The Logic Of Divestment
If indeed this is true, two points need to be made with equal emphasis. One, bureaucrats in the central government are yet to learn how they ought to treat the PSUs which function under their administrative control. Two, they have not understood anything about the logic and principle of disin-vestment of government equity in PSUs.
Why on earth should the bureaucrats permission be sought before the government decides to disinvest equity in a PSU? Who are these bureaucrats? Arent they simply nominees of the government on the boards of these PSUs? And if the government has not informed its own nominees on the PSU boards about its disinvestment plans, this is purely an internal problem. Instead of publicly wailing about their lack of knowledge about the proposed disinvestment, these bureaucrats should seriously find out what is wrong within the government.
The real reason for such a cry of distress from these bureaucrats seems to lie elsewhere. It is the mindset that every bureaucrat suffers from. Once a bureaucrat is made a nominee on the board of a PSU, he starts treating the company as an extension of the government. Rarely does he see himself as a director on the board of the company and even more rare are occasions when he decides on a board proposal keeping in mind the interest of shareholders whom he represents. Very soon, a bureaucrat, who is also a director on the board of a PSU, develops an acute sense of possessiveness over the company. Thus, disinvestment plans are always looked at with suspicion, something that will dilute his power over the company.
Mind you, such possessiveness has done little good to the PSUs. Barring some rare exceptions, most government nominees have treated the PSUs as their fiefdom. Ministers too have used these nominees to great effect. Many committees in the past have questioned the kind of role the government nominees on PSU boards play. All that has happened as a result of these committees and their findings is that the number of government nominees on PSU boards has now been reduced to only one, instead of two to three in the past. But their attitude remains the same. That is why the bureaucrats do not like the manner in which the government is divesting its stakes in the PSUs as they fear losing some of their perquisites.
An equally preposterous argument put forward by the power ministry bureaucrats is that no profit-making PSU should be considered for disinvestment. This is an argument which Kamla Kant Tewary had raised when he was the minister of state for public enterprises. Mr Tewary had argued against further dilution of government equity in Maruti Udyog Limited on the ground that the company was making profits and earning dividends for the central exchequer. The same logic continued to be used till recently when the government neither agreed to invest more in Marutis new project nor agreed to dilute its stake to facilitate the expansion plan.
What the bureaucrats should understand is that the logic of disinvestment does not emanate from the losses the PSUs are making. Disinvestment is favoured because the government should pull out of areas which should ideally be left to the private sector. If some PSUs are making profit, this does not mean that they should continue to remain in the public sector, unless of course they operate in strategically vital areas of the economy. And if some PSUs are incurring losses, they too should be considered for disinvestment.
And that is where the role of the recently set up Disinvestment Commission comes into play. In its present form, the Commission is essentially engaged in recommending PSUs for disinvestment. It has no powers to pick and choose the companies for this. It has even less powers for suggesting any strategy for turning around the sick PSUs before being considered for disinvestment. In fact, it has no powers even to ensure that the government goes in for disinvestment in the PSUs it has recommended.
This brings one to the larger question of empowering the Disinvestment Commission sufficiently to ensure that the goals set by the government for it are achieved in a given time-frame.
Conversely, the Commission also becomes accountable to achieving these goals. Perhaps, it is time the government followed the Mexican model which envisaged the creation of an independent agency, directly reporting to the president. Once a PSU, profit-making or sick, is referred to the agency for disinvestment, it is the latters responsibility to dilute government equity at the best available price. If it needs to first turn around the PSU, it could do so before divesting government stake. In this way, the efficacy of the agency in ensuring meaningful disinvestment of government equity in PSUs can also be assessed.
Unfortunately, we have a Disinvestment Commission which has been reduced to a recommendatory body. It has no real powers. Hence, it has no responsibility or accountability.
The result is there for all of us to see.