On disinvestment, make haste slowly
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There is uncertainty about the exit from the stimulus package. The stimulus package to mitigate the consequences of the financial meltdown had two principal components: relief in excise taxes and increased public outlays. This was in addition to the liquidity accommodation through various measures adopted by the Reserve Bank. The current fiscal scenario is unsustainable, but sharp reduction in public outlays and increase in tax rates could impair the recovery process. It is this configuration which makes the revival of the disinvestment programme a key component of our economic strategy.
Over the years, government has rarely been consistent either in its pronouncement or in implementing the disinvestment programme. It commenced in 1991 as part of a bold strategy of economic liberalisation by bundling of shares of public sector companies representing a miniscule part of public equity. This attracted multiple controversies. Limited disinvestment programmes were often resorted to for raising resources. During the NDA regime, a proposal by the then finance minister to restrict public equity to not more than 33 per cent in all public undertakings could not be legislated given the dissent within the NDA, particularly the BJP itself. Front organisations of the BJP regarded this move as excessive in its embrace of new liberalism, as against the larger social purposes that public utilities served. No doubt during the NDA regime some audacious decisions were taken for outright privatisation, and strategic sales were beginning to gather momentum. With the return of the UPA government with the support of the Left parties, privatisation was laid to rest and notwithstanding two companies whose shares were offloaded, disinvestment was put in deep freeze. The present UPA government, particularly the finance minister must be credited for having salvaged this important tool from the deep freeze to announce a robust programme over the next three years. The essence of the programme is to offload 10 per cent of the equity of all public listed companies and to list those which are unlisted and have made continuous profits over the last few years. This itself is an ambitious programme and on the current reckoning could yield a handsome total.