Stating that divestment target of Rs 12,000 crore (Rs 120 billion) set for fiscal 2003 would be missed by a wide margin for want of consensus, the Economic Survey on Thursday sought to allay fears about workers' interest and said privatisation would help improve efficiency and productivity.

Asking the government to push ahead with divestment for greater fiscal consolidation, the Survey said "emerging consensus on the need to speed up privatisation is also likely to contribute to fiscal consolidation."

Noting that only Rs 3342 crore (Rs 33.42 billion) was mopped up during April January 2002-03, it said "while the quantum of receipts so far by divestment of PSUs is less than the target, it should be viewed in the context of the need to develop a consensus around the key issues."

The Economic Survey also provided the much-needed breather to divestment efforts in the face of heavy criticism from certain sections, saying "evidence suggests that there had been improvement in the efficiency of PSUs after divestment."

Lauding the shift in divestment route from sale of minority share holding to strategic sale, the Survey said this trend, combined with emerging consensus on the need to speed-up privatisation, is also likely to contribute to fiscal consolidation, which continues to remain a major challenge in the process of on-going economic reforms in the country.

Through the decade of 1990s, there has been an increasing consensus on merits of privatisation, the Survey said adding on basis of about Rs 2.2 million crore of aggregate assets of all PSUs, relatively modest improvements in efficiency of their functioning would have a significant impact upon GDP growth.

"Hence policies on privatisation are an important component of the policies for efficiency and productivity," it said.

The survey noted that in face of major apprehensions that interest of employees may suffer on account of transfer of management to private hands post-divestment, Government has incorporated provisions in the shareholders' aimed at enhancing employees welfare.

"Government has chosen to put in requirements into the shareholders agreements, executed as part of strategic sales, to ensure that there is no retrenchment of employees at least for a period of one year after privatisation. Even thereafter, retrenchment is possible only under the Voluntary Retirement Scheme or Voluntary Separation Scheme," it said.

It said while the public sector undertakings had seen a net reduction in employment fro2,179 million employees in 1991-92 to 1,742 million in 2000-01, in comparison the retrenchment of employees after divestment had been marginal.

"In eight of the divested PSUs and five disinvested ITDC hotels, against an initial employee strength of 27,967 at the time of divestment, 2,119 employees were retrenched through VRS and another 910 for other reasons.

"Against 3,029 post divestment separations, 855 fresh appointments have been made resulting in a net reduction of 2,174 employees or about 7.8 per cent employees, compared to employee level at time of divestments," it said.

PTI