Why The Budget Must Enunciate The Disinvestment Policy

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The meetings sought with Disivestment Secretary Rahul Khullar by investments bankers Rothschild, Goldman Sachs and UBS indicate the expectation that the Congress led government has generated. But Khullar would not like to proceed without a clear disinvestment policy. This policy would take on board the misgivings of Congress MPs, not all of whom are convinced, as well as those allies, Trinamool Congress and DMK who may not be in favour for reasons, not of ideology but local sensitivity.

Such a policy would silence discordant voices like those heard from the power, steel and fertiliser ministries. It would also help avoid the go, no-go approach to disinvestment seen during the UPA's previous term in office.

The Congress Party's election manifesto has ruled out privatisation of state enterprises. But it says that the Indian people have every right to own part of the shares of public sector enterprises with the government retaining majority shareholding. So disinvestment in the Congress Party's view is not a concession.

The policy will have expand on this commitment. Whether selling a part of shares means offloading up to 24 percent or 49 percent. Whether majority ownership means a 76 percent or 51 percent stake. And whether navratnas and mini-ratnas, expressly excluded previously in the Common Minimum Programme, will now be on the sale list.

There will have to be rethink on the National Investment Fund launched in October 2007 in a futile bid to win over the Left parties. As of December, 2008 it had Rs 1, 1815 cr, but only the income generated can be used - a quarter for reinvestment in state enterprises and the rest to promote education, healthcare and employment. But this mutual fund approach will not work for big-ticket disinvestment - and if the intention is to retire public debt, or make massive investments in infrastructure and the social sectors.

At the moment the disinvestment department has two issues on its plate - that of NHPC and Oil India Limited. Even if this government gives clears the way for the rest, disinvestment might not take off in earnest this year, for procedural and regulatory reasons.

At a meeting with Finance Minister Pranab Mukherjee earlier this week, industry leaders Sunil Bharti Mittal and Anand Mahindra forcefully argued in favour of allowing state enterprises to sell equity to fund their own expansion. This, they said would spur investment demand, supplement consumption demand that the government is stoking, and boost stock market sentiment. Investors are looking for a signal. Expect it in the President's address to Parliament and the Finance Minister's Budget speech.