The Hindu Business Line : No make-over for PSUs

COSMETIC CHANGES AND all, public sector units will look much the same under the new disinvestment policy. The Government on behalf of the public, and not the people themselves, will continue to hold 51 per cent stake in listed and unlisted profitable public sector units which will report not just to their boards but also to the various ministries and Parliament. Privatisation is off. To keep the protesting Left quiet, the Finance Minister, Mr P. Chidambaram, has promised a National Investment Fund (NIF) to be raised with the proceeds from the direct sale of government stake in the PSUs.

Politically an appropriate device to fund social sector projects, the NIF would have made sense had anti-poverty schemes been short of cash, which of course is not the case. The NIF will be managed by public sector mutual funds (why not better performing private funds?) with 75 per cent of the earnings going to the poor and the rest to the PSUs. New Delhi has always been adept at cosmetics though not much beyond as the entire process, starting in April, could take a while to become clear with no one sure when the equity downloading will start. By deferring equity sales in Maruti and BHEL to the next fiscal, the Centre's effort appears half-hearted. Mr Chidambaram can smile that everyone is agreed that Government need retain only 51 per cent stake in the PSUs and that as at some point in future this level too will be breached when the companies squeal for funds. That at least was the ploy in getting the government's holding down to 51 per cent in nationalised banks as by 2006, when the Basel norms kick in, additional funds can be raised only when government is not the majority owner.

An attritional gameplan but one that could click. Anyway, the Manmohan Singh Government does not seem to have an alternative. But it could tell on capital investment and growth. Based on numbers available till 2002-03, the gross domestic saving (GDS) rate moved up to 24.2 per cent of GDP in 2002-03 from 23.5 per cent the preceding year entirely due to lower public sector dis-saving at 1.9 per cent from 2.7 per cent. But the investment rate continues to be lower than the saving rate. While the rate of gross domestic capital formation (GDCF) improved marginally in 2002-03, it was sharper for GDS. The trend is evident in banks still having enough cash to go round, with borrowers not moving in. The scene is not very different from 1991 when Dr Manmohan Singh, as Finance Minister, set the terms of disinvestment and promised to use the proceeds for upgrading skills and helping the poor. Has anything changed for the public sector?

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