Ethics code sought for divestment

The India Infrastructure Report has asked for a code of ethics on statement by politicians and bureaucrats on disinvestment issues, to check wild swings in prices of PSUs in stock markets.

The Report has examined the impact of such statements on the price movements of HPCL stock and concluded that even as Securities and Exchange Board of India has been attempting to check insider trading by others, such statements are destroying the integrity of the Indian stock market.

It says that on four out of the five highest excesss return days for HPCL in the past two years, when it has been on the block for disinvestment, the stock prices gyrated because of significant political comments on it.

It adds that it would have be therefore possible for someone who got information early to take a potantially profitable stance in the market based on the information. On an ominous note it adds "it is a moot point whether somone indeed benefitted from the information being available to him it became public".

The other example quoted by the report is that of return of equity by public sector banks. Towards the end of May 2003, the prices of the public sector bank scrips yo-yoed, based on the apparent flip flop tat was reportedly done by the finance ministry officials regarding the issue.

Huge amount of monies were made as two contrary views did the round of the markets. It says that though the fiannce minister ordered an enquiry by Sebi to determine the possible involvement of his ministry's officials, it is unlikely that any fool proof evidence will be unearthed.

It adds that while the episode was bad enough, the government waqs yet to make up its mind on how the equity was to be returned.

To bring transparency to the disinvestment process the India Infrastructure Report has said that a law describing the objectives and mode of privatisation was necessary. It says if the dsinvestment ministry was keen on a fair and orderly process it shoud have a strong incentive to do so.

It is not the business of the governemnt to micro manage the disinvestment process. It has also argfued that further cut in the fiscal deficit is not desirable and instead there should be a massive privatisation.

This should be accompanied by enhanced expenditure by these former PSU enterprises, which would raise the overall investment rate in the economy to ensure a higher growth rate.