The espirit of disinvestment

Can we afford to let the disinvestment process go off-track?

The Union minister for communications has proved himself to be an adept minister as far as his portfolio goes "� the bell never seems to stop ringing. Pramod Mahajan has set off many alarm bells in his long and chequered career. But this time, it is Ratan Tata on the line, saying that he wishes to return VSNL for Rs 1,200 crore plus interest and some compensation. Pramod Mahajan may baulk at this call and even say "wrong number"!

Mahajan created a media tamasha about the backward integration plans of VSNL. He had clearly favoured BSNL and other basic service operators by delaying Tata-controlled VSNL's plans for the same.

This delay helps Bharati and Reliance in starting their international long distance (ILD) services and it also gives BSNL a virtual pincer grip over VSNL. To ring in VSNL's death knell, all that Mahajan has to do is terminate BSNL's agreement with VSNL. He also retains the option of continuing the fight over the investment in Tata Teleservices. What is sad is that this situation is a grim portent for future disinvestment deals.

Good governance demands that an agreement should be honoured in letter and in spirit. Instead of creating a media spectacle, Mahajan should have used the forum of the board of directors and, if necessary, he could have followed it up with a complaint to the department for company affairs (DCA). Had Mahajan done so, given the lack of business logic in his objections, at least the espirit of disinvestment would not have been muddied.

Instead, Mahajan went after the Tatas for paying Rs 1,200 crore to acquire VSNL and then objected when they intended to use Rs 1,200 crore of VSNL's cash within six months of the takeover to invest in Tata Teleservices.

Why does Mahajan wish to terminate the BSNL ILD agreement with VSNL soon after selling his company at the ridiculously high price of Rs 202 per share?One can also accuse Mahajan of manoeuvring to acquire VSNL at 120 rupees per share so that the Tatas could book losses and carry on.

The unassailable truth is that while Mahajan has accused the Tatas of not being fair, he himself has not acted in the spirit of the disinvestment agreement. If Mahajan argues that business conditions have forced the ILD rate war, surely the Tatas had better business sense when they wanted to bring in a partner other than Reliance and Bharati in basic services.

Mahajan's gross violation of the spirit of the agreement at every turn has done harm to the disinvestment process. His actions beg this question: will a prospective investor want such a partner, post-disinvestment?

It is going to take some time for this tangle to clear up: legal actions cannot be ruled out, as well as the fact that the Tatas may want to return VSNL. The post-disinvestment controversy at Balco subsided for a while before VSNL began to ring in jarring notes.

In the imbroglio over the disinvestment of HPCL and BPCL, Ram Naik is seeking to retain management control. Failing this, the petroleum ministry may well be reduced to being a minority partner "� a la Mahajan? It is a fair guess and yes, he might be even more ambitious.

The logic behind the disinvestment process is that the government has no business being in business and that it does not know how to conduct business in a competitive environment. Given these two guiding principles, the conduct and approach of these two ministers should have been exemplary. But in reality their conduct and approach is both indefensible and reprehensible.

These blows to the disinvestment process come in the backdrop of the fact that it has to proceed at twice its earlier speed. Business Standard recently pointed out that the UTI, IFCI and IDBI bail-outs are likely to amount to approximately three and a half per cent of gross domestic product! Rs 14,000 crore or so may be needed for the UTI bail-out and the disinvestment target was to raise Rs 20,000 crore.

Drought relief needs another Rs 4,000 crore while a US attack on Iraq may well send the economy into a tailspin. Can we afford to let the disinvestment process go off-track?