Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
Thus, you have a new institution called the Board for Reconstruction of Public Sector Enterprises (BRPSE) that appears to be a rebirth of the Disinvestment Commission with a larger role that includes advising the government on restructuring of public sector companies.
The Commission will advise the government whether a PSU should be disinvested, closed down or sold.
A clearer picture will emerge once the structure and head of the Commission is finalised.
The Finance Minister has also signalled continuity in policy by budgeting for Rs 4,000 crore as disinvestment receipts for 2004-05. This is 30 per cent of the last year's budgeted figure of Rs 13,200 crore.
Mr Chidambaram has been cautious in budgeting for an amount that can be raised without resorting to controversial sell-offs.
At least Rs 1,500 crore of the budgeted disinvestment proceeds could come from the sale of 5 per cent equity in National Thermal Power Corporation, which is coming out with an IPO shortly.
The balance will likely be made up from selling residual stakes in Maruti Udyog, where the government still holds 18.28 per cent and in Bharat Aluminium Company, where it holds 49 per cent.
It is significant that the Finance Minister has described privatisation as a "useful economic tool" even though he has clarified that disinvestment will be subject to government retaining control over the company.
He has also shielded himself from any possible criticism by declaring his intention to use disinvestment proceeds for social sector schemes and committing himself to reporting such usage to Parliament during the next Budget. Mr Chidambaram has signalled the government's commitment to restructure ailing PSUs by granting Rs 508 crore to Indian Telephone Industries (ITI) to keep it out of the BIFR net. Hindustan Antibiotics, yet another ailing PSU, will also be given financial support for restructuring.
ITI had accumulated loss of Rs 185 crore as of March 2003 while Hindustan Antibiotic had accumulated loss of Rs 174 crore as of March 2002.
The decision to lend financial support to these two companies is a bold one but without a comprehensive scheme of revival that would include technology infusion, the government runs the risk of pushing good money after bad.
It remains to be seen if these two companies are isolated instances or whether there are others who would also be provided similar support in which case, the critical issue for the government would be to locate a source for such funds.
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