A K Bhattacharya: That public sector priority

RAISINA HILL

A strong public sector is one of the key policy objectives of the United Progressive Alliance (UPA) government.

It is, therefore, important to analyse the Union Budget for 2004-05 from the public sector perspective. How well have the public sector undertakings' (PSUs') needs been met? Or do they still feel neglected?

There are as many as five paragraphs in Chidambaram's Budget speech that are entirely devoted to the needs of the public sector. And not all of them are what you would associate with the conventional notions of strengthening PSUs.

For instance, the finance minister made it amply clear that the government would offload its stake in PSUs as long as it retained majority control over them and their public sector character was not affected.

Chidambaram even took credit of Rs 4,000 crore as proceeds from disinvestments of government equity in PSUs during the current financial year.

So, now you have a new concept of making the public sector strong. Disinvestment is okay and only the modality of the government reducing its stake up to 51 per cent has changed.

Instead of the Disinvestment Commission during the NDA regime, you will now have a new body that will recommend sale of government equity within the broad parameters of the new policy. The new body will be known as the Board for Reconstruction of Public Sector Enterprises. No one knows when it will be set up.

While the UPA government's decision to resume disinvestments after a lot of uncertainty is a welcome move, it is interesting to see the return of disinvestment through this roundabout way.

What about pumping in more investment? In his Budget speech, Chidambaram says the following: "I am happy to announce that in 2004-05, the government will provide equity support of Rs 14,194 crore and loans of Rs 2,132 crore to Central public sector enterprises [PSEs], including railways. Major investments will be made in PSEs falling in the sectors of power, telecommunications, railways, roads, petroleum, coal and civil aviation. I am sure Honourable Members will appreciate the deep commitment of [the] Government to a strong and effective public sector operating in a competitive environment."

That was the speech. In reality, what Chidambaram gave to the Central PSUs by way of equity support was only Rs 1,146 crore more than what his predecessor, Jaswant Singh, had provided for in 2003-04. That is an increase of a little less than 9 per cent.

Surely, with a commitment as deep as Chidambaram's, the outlay for public sector equity during the current financial year could have seen a much higher growth. And what about government loans to the public sector?

A reading of the Budget documents will tell you that what Chidambaram gave to the PSUs in 2004-05 (Rs 2,132.56 crore) is actually less than Rs 2,933.41 crore provided by Jaswant Singh in 2003-04.

The finance minister's tendency to pay only lip service to the public sector is evident even from the manner in which equity support has been provided to Central PSUs in sectors such as petroleum, coal, telecommunications, power, roads and aviation. These are the sectors, that, according to Chidambaram, will receive major investments during the current financial year.

Let us take a closer look. The finance minister has provided no equity support to any of the Central PSUs in the coal, petroleum and telecommunications.

Even the plan outlay for PSUs in these sectors has seen no substantial increase. For Coal India Limited, the plan outlay has gone up from Rs 1,846 crore to Rs 2,310 crore.

But for both Air-India and Indian Airlines, the total plan outlay for the current financial year has seen a drop to Rs 471 crore and Rs 226 crore, respectively, from the previous year. Equity support to all the PSUs in the entire civil aviation sector has gone up from Rs 13 crore last year to Rs 17 crore in the current year.

Even the equity support to the much talked about National Highway Authority of India (NHAI) has declined to Rs 1,848 crore from Rs 1,993 crore in 2003-04.

Except two PSUs in the power sector (National Hydroelectric Power Corporation and Power Grid Corporation), there is no equity support to any other companies for the current financial year.

It is true that the plan outlay for the oil sector PSUs, NHAI and the Indian Railways (whose equity support too saw an increase) has been raised, but the overall impression that one gets is that there is a huge gap between what the finance minister has promised in his speech and the actual numbers that show up in the Budget documents.

If you also consider the finance minister's decision to levy a tax on aircraft leasing (which hits Air-India and Indian Airlines the most), you may start wondering if the UPA government is serious about its commitment to the public sector.

Or whether Chidambaram is preaching one thing to please the Left and practising something quite different to keep his image as the original reformer intact.