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Calling off divestment is a serious problem
July 07, 2006
There is a bit of disappointment for a lot of investors now that there has been a flip-flop on divestments once again. Non-executive chairman of Thomas Cook [Get Quote], Udayan Bose believes that this is a sad state of affairs and that such acts will become a serious problem for the government going ahead.
Excerpts with CNBC-TV18's exclusive interview with Udayan Bose:
You have seen a few of these divestments happen in the last few years, are you hopeful that after this, something will happen because this is not a strategic sale, it just an offer for sale from the government or do you think even that may not go through?
It is a surprise because they were trying to sell 10% of Nalco from 87% stake down to 77%, and 10% of Neyville from 93% to 83%. So I cannot understand what has irked Mr Karunanidhi to get so ballistic.
Somebody needs to sit down and talk some serious mathematics; we are trying to raise Rs 8000 crore (Rs 80 billion) and that goes to the budget, which is from where people draw money. At this rate they might as well have a fair price for selling stakes in future, and that too the DMK should threaten and say they would pull down the government.
For a foreign investor how does this sit as an internal squabble or as signs of something more serious for this government and this performance?
This is a serious question. This could be the beginning of the end. If this is the way a party with 30-40 seats going to behave, then it's sad. It wasn't one of the things CPM or CPI normally does.
But this was something very serious, he called up and said I am pulling out. Somebody like Maran for whom I have great respect for being progressive and reformist, it's sad that he went and delivered the message that we are pulling out, but pulling out for what?
This is pretty serious and now any party can say that they are pulling out. There will be a problem. Also with the PM backing off, this could be serious.
What would you like to hear or even see as a face saving measure now?
Now whether this Rs 8,000 crore will come to the market or not, it will not alter the market. It is also not the Shipping Corporation of India [Get Quote] type of sell-off, where it was a strategic sale.
This leads to a broader question that if we now talk about reforms in banking, retail, and FDI then who knows tomorrow CPI or CPM may say they will withdraw support, DMK will say it again. So this government will have difficulty in functioning.
I am reminded of the fact that in Japan when the PM wanted to privatise the post office and the opposition said 'no', he resigned, he then called for an election, he won the election and he privatised the post office.
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