DoD formulates 3-year divestment plan

DoD formulates 3-year divestment plan
ENS ECONOMIC BUREAU

NEW DELHI, JUNE 19: Taking a long-term view of privatisation, and in an effort to streamline the process, the department of disinvestment (DoD) has prepared a three-year plan which will be placed before the Cabinet Committee on Disinvestment (CCD) on June 23. There is also an annual programme for which the approval of the CCD will be sought.

"The three-year annual plan would be similar in its approach to the five-year plans," said disinvestment secretary Pradip Baijal. The three-year plan has laid down the process of disinvestment in detail, though he refused to divulge the details of the plan.

Commenting on the streamlining of the disinvestment process his department has recommended, Baijal said that the streamlined process would pace up privatisation.

The CCD nod to the three-year plan would give a big boost to the sell-off programme which has been opposed by a variety of people, the most important ones being within the Union Cabinet. Minister of Heavy Industries and Public Enterprises Manohar Joshi has expressed his reservations public -- in fact, in the presence of Prime Minister Atal Bihari Vajpayee.

Similarly, Minister of Petroleum and Natural Gas Ram Naik is against disinvestment in IOC and ONGC, on the grounds that oil is of "strategic importance." Communications Minister Ram Vilas Paswan, too, is not a very enthusiastic supporter of privatisation. Civil Aviation Minister Sharad Yadav's views on the subject are also well-known.

In this context, the CCD meet on June 23 has assumed great importance. Disinvestment Minister Arun Jaitley will have to plead his case with remarkable cogency to convince the CCD that any dithering or delay in the sell-off programme will be bad for PSUs, the economy and the tax-payer.

Finance Minister Yashwant Sinha has set Rs 11,000 crore (including Rs 1,000 crore to retire public debt) as disinvestment target for the current fiscal. There has been a lot of scepticism regarding the achievement of this target. The most important reason for this is that the last fiscal's target of Rs 10,000 crore was only partially achieved.

Though the DoD under Jaitley was able to execute the first genuine privatisation, of Modern Foods, and the programme seemed to be catching momentum, considerable opposition to the programme suddenly appeared in the last few months. With one minister after the other expressing their anti-privatisation views, the achievement of Rs 11,000-crore target seemed very difficult.

The DoD, however, hopes that the CCD would approve its three-year plan. This, in turn, would accelerate the sell-off process.

Govt against creation of monopolies: The government is against creation of monopolies for the private sector through the disinvestment process. The issue is likely to feature prominently in the Cabinet Committee of Disinvestment meeting on Friday which will finalise the road-map for PSU disinvestment.

Finance Minister Yashwant Sinha said that no government can be seen to encourage monopoly situation through disinvestment. Replying to a question on the status of disinvestment in Indian Petrochemicals Corporation Ltd (IPCL) where Reliance and IOC-Soros combine are the two bidders, Sinha said the decision will take some time as the government has to take the monopoly factor into consideration.

Government sources said Sinha's views have the backing of some other ministers who are members of the Cabinet Committee on Disinvestment (CCD).

They said mere completion of bidding process will not be taken as the finalisation of divestment in any public sector company. The government will ensure that no monopoly situation was initiated through divestment.

Some senior members of the CCD are of the opinion that creation of monopolies could lead to a politically explosive situation for the NDA government. Some of the coalition partners of the BJP with socialist leanings are also against creation of monopolies.

Sources said that the government would like to avoid controversy at the beginning of the disinvestment process this year as it could jeopardise sale of government stake in other strategic public sector undertakings.

However, it is believed that there are some within the government who do not agree with this point of view on the monopoly issues. The department of disinvestment believes that only large private sector companies with financial muscle and experience of the same industry will bid for the large public sector undertakings. If the monopoly issue is taken into consideration for every such case, it could delay the process of disinvestment. They also cite the case of IPCL.

The government's decision on IPCL disinvestment will set the trend for the disinvestment of those public sector companies where there will be a likelyhood of emergence of the monopoly situation, said sources.

The CCD meeting will take up disinvestment of several PSUs including Maruti Udyog, Mahanagar Telephone Nigam Ltd, Videsh Sanchar Nigam Ltd, Indian Oil Corporation and Oil & Natural Gas Commission.

With the government deciding to give a fillip to the disinvestment process by evolving a short-term as well as long-term strategy on hiving off its stake in PSUs, the CCD meeting is likely to come out with plans of some big-ticket divestment in coming months.