The proof of the privatisation pudding…

The proof of the privatisation pudding…

By: RC Acharya

|  The proof of the privatisation pudding… – The Financial Express 26/02/21

the-proof-of-the-privatisation-pudding Test: It should inspire others to follow suit Narendra Modi’s talk of privatisation implies big reforms Perhaps, in his push for privatisation, Modi appears to have realised that rigid governmental rules and procedures may stand in the way, for which he has to take head on the bureaucrat’s culture of maintaining ‘status quo’. As early as 1956, the Industrial Policy Resolution had given the public sector a strategic role in the nation’s economy, and several ventures were set up in the next four decades or so. But, what started as an exercise to kickstart the economy and propel it on the path of fast growth, soon degenerated into a plethora of unviable projects with nearly half of them facing a mid-life crisis. Added to this was the unfortunate policy that it was the duty of the government to bail out every private sector enterprise which became financially sick to save jobs, while the parties which had made it sick in the first instance went scot-free! Undoubtedly, the Railways, which had set up its first locomotive production unit at Chittaranjan, West Bengal, was the role model for most of the early giant PSUs such as Bharat Heavy Electricals Ltd (BHEL), with is own staff quarters, hospitals, schools, etc—a city within a city. While giants like BHEL, NTPC, ONGC, IOC, etc, which were professionally managed from the day one with their own management cadre, fared well, those such as ‘Scooters India’, based in Lucknow, UP, with a string of bureaucrats taking over as the managing director, suffered an early decline. Though the ‘privatisation’, or the more politically correct ‘disinvestment’, exercise had begun as early as in 1997, it was only in 2000 that the department of public enterprises came up with the ‘red brigade’, a list of 101 PSUs with their balance sheets awash with red ink. ALSO READ Companies like redBus, Edelweiss, WhiteHat Jr have not only managed to continue doing business during this pandemic, but also break new grounds in their industry. Salesforce CRM has played an integral role. Know what it is. Sponsored By Salesforce They had incurred a loss of Rs 4,826 crore in 1995-96, of which the top nine accounted for over Rs 2,367 crore of losses, nearly 50% of the total! Arun Shourie was as the minister in the Vajpayee-led government in charge of disinvestment. With the avowed objective of making optimum use of available assets of equipment, land, structures, and human resources, it was no longer a case of selling the ‘family silver’. The first ever privatisation was of Food India, which manufactured the humble bread, which was sold to Hindustan Lever Ltd—a ‘baby’ but significant step. Since then, Indo British Petroleum was sold for `1,154 crore to IOC. Sign in The proof of the privatisation pudding… – The Financial Express 26/02/21, 12(38 PM https://www.financialexpress.com/opinion/the-proof-of-the-privatisation-pudding/2202132/ Page 3 of 10 This was followed in quick succession by controlling interest in VSNL being sold to the Tatas for Rs 3,689 crore, IPCL to the Reliance Ltd for Rs 1,491 crore, Hindustan Zinc to Sterlite for Rs 445 crore and the Indian flagship in automotive sector, Maruti Udyog, for Rs 2,424 crore to existing partner, Suzuki of Japan. Having gone from a journalist to a super-speciality financial surgeon, Arun Shourie had his job cut—to stop the Indian economy from being bled to death by the hundreds of poorly managed PSUs. This long journey, building a strategy on ground work that had already been done more than a couple of years earlier, by GV Ramakrishna, chairman, Disinvestment Commission, was not easy, and he had to face severe criticism. On acquisition, a purchaser could proceed to either to integrate the unit into its own set up, downsize by offering its staff a ‘golden’ hand shake, or simply strip away its assets to pay the outstanding debts, etc. With no less than 277 central PSUs—not all of which are in the red—Modi has a lot on his plate. An ambitious disinvestment target of Rs 2.1 lakh crore has been set, and performance in FY22, as the very first year, will be crucial. It will also establish if Modi’s confidence in the private sector’s capabilities for taking up challenges is well-placed! The author is Former member, Railway Board Subscribe to FE Daily Newsletter for latest updates on markets, busi