Another good reason to disinvest

The previous NDA government had made ambitious plans of disinvesting stakes in numerous PSUs. However, given the left support to the current government, and the presence of people from the socialist era, most of these plans have been scuttled. The disinvestment ministry was scrapped and parliamentary proceedings stalled for numerous days (thus wasting millions of rupees of taxpayers’ money) when the government wanted to sell stake in BHEL!

Given the policies of the current government, a number of PSUs are likely to be continued to be closely held, with a huge majority of shares with the government and small portions with public sector banks, NBFCs, LIC, etc. However, it makes eminent sense to sell a small stake in these companies to the general public, if not anything else, to improve transparency.

Let me illustrate this taking Telecom as an example. Telecom in India is an uneven playing field, with private players being charged an “Access Deficit Charge” (ADC) which is supposed to go into cross-subsidizing BSNL’s rural telephony. Of course, there is the talk of how different players are manipulating with the ADC in order to abstain from paying, and there is also talk of how excess ADC has been collected this year.

However, the crux of the matter is that BSNL is not a public company and has not declared its financials for about two years now. As a consequence, nobody has any clue as to where the ADC is going and whether BSNL is actually using the money to provide rural telephony, rather than to just subsidize its local calls at the cost of its competitors!

Now, BSNL has been asked to come up with this OneIndia plan, where STD calls to anywhere in India would cost just Re. 1 a minute. Sceptics, including the MD (or is it Chairman) of BSNL have expressed their reservations regarding the feasibility of the plan. Once again, a little information about BSNL’s financials would have helped clear the air. If not anyone else, it would have at least helped TRAI frame its policies better.

What I am driving at here is that had a small share of BSNL (even as small as say 1%) been held by the public, SEBI would have forced BSNL to publish its financials, solving a number of problems. Similarly, given that a large number of sectors would be (hopefully) opened up to competition pretty soon, it would be really helpful if the government agencies in the same were listed and available for public scrutiny.

Even if we keep this competitive issue aside (after all there are so many private firms which are competing in various markets), in the larger public interest it makes sense for the companies to be public. After all the companies belong to the people and it is well within the rights of the people (as indirect shareholders) to scrutinize the financials. And we have already seen that unless the SEBI sits on a company’s back, it is not likely to release financials very efficiently.

In conclusion, it would only be in the interest of the people if a small stake in each PSU (both state and center) were sold to the public. It would bring greater transparency to the affairs of the companies and discourage hijack by politicians and bureaucrats. And it is evident that there could be no better time than now, what with the buoyant stock markets, to do the same. Just hope Mr. Chidambaram has the willpower to do it, though I’m sure Mr. Yechury and Mr. Bardhan are likely to make more than their fair share of noises!

Put Comment