The Hindu Business Line : BHEL disinvestment

FUNDAMENTALLY, EVERY policy decision taken by the UPA Government must draw its sustenance from the Common Minimum Programme (CMP) adopted by the alliance partners, the yardstick that has also to be applied to the BHEL partial disinvestment case.

This specific issue has been brewing for quite some time, and every time a decision was seen to be imminent it was shelved for consideration later. On Thursday, the Manmohan Singh Government went ahead with the decision to sell 10 per cent of government equity which has, expectedly, set the cat among the pigeons as it were.

According to reports, a statement issued by the CPI(M) said: "BHEL is a navratna public sector unit which is making significant profits in a competitive environment. BHEL significantly contributes to strengthening of India's economic self-reliance.

The CMP, on whose basis this Government is meant to function, clearly states that the UPA will encourage and strengthen the navratnas to become global players. The CMP also categorically states that the Government shall not disinvest/privatize the profit-making PSUs. In the light of these commitments made in the CMP, the CPI(M) considers the Cabinet decision contradictory."

Apart from the fact that the Finance Minister himself has said that the Left was "consulted" before the decision was taken, Government "managers" have been reported as saying that the step had been taken in accordance with the norms contained in the CMP.

To quote them (as reported): "The CMP is very clear. It has only said that `generally' profit-making PSUs will not be privatised. In any case, even after the decision, 58 per cent stake will remain in Government hands.

Besides, the CMP has said that all privatisation will be considered on a transparent and consultative case-by-case basis. It has also said that navratnas will be allowed to raise resources from the capital market".

What does the CMP itself have to say on the subject? To quote the relevant portion of the Programme: "The UPA Government is committed to a strong and effective public sector whose social objectives are met by its commercial functioning. But for this there is need for selectivity and a strategic focus.

The UPA is pledged to devolving full managerial and commercial autonomy to successful, profit-making companies operating in a competitive environment. Generally, profit-making companies will not be privatised".

The document continues: "All privatisation will be considered on a transparent and consultative case-by-case basis. The UPA will retain existing `navratna' companies in the public sector, while these companies raise resources from the capital market... It also believes that there must be a direct link between privatisation and social needs — like, for example, the use of privatisation revenues for designated social sector schemes. Public sector companies and nationalised banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors."

As far as encouragement to "retail investors" is considered, the Government has been careful enough to split the stock offered for disinvestment so that a portion is reserved exclusively for the average citizen.

The details of the split-ratio are to be announced later "in consultation with the Departments of Disinvestment and Heavy Industry" and after the choice of the lead manager.

As regards the expenditure of the proceeds on "social needs", the Government has said that three-quarters of the funds (around Rs 2, 200 crore) will be spent on health and education, the remaining 25 per cent going into the revival of ailing PSUs.

Most important, the disinvestment proceeds will not be reflected in the Budget, a euphemism for the disappearance of the funds into the bottomless and colourless pit of the Consolidated Fund of India.

This is all very good, above board, and so on, but the basic issue appears to be whether the 10 per cent of government equity which will be put up for sale could have been leveraged to make BHEL even stronger and more effective, furthering the objective of making the company even more profitable in the highly competitive business world of today.

This is the issue that needs to be gone into in some depth because what the 10 per cent sale decision could in fact mean is that BHEL's long-term strategic interests have been sacrificed in the interests of garnering a few thousand crore rupees today, which may or may not be utilised effectively, and in any case will not help the company in any way.

Ranabir Ray Choudhury

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