In desperation, it has reportedly decided to get financial institutions to pick up Rs 5,000 crore of equity in two oil companies, one aluminium company and a telecom major. They willallocate the shares among themselves at a discount to the market. But these days, after every rise, the market quickly brings down share prices. In effect, forced PSU disinvestment to fill the hole in the budget means burdening the FIs with unwanted equity.

Conceivably, the market will see better times. FIs could sell the PSU equity at a profit (to be shared with the government) in the not too distant future. But mega disinvestment year after year--in PSUs, DoT, ports, FIs, banks, insurance, etc,--is bound to create an oversupply. And if PSU share prices go really cheap, relative prices of private sector shares in the secondary markets cannot but sag. The disinvestment route to reform is unlikely to click in the foreseeable future. This will block FIs' funds in PSU paper at the expense of lendings to the real sector.

Cliches are of no use to hard-headed businessmen. One advisory group wants the government to swap PSUs' debt into equity to strengthen their balance sheets. This will make their equitysaleable. There is also an ambiguous reference to dual nationality type schemes; this could mean sale of PSU equity to foreign buyers. Swadeshi dismay apart, there is merit in the proposal, for disinvestment would then attract foreign funds, and free domestic savings for new investment. Astonishingly, the PM's advisors have been coy about the on-going slack in private investment. There are no ideas on getting back investors who have fled the primary market en masse. Mutual funds are promising them safe investment in government securities!