Political debate overshadows disinvestment process

Wednesday, 06 November 2002, 20:30 IST
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With the ministry of disinvestment having decided to defer divestment of NALCO, India's target of garnering Rs 120 billion through privatization of state-run companies during fiscal 2002-03 seems to have run into yet another dead end.

NEW DELHI: With the ministry of disinvestment having decided to defer divestment of the National Aluminium Company (Nalco), India's target of garnering Rs 120 billion through privatization of state-run companies during fiscal 2002-03 seems to have run into yet another dead end. The whole process has got mired in political debate with big ticket Nalco being the latest to be put on the backburner following agitations by workers and political groups stalling the due diligence exercise. The ministry of disinvestment said Tuesday that the due diligence has been deferred till January, which in effect rules out completing the disinvestment process within this fiscal. So far only about 35 billion have been realized through disinvestment, as the government looks to raise resources to push ahead with infrastructure projects seen as a major key to achieve the targeted economic growth of eight percent per annum. With economic think tanks forecasting only around five percent growth this fiscal, India's target of higher growth in the next five years is unthinkable if the present impasse on disinvestment continues, say experts. "This is a disturbing trend. The whole issue has become more of a political debate than an economic decision," B.B. Bhattacharya, director of the Institute of Economic Growth, said. What started as a debate on the advisability of the government diluting its stake in two state-owned oil companies on grounds of their being of strategic importance has degenerated into a political debate that has all but stalled the whole process. "Not only this year's target but also the five-year plan (2002-07) target of 780 billion seem unachievable," said Bhattacharya. "What is required is a white paper that lays out the companies for disinvestment and methodology of calculation and then start the individual process." On the lines of the disinvestment process adopted by former British prime minister Margaret Thatcher, the white paper could be debated in Parliament, by common people and by trade unions on the grounds of policies before being adopted, the experts said. In the event of the disinvestments process not gaining steam, the government would either have to slow down public investment to contain fiscal deficit or go in for additional borrowing. "The slowing down of the disinvestments process will become another bottleneck in India's plans to boost public spending in infrastructure," market analyst D.H. Pai Panandikar said. The only way forward, he felt, is for Prime Minister Atal Bihari Vajpayee to take a firm stand. "With the policy having been agreed to in the cabinet, the prime minister has to take a firm stand to ensure the ministers abide by the decisions they had supported. Though the prime minister is showing signs of being firm on the disinvestments process, it is not firm enough," said Panandikar. Once a decision has been taken, hedging it with ifs and buts is the best way to derail it, felt the experts. While Coal and Mines Minister Uma Bharti and Orissa Chief Minister Naveen Patnaik are opposing the privatization of Nalco, Petroleum Minister Ram Naik, Defense Minister George Fernandes and Human Resource Development Minister Murli Manohar Joshi have together forced a three-month delay on selling stake in two state-run oil majors, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). "The divestment process is a political issue not only in India but elsewhere also. Each country has to find its own answers," said Pradeep Srivastava of the National Council of Applied Economic Research (NCAER). Given the political divide, Srivastava feels "in the long run a credible white paper that addresses various concern would help. We need to assess each case of divestment done so far and the outcome to improve on the process."
Source: IANS