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August 21, 2000
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Full transparency in PSUs valuation: Shourie

Y Siva Sankar

Divestment Minister Arun Shourie has assured full transparency in the valuation methods to be adopted in the run-up to divestment of government stake in public sector undertakings or PSUs.

He said the government would adopt valuation methods that could vary from one PSU to another. "Various methods could be used -- valuation of shares by the market, asset valuation, assessment of business potential, book building, etc. The method which will be appropriate in some cases, may not be as appropriate in other cases. For instance, software companies have little real estate or other assets but, given their business potential, their valuation is placed very high,'' Shourie told

Elaborating, he said: "Valuation of land, etc, will be more appropriate when a company is being closed rather than when it is going to continue to function, and the land is going to continue to be put to the same use as it is at present. In each case, the appropriate method or methods would be used and there will be full transparency in regard to what has been done."

On the demand that equity of profit-making PSUs be offloaded to people, he said the government would consider all options. "It is not a good idea to lay down some unvarying rule -- for instance, that equity in profit-making PSUs should be offloaded only to the public. It is also not a good idea to lay down a general rule, or a percentage, on sale proceeds that should be earmarked for employees."

Shourie declined to discuss specific PSUs in the context of divestment. "Information about them (Indian Airlines, MTNL, BHEL, Maruti, RINL, Balco and other PSUs) will be disclosed as they ripen. In general, it is not a good idea to build up expectations and hype. The government should speak through its actions."

He admitted that the values of public sector shares in several cases are lower today than the prices at which they were off-loaded to financial institutions when minority sales was the policy. "That happened because the management practices, governmental interference in the enterprises, the work culture did not change as they were expected to change. The same difficulty can arise now if decisions are delayed, and in the meanwhile to cite one factor, the market-share of the company concerned continues to fall."

Underlining the government's resolve to retain majority control in strategic sectors like defence-related industries, atomic energy and railways, the divestment minister said, "There is enough to be done within the parameters that have been already decided upon."

In certain cases, divestment, Shourie said, is a last-ditch exercise to resurrect inefficient, loss-making PSUs controlled by incompetent, corrupt officials. "The process of disinvestment is actually, in part, a result of the huge losses incurred by PSUs. One of its main objects is to change the work culture and management practices in these units so that they once again become vibrant, and so that jobs in them may once again be fulfilling and secure. And, one of the reasons for taking this route is that in governmental organisations, it is not possible to ensure accountability, to hold any individual responsible."


August 14, 2000: Exclusive interview with Divestment Minister Arun Shourie

August 5, 2000: RPI activists manhandle Shourie in Bombay

January 19, 2000: Exclusive interview with then Divestment Minister Arun Jaitley

Gurudas Das Gupta, CPI leader, on divestment


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