And pigs will fly

You have to give the government full marks for enthusiasm "" it manages to pull off a coup by selling six issues in the stock market to raise around Rs 14,000 crore in barely a month's time, and immediately it's talking of raising seven times that amount.

And not just as a one-shot measure, but year after year, according to a statement by Finance Minister Jaswant Singh to this newspaper a few days ago.

First off, the figure seems unrealistic, because it amounts to more than 3 per cent of the GDP. The only countries that have managed such a level of privatisation have depended heavily on the inflow of foreign capital, and in India's context that would be politically unacceptable when it comes to PSU blue-chips.

The domestic market might superficially seem to have the absorptive capacity, because with the Sensex more than doubling over the last year, the "wealth" of market players has risen by around Rs 8,00,000 crore in this period, so there's a lot of money around. But the unloading of new paper on the proposed scale would force a rapid shuffling of investment portfolios and inevitably force a sharp drop in secondary market prices "" which is not what the government wants.

Then there's the issue of whether the government actually has enough stock of blue-chip PSUs to sell "" for few would wish to buy many shares in loss-making firms, and if they did, the money raised would be quite small. Then, taking the blue-chip PSUs the government has, and based on current valuations, their total market capitalisation is in the region of around Rs 2,50,000-2,75,000 crore.

Presumably, the government will wish to sell less than 51 per cent in these companies, since it will still wish to retain control; if not, it might as well revert to strategic sales.

Besides, the government doesn't have the entire equity of these PSUs "" in ONGC it has 85 per cent, in IOC 82 per cent, in BPCL it is 66 per cent, and in MTNL 56 per cent. So the total amount of "sellable" paper comes down to around Rs 1,00,000-1,25,000 crore. And that's the total available for sale, not what can be done annually.

As for the option of strategic sales, the government cannot sell ONGC, IOC or Gail as it wants to retain one PSU each in important areas. Based on current valuations, it can get around Rs 60,000 crore from these three PSUs.

But in the case of BPCL, for instance, it is obvious that merely selling shares to retail investors will not fetch the same value as strategic sale. While it is true that, in the just-concluded round of sales, the government got higher P/Es than it has got in the past, this was primarily because the stock market is booming right now.

So, barring the three oil PSUs, the government's best bet really lies in strategic sales "" which the disinvestment minister favours but the government apparently does not. All in all, the government would do well to set its sights on realistic numbers.