'PSU funds must not bankroll pvt sector revival'

Why should the public sector fund the revival of the private sector ? And should profitmaking Public Sector Undertakings (PSUs) equity be sold for an investment fund that will also fund the private sector?

These are the two questions the CPI M has raised in an article in the forthcoming issue of party organ People's Democracy against the background of the government's decision to offload some equity from profitable, non-Navaratna PSUs to fund the National Investment Fund.

Authored by CPI MP Dipankar Mukherjee, the article argues that the government approved two major revival schemes since it came to power. Both companies were in the private sector with investments coming from public sector.

The first one was the takeover of Global Trust Bank by public sector Oriental Bank of Commerce Bank (OBC) involving Rs 2,500 crore and the other one is revival of Dabhol Power Company (DPC) involving Rs 10,000 crore through two PSUs, NTPC and GAIL along with public sector financial institutions and banks.

The CPI M notes that there is a difference. In the case of OCB, it says, the interest of thousands of depositors was involved. '"ut in the case of the revival of DPC, through its conversion to a new company - Ratnagiri Gas and Power Company - the finance minister recused himself from the exercise of revival of DPC on ethical grounds", the article says.

It points out that even without the presence of the Finance Minister, the package went through. So, although the investment fund is yet to come about, revival of private outfits is taking place through money belonging to PSUs, Mukherjee noted.

He pointed out that this is happening even as the government says there is no money to revive 30 odd sick PSUs that have been recommended for revival by the Board for Reconstruction of Public Sector Enterprises (BRPSE).

Mukherjee says resource mobilisation for PSUs is possible without disinvestment. All that the government has to do is moblise into service, the profits of the 140 profitable PSUs. The net profit after tax of all these PSUs amounts to Rs 53,168 crore, he says.

"But the most startling point is the low rate of investment of the available reserves" Mukherjee says, urging the government to deploy these reserves instead of disinvesting in profitable PSUs. Mukherjee says the underinvestment by profitmaking PSUs is startling.

'BSNL, for instance, which has reserves of over Rs 50,000 crore and a cash/bank balance of over Rs 11,000 crore, has invested only 12 per cent of its reserves and surplus.... Almost all the PSUs in the hydrocarbon sector too appear to be underinvesting given their profitability and internal accruals' he says. He says more than 4.5 per cent of the country's GDP is locked up by these companies in bank deposits and government securities.

'If GAIL, NTPC or OBC funds can be used for reviving private sector, why not a part of CPSU reserves be used for revival of CPSUs?' he asks.

Mukherjee charges that lack of will and not resources is the reason the government is arguing for disinvestment of profitmaking PSUs. That the CPI M is taking this line would suggest that they propose to pursue it to prevent the UPA from selling equity in profitmaking PSUs in the future.