P Vaidyanathan Iyer: The Left moves in mysterious ways

RAISINA HILL

Disinvestment has become a dirty word in the new dispensation under the Congress-led United Progressive Alliance (UPA). And surprisingly so, when it is the Congress "" the original reformer "" that is veering towards the Left in the disinvestment debate.

During the past 13 years, India has arguably emerged as a major force to reckon with in the global economy. Part of the global interest can definitely be attributed to the cautious, yet sustained, effort by the government to pull out of areas that are best handled by the private sector and instead address the MDG (millennium development goals) issues such as poverty, health, education and family welfare.

Compromises by the Congress in a coalition government are understandable. But what is difficult to comprehend is the Left's relentless tirade against disinvestment in its entirety. "Scrap disinvestment policy," the Left screamed even before the government was in place. Surely the Communists believe that India needs good airports. Opposition to even an initial public offering by the National Thermal Power Corporation, thus, appears mindless.

If Prime Minister Manmohan Singh can assert himself in raising the foreign direct investment (FDI) cap in telecom and civil aviation, so can he come out strongly in favour of "mindful" disinvestment. The UPA government and Singh himself are against mindless disinvestment that results in the proceeds being used for fiscal correction.

It would be worthwhile here to list out the salient features of the Congress' policy on public sector enterprises way back in 1991. The policy statement of July 1991 spoke of divesting part of the government's holdings in select public sector enterprises (PSEs). It, however, did not specify cap on the extent of disinvestment.

Subsequently, in the Budget speech of 1991-92, a 20 per cent cap for disinvestment was fixed and the eligible investors' universe included mutual funds, investment institutions in the public sector and workers in these PSEs. The objectives were three-fold: raise resources, encourage wider public participation and promote greater accountability. The Congress' disinvestment objectives spelt out in 1991 are as relevant today as they were 13 years ago.

The United Front government, too, backed the Congress' policy on PSEs in its common minimum policy. To address the concerns relating to the government's withdrawal from non-core strategic areas and also to allay workers' genuine job security fears, it set up a Disinvestment Commission to advise the government.

The UPA government's Common Minimum Programme (CMP) does not rule out disinvestment, although it will be considered on a transparent and consultative case-by-case basis. The existing navaratnas will be retained in the public sector while they may raise resources from the capital market. The government has also decided to do away with the Commission and instead set up a "board for restructuring PSEs".

In making statements such as "why bother about stock markets" and so on, the Left only exposes itself to charges of economic and business illiteracy. The capital markets, no wonder, get enraged, often reflecting their helplessness by letting various indices plunge. Why can't the Left try and say, "Yes, the markets are important, but so are workers' interests."? In doing so, neither do they compromise their ideology in the changed economic context, nor do they scare the markets.

The Bombay Stock Exchange introduced the BSE-PSU index on June 4, 2001, to track the performance of listed equity of public sector undertakings. The disinvestment story is perhaps best summarised in the movements of this index, which comprises 34 major listed PSUs. The index reached its all-time high "" 4,460 points "" on January 9, 2004, when early general elections were a certainty with belief amongst punters that the National Democratic Alliance would return to power, though with a thinner majority.

The index, according to the BSE site, last updated on August 2, stands at 3,329 points, having shed over 1,100 points since January this year. The market capitalisation of the 34 PSUs, which includes state-owned banks, stands at Rs 3,49,578 crore. In many ways, the index serves as a suitable benchmark for the central government to monitor its wealth on the bourses.

The Left may dismiss the loss in market capital of the PSUs as
notional. But letting the family silver lose its sheen also hardly serves any purpose.