Blind alley

The Common Minimum Programme (CMP) of the UPA government states that "generally profit-making companies will not be privatised".

Purists may argue about the significance of the absence of the comma after the word "generally". Had it been there, the statement could have been interpreted as having laid down a principle, but making allowance for exceptional circumstances. Its absence, on the other hand, implies a distinction between companies that generally make profits and those that do so only occasionally. Was the comma, then, deliberately omitted or simply the victim of hasty drafting?

The government's decision to not proceed with the strategic sale of 13 profitable public enterprises goes some way towards resolving that ambiguity.

Although it has indicated that it is only eschewing the strategic sale route and is still keeping open the window for a public offer of shares, the recent experience with Bhel suggests that this option is also not one that can be easily exercised.

As far as the government is concerned, the comma was deliberately omitted and the statement is to be interpreted as it was written.

Until further notice, and barring the stray exception of an inconsequential firm, the book on privatisation might as well be closed.

That is a great pity. The opponents of privatisation, led by the Left parties but with a significant presence across the ruling coalition, may have had their way for now, but it will prove to be a hollow victory.

First, on the basic principle of privatisation itself, can anyone deny that the arguments in favour of the state being a producer of most of the items in the current public enterprise basket are completely obsolete?

Neither monopoly power nor inadequate capital markets are issues in today's environment. Second, with respect to the preference for public offers over strategic sales (if they should ever happen), there is a significant issue of who earns the control premium.

In a strategic sale, the government (representing the entire country) appropriates the premium. In a public offer, on the other hand, anybody wanting to acquire a controlling interest would have to effectively pay the premium to those shareholders who were lucky enough to get allotments during the offer.

Surely the former is a more socially equitable outcome than the latter? Third, with respect to timing, the markets are extremely buoyant for the moment and there is no better time for the government to divest its holdings.

There is no question that the government should push ahead with the privatisation agenda. To do so, it needs to neutralise what is proving to be extremely stubborn and well-organised resistance.

It has the tools at its disposal by way of the National Investment Fund. Two things need to be done. First, the decision-making process of the fund has to be put in place. Due representation can be given to those who oppose privatisation. Second, there has to be a firm declaration of the kinds of activities that will be funded exclusively by the proceeds from privatisation and will not be eligible for any other budgetary support.

This list must include causes dear to the hearts of the opponents. Failure to act now and along these lines will only strengthen the opponents' hands, encouraging them to assert their positions across a widening range of issues.