entire exercise stays stalled. That would have been bad enough but the absence of any renewed commitment by the Government to the process makes it all the more regrettable. Nothing exemplifies this better than the official explanation for deferring a decision to exit from Air India and Indian Airlines. It is that the Government is committed to spending a huge sum of money on the two airlines' fleet expansion plans. Implicit in this is the belief that it would amount to giving away largesse to the prospective successful bidders.

Quite apart from betraying a touching faith in the speed of government decision-making process, it is by no means clear why the investment in new aircraft cannot be factored into in any valuation should the Government actually succeed in pumping in money ahead of a sale of its stake. The argument is specious for another reason as well. As the Government says, a decision on public investment in fleet acquisition necessitates the postponement of that on divestiture. But one canargue with equal force that the logic of disinvestment obviates the need for public investment in the first place. It is not as though an emergent situation has arisen that the fleet expansion plans of the two airlines brooks no further delay. Moreover, saddling the two airlines with a fleet of government's choice runs the risk of securing a reduced value in disinvestment. After all, a strategic investor may have his own ideas on how the airline should be run and will be willing to pay a premium for the acquisition if the enterprise has enough flexibility that allows it to be reshaped to his dictates. It is such wholly untenable arguments that expose the Government to the charge of a rent seeking behaviour (implicit in any purchase decision, but especially one as large as the purchase of aircraft) rather than motivated by considerations of public interest. That elections are round the corner in four key States does not help allay such suspicions.

Thankfully, there is some logic on the decision to re-tender sale of stake in Shipping Corporation of India. The initial decision to restrict overseas investment to 25 per cent did not make sense. With all the emphasis on core competence, it is highly unlikely that the stake sale would have interested anybody other than those actually in the shipping business with varying degrees of reluctance/ability to participate in the process. It is clear that overseas participation has to be made more attractive. But even here the Government must spell out its stand on taxation of shipping companies on the basis of a moderate compounding levy. Valuations can get grossly vitiated in the absence of a clear stand on this, and this could derail the process of eventual disinvestment should the tax laws change to a compounding levy, as demanded by the domestic shipping industry. The Government could well find itself enmeshed in litigation.

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