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August 14, 2000
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'There is a general political consensus on divestment'

Arun Shourie
Ever since he replaced Arun Jaitley as the Union minister of state in charge of the newly-created department of divestment, Arun Shourie, 59, has been taking stock of the controversial issue of offloading of government stake in public sector undertakings.

Stressful roles are not new for him: he has had stints as an executive with the World Bank, a high-profile editor, a controversial writer, a thought-provoking columnist and speaker, and, of late, as a minister for planning, statistics, programme implementation and administrative reforms.

But the latest challenge of demystifying divestment seems a stiff one. In his king-size office on the first floor of Yojana Bhavan in New Delhi, numerous red-flapped government files rest in tiny heaps on tables here, there, everywhere. He has perused them all and seems to revel in effortlessly zeroing in on facts and figures that prove the point that most PSUs are in a bad shape.

Clad in navy blue half-sleeved shirt, black trousers and black leather shoes, Shourie seems hassled by the seemingly endless stream of visitors -- far too many things remain to be done but time seems in short supply. When his staff reminds him of an appointment, he sighs, and sinks his semi-bald head into his palms. "How many more?"

It is the day after. A few hours earlier, on August 10, Shourie had faced Parliament for the first time as divestment minister and was involved in four-hour-long heavy exchange of ideological and political fire with the Opposition, that ended when the latter staged a walk-out. This morning, he had talks with the Swadeshi Jagran Manch's convener and long-time friend S Gurumurthy and Prime Minister's Secretary N K Singh. Then the charming politician from Andhra Pradesh Renuka Chowdhary came a-visiting with a trade union leader to discuss a revival package for a PSU.

For the first time, Shourie takes a break from the files, and shows her around his office. He flaunts a collection of rare photographs of Mahatma Gandhi and Vallabhbhai Patel, neatly framed and mounted on a sidewall. Then there is another rare picture of an Ajanta sculpture and an oil painting of Lord Balaji. On the floor are old carpets, and in a corner, decorative woodwork. On the roof, half-a-dozen Independence-time ceiling fans, complemented by a half-a-dozen air-conditioners on wall-tops. Cushioned rosewood furniture is ubiquitous in what looks like a mini-hall. Behind his official seat are the Net-ready multi-media unit and a wall-mounted framed poster featuring his smiling son and the slogan "Help the spastics to help themselves". In front of the right side of his seat, by the wall, is a mini-library. Chowdhary is impressed with the overall look of Shourie's office.

Later, in an exclusive interview with Associate Editor Y Siva Sankar, Shourie switched gears quickly to focus on divestment.

Could you recall the moments when you were made the minister for divestment?

Actually... this must have been in the night. We had taken our child to my cousin and brother-in-law's place near Gurgaon because he [my son] is in a wheelchair and so these are outings for him. He is fond of that uncle and aunt. We were stuck on the way back in a traffic jam. Because of these trucks... it is at 8 o'clock or 9 o'clock that they start, and the highway was completely crowded. Suddenly -- I was driving the car -- the mobile rang, and the prime minister was on the phone. 'Yeh decide ho gaya, tumhara dosth tho chala gaya. [That was Ram Jethmalani - smiles]. So I have decided that this disinvestment thing should be handled by you.' I said, 'Fine.' That was my letter of appointment. [Smiles].

What was the PM's mandate?

He has never mentioned it. But it is to carry on the programme of the government on the following points:

First, the decisions that have been taken in accordance with the... you know, the job of the divestment minister is to actually service, in the first instance, the Cabinet Committee on Disinvestment; and second, to implement their decisions. That is the job.

All decisions are taken collectively by the CCD. Papers have to be prepared for that Cabinet committee arguing the case one way or the other, after extensive discussions with the administrative ministry under whose charge the particular public sector undertaking may fall.

Then the paper is put up to the Cabinet committee. After that, it is followed up at the official level. Several things have to be done. For instance, advisors will be appointed. And then there will be a series of meetings with the advisors and the administrative machinery.

The appointment of advisors itself is a very complex process going through ministries. The advisors and others come up with proposals, which then are taken back to the Cabinet. So, in the first instance, preparing papers and then after the Cabinet discussion, follow up and implement those decisions. That is my function.

I would certainly emphasise the collective nature of the decisions.

In Parliament also yesterday [August 10], Mr Basudev Acharya and other members were exaggerating in saying that next to the prime minister, I'm keen on disposing of the assets of other ministries. Nothing of that kind at all. This particular minister should really function as the secretary to the CCD.

What is your understanding of the whole divestment issue?

This is a policy that has come up gradually since... it was first enunciated in the interim budget of Mr Chandra Shekhar's government {in 1990]. Then it was built upon, advanced and enlarged in successive budgets of Dr Manmohan Singh. Then the United Front government set up the Disinvestment Commission and referred 72 cases of public sector enterprises to them.

Now there have been several evolutions in the policy. The policy today is not exactly what was being done then. But it is a much-improved policy based on the experience of the last 10 years.

For instance, for the first time, in the main sales of 1991-98...what were minority sales -- "10 per cent bhej dho, paanch per cent bhej dho": "sell 10 per cent stake, sell five per cent stake" -- and the result of that was none of the objectives were achieved. Because, with that little bit, you don't get the value you would get if you made a strategic sale.

'Induct a strategic partner, change the management, change the work culture of the enterprise.'

If the investors also saw the prospect of all that happening, they would perceive the value as much higher.

So the minority sales were counterproductive, they were offloaded maybe from one public sector enterprise to another public sector enterprise and to public financial institutions. This was terrible. The public institutions actually take what the government compels/induces them to take. And the share values of those very enterprises have fallen sometimes to one-seventh or one-eighth the value at which they were sold or which they were offloaded to these enterprises!

I read out this list in Parliament. 'You are not just watching what is happening,' I told them.

Let me give you some examples. These are the market prices of some PSU shares as on July 1, 2000. See how they have fallen from the levels at which minority sales were effected between 1991 and 1996. Rs 322 then. Rs 24.50 on July 1... That is just one instance. Take BEL. [Rs] 142 pay aapnay offload kiya. [You've offloaded at Rs 142]. Market price [Rs] 69! Only BHEL has increased. BPCL had dipped to one-third its value. BRPL...42 to one-sixth of its value. Engineers India, 626 to 145. HMT, 55 to 7.40. HPCL, 824.6 to 129.

Why did this happen? This happened because we built up the expectation that the management will be changed, work culture will be different, technology will be inducted. Nothing of that kind happened. So in market assessment, the valuation naturally fell.

The second point was, the Disinvestment Commission itself had warned then, 'don't do minority sales.' Of the 42 cases, they recommended 37 strategic sales and only five were to be minority sales. And what is the record? One strategic sale and minority sales in 39!

So if ever there was a time when family jewels were being sold only for filling up the deficit, this was that time. So a conscious decision was taken: 'continue with divestment but go in for strategic sales'.

There are several other changes but all based on experience of successive governments.

I regard this as one of the strengths of India: this is the fifth or sixth government since the early nineties but the main direction of economic policy is continuing in one way.

Similarly, we have different political parties in power in different parts of the country. But all are doing more or less the same thing. Karnataka is doing disinvestment, Rajasthan is doing, Haryana and Punjab are setting up Disinvestment Commissions, Madhya Pradesh is doing something of that kind, Maharashtra is compelled to do that, because it is under the same compulsions. When they are in power, any party, they do more or less the same thing. But when not in power, they oppose the same things they did. So this way, we keep blocking advance. So their members may shout at you in Parliament, but at home they are doing the same thing.

Does this mean there is a general political consensus on divestment?

Not only that. There is a general consensus all over the country, not just in the political parties, on economic policy in general. And the political class is so feeble that it does not allow this system, it does not allow itself to act on that consensus.

So it is on liberalisation. And on import policy, foreign exchange controls, foreign direct investment, changes in labour laws.

Part II of the Arun Shourie interview: 'Why not look upon divestment as changing one asset for another?'



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