‘I do not expect much progress on genuine disinvestment’
Anil Kumar Sood, Professor, Institute for Advanced Studies in Complex Choices, talks about the NDA’s strike rate on the disinvestment front.
How do you rate the disinvestment process?
Rating is very subjective, but I would give it a 3.
The aggregate capital receipts from disinvestment or strategic divestment have constituted about 2.0 per cent of the Central Government’s nondebt revenue and capital receipts during the last 25 years. For example, the disinvestment receipts during this period have been a little over ₹5 lakh crore, that is about ₹20,000 crore per year.
Sometimes, these are not even true disinvestments that involve the sale of a PSU to a private sector firm. For example, ONGC bought HPCL shares worth ₹36,000 crore from GOI during 2018. In a case like this, the divestment allows the fiscal deficit to be lower, as the debt shifts to a public sector firm. It does nothing more than that.
Has disinvestment lost steam?
We do not have much to divest at this stage, as some of the PSUs have not been doing well, e.g., BHEL, BSNL, etc. The valuations of some of the large PSUs are stretched. The question, therefore, is which of our business families have the ability to raise equity to finance these large corporations or the ability to raise large amount of debt?
What is the road ahead?
I do not expect much progress on genuine disinvestment. Global firms are unlikely to be interested in investing in areas where the political influence continues to be high — energy, banking, telecom, etc.
I also expect that the government will hesitate to create private sector monopolies by handing over PSUs at poor valuations to Indian business families.
Finally, it makes limited economic sense to privatise at a stage when we need additional private sector capex to accelerate economic growth. A mere exchange of money from the private sector to public sector for balancing government books or show that we are privatising to bring efficiency is of limited value to the country.