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Divestment: More smoke than fire in 2005
Mukesh Jagota | December 26, 2005
There was more smoke than fire in the year gone by as far as divestment was concerned, with the Left parties' stalling the government's move to offload stake in profit-making Navratna PSUs.
At the start of the year, the government had announced the intention to sell a part of its equity in Bharat Heavy Electricals Ltd and Maruti Udyog Ltd. The Left parties, which are supporting the government from outside, protested the move.
Aware of the Left parties' opposition on the issue of selling the shares of the government in companies that it owns for funding its day-to- day expenditure, the government said the proceeds from divestment would go to National Investment Fund.
As the money raised from divestment would not go for funding its deficit but in NIF, the government thought it has countered the argument of Left parties.
It said the divestment proceeds would remain in the capital account and the resources generated by the NIF would be used for spending on social sector projects and revival of PSUs.
The Left Parties' opposition, notwithstanding, the government went ahead with the process of sale of 10 per cent shares in BHEL. It even invited the bids from advisors for the sale.
All this while, the protest grew louder and louder and as a shock therapy to the government, it decided to boycott the meetings of Left-United Progressive Alliance Coordination Committee.
This sent the alarm bells ringing and after much coaxing the Left Parties returned to the coordination committee but not before it had stalled the sale of BHEL shares.
After tortuous discussions, a compromise was finally reached. The government decided not to dilute its stake in Navratna companies and in return the Left Parties gave their nod for sale of shares of other profit-making state-owned companies.
It also approved sale of residual stake of government in the companies that were privatised earlier. This paved the way for sale of 8.0 per cent in Maruti. The process is in advanced stages and in next two months it is likely to be completed.
The compromise gave a large playground to the government. Of the 240 public sector companies, only eight figure in the list of Navratna companies.
Of the 240 companies 88 are making losses while the rest are making profit. Among the non-Navratna companies there are real gems like Bharat Sanchar Nigam Ltd and National Hydro Power Corporation.
According to sources, the government has drawn up a list of 14 companies where it can offload small portion of equity and the list would grow with time.