The government’s decision last week to sell its equity stake in the loss-making Scooters India represents a significant policy shift. In the seven years of the United Progressive Alliance (UPA), the government has sold equity in several public sector undertakings, mobilising Rs 54,800 crore. Much of that has happened in the last two years, since UPA-II does not need Left support, but none of the divestments has been a strategic sale. Now, the government seems ready to go beyond merely augmenting the flow of disinvestment proceeds; in short, it is willing to try its hand at full-scale privatisation.
However, the government will move cautiously, given the history of the Congress party’s criticism of valuation decisions when Arun Shourie was disinvestment minister in the National Democratic Alliance government; controversy erupted in one case when there was an immediate follow-through sale at a higher price. This might explain why the government has stipulated that Parliament will approve the conditions of sale — a rider that could complicate the process. How will the government ensure that prospective buyers do not face any uncertainty because of delays and political hurdles? If there is no such assurance, will it limit the number of people willing to participate in an auction?
Scooters India is for all practical purposes a non-functional company; its value lies principally in its ownership of over 150 acres near Lucknow. In the late 1980s, the Rajiv Gandhi government had tried to sell the company to Bajaj Auto; the deal fell through because of the land question. A latter-day variation of this is the controversy over the land that belonged to Videsh Sanchar Nigam Limited when it was sold to the Tatas, with a proviso that the land would be separated from the rest of the company — something that is yet to happen, despite the passage of many years. A successful sale of Scooters India, without any controversy over the valuation of its land, would prepare the foundation for a more ambitious privatisation programme, badly needed as it is.