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Fernandes seeks review of divestment policy

Defence Minister George Fernandes is believed to have asked Prime Minister Atal Bihari Vajpayee for a thorough review of the government's divestment policy to guard against "rich getting richer" and prevent private monopolies.

Fernandes, who is not a member of the Cabinet Committee on Divestment, recently wrote to Vajpayee suggesting a meeting of "key" ministers to debate the current divestment policy, informed sources said.

Citing divestment in state-run companies the worldover, Fernandes is believed to have questioned the current model of stake sale to a strategic partner. He favoured offloading government equity to retail investors, as has been done in majority of countries.

Divestment, he said, should not make rich more richer but the national wealth should be equitably distributed, according to sources.

Fernandes is also understood to have called for review of the divestment policy in strategic sectors like oil as complete privatisation could threaten nation's oil security similar to the one experienced during 1971 war when the privatised oil sector refused to cooperate with the government.

Incidentally, the CCD meeting scheduled for August 29 was postponed at the last moment to September 7 to accommodate request of certain ministers to be present during deliberations on divestment in oil PSUs Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

Sources said the defence minister, who is currently abroad, wanted to be present at the CCD.

In an obvious reference to the sale of the country's second largest petrochem company -- Indian Petrochemicals Corporation -- to market leader Reliance Industries, Fernandes is believed to have questioned the policy that gives birth to monopolies.

Divestment should not lead to concentration of wealth in the hands of a few. A process, which transforms public monopoly into private monopolies is dangerous, he is believed to have written.

Sources said Fernandes' comments were on recent big ticket divestments in telecom and petrochemicals where market leaders had become even more larger. While the Tatas bought over international long distance monopoly company Videsh Sanchar Nigam Ltd, India's largest petrochemical company RIL acquired IPCL.

Taking exception to divestment ministry's move to bar all PSUs from participating in the divestment process, Fernandes is understood to have sought equal opportunity for both private and public sector companies to bid for buying government stake.

Government can realise maximum value for its investment when there is multiple competition. Narrowing the process to strategic sale only to private sector while keeping away PSUs and retail investors may not bring maximum realisation, he is believed to have written to the prime minister.

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