NEW DELHI, Sept 5: The proposal made by Finance Secretary Vijay Kelkar to speed up the privatisation process, may actually end up allowing politicians and bureaucrats to exercise far more control over the public sector units (PSUs) currently under their administrative jurisdiction. It will also put a very large burden on the PSUs who will, under the proposal, be initially asked to lend money (Rs 2,000 crore) to a company which will be sold these shares. This company, termed a special purpose vehicle (SPV), will later sell these shares to individual investors in the market, once the stock market situation improves.The crux of Kelkar's proposal is that, once the government divests its stake to the SPV -- the Government will retain 49 per cent -- then the PSUs will be freed from the control of Parliament, from CAG, etc. The point, however, is that once the PSUs cease to be under government control, who will be in charge of them till the time that they become genuinely private sector companies?
The answeris: The company's boards, like say in the case of Maruti Udyog. The problem, however, is that since the boards of these companies will still not be private ones -- they would be if the units were sold to strategic partners in the private sector -- they will then be more under the control of the administrative ministries. With few checks, from either Parliament or the CAG, it will be relatively easy for the bureaucrats/ministry to order these companies around, and get contracts issued to favoured parties. And, even in the case of Maruti, Suzuki's complaint was that the bureaucracy/ministry was trying to run the company.
While Kelkar's proposal was discussed by the core group of secretaries yesterday, no conclusion was reached, and the matter has been referred to the Group of Ministers. It appears that the head of the Disinvestment Commission, G V Ramakrishna has written to the Cabinet Secretary protesting that he was given the proposal just the day before and has not even been asked to give his comments onthe proposal.
Under Kelkar's proposal, the Government will retain just 49 per cent of the equity in select PSUs and divest the rest to the SPV. Forty nine per cent of the equity of the SPV will belong the the Government of India, and 51 per cent will be held by the PSUs and other financial institutions which are not controlled by the government. When, a couple of years later, the SPV sells these shares, and makes a profit -- it is assumed it will be at a profit -- this will then be divided between the government and the PSUs who own the SPV.
Immediately, the SPV will give the Government Rs 4,000 crore for this -- Rs 1,960 crore of this will be lent to the SPV by the Government, and Rs 2,040 crore by the 5 PSUs and the IDBI which whose shares will initially be parked with the SPV.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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