GDR's fine, no sale of VSNL says Paswan

GDR's fine, no sale of VSNL says Paswan
Sunil Jain

New Delhi, Dec 25: Pity Arun Shourie. For several weeks now, the minister of disinvestment, has been under the illusion that he had got communication minister Ram Vilas Paswan to agree to selling off VSNL. Yet, just a couple of days before the meeting of the Cabinet Committee on Disinvestment, Paswan sent a note saying that while he was not opposed to VSNL going in for a GDR or an ADR issue, he would not go along with a sale to a strategic partner.

An ADR or a GDR issue, according to Paswan's logic, would also serve the purpose of making the company autonomous -- once the government's shareholding falls below 51 per cent, the company is no longer answerable to Parliament, the CAG, the CBI, and other such bodies. What it will also do, is to allow the communication ministry to run VSNL exactly as it feels, without even the token fear that bodies like the CAG will be looking into its various actions.

Paswan, it appears, was quite unmoved by the department of disinvestment's arguments that, come March 2002, when international calls will be opened up for the private sector as well, VSNL's market price is likely to plummet dramatically. It is well known, for instance, that a large part of VSNL's profits are monopolistic in nature, since no other player is allowed to provide international long distance telephony.

Besides, in 2002, when full `convergence' is allowed, the government is committed to allowing internet telephony -- by then, with greater improvements in technology, the clarity on internet telephony is likely to be near the phone-quality of today. In which case, the global long distance telephony market is certain to crash, as will VSNL's value in its current form (to retain value, VSNL needs to re-engineer itself completely as a complete communications-solution firm).

Interestingly, it's not just VSNL, but most public sector units have lost value when the government has broken up their monopolies. The quasi-PSU Maruti saw its profits and market shares plummet when Hyundai and Daewoo came in, Indian Airlines faced the same fate when players like Jet Airways entered the fray, STC and MMTC saw business fall when more private players were allowed to import commodities earlier reserved for them ...

With Paswan now putting his foot down firmly (earlier, his strategy was to delay decisions), the only way that VSNL can be sold is if Prime Minister Vajpayee is able to over-rule him firmly, something Vajpayee has chosen not to do so far to any of his Cabinet.

Paswan's stance on VSNL also puts a question mark before the sale of MTNL -- earlier, Paswan was agreeable to selling off VSNL provided MTNL's sale was deferred.

Paswan's decision, incidentally, also means that, for all practical purposes, the process of big-ticket disinvestment has been scuttled for now. Selling off the government stake in Maruti Udyog is at an impasse, and the bids the government has got for both Air India and Indian Airlines are an embarassment -- with the government not allowing the Hinduja bids to be taken seriously because of their Bofors involvement, the number of serious bidders for the two airlines are too few for any credible auction.