Will govt step up disinvestment in these PSUs?

Tue, 24 Feb Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

The Government has already started the task of unblocking the choked economic arteries and disinvestment of stake in profitable PSUs continues to be one of the key highlights.

Disinvestments have been one of the major sources of income for bridging gap in budgetary revenues and expenditure. While disinvestment process faced various obstacles in past, offering discount in recent issues of profitable PSUs has worked in their favour. The most recent ones being SAIL and Coal India Ltd.

Interestingly, there has been no attempt by the government to liquidate the loss making PSUs that have been a big drain on resources. As per an interview published by Firstpost, HDFC chairman, Deepak Parekh, has encouraged the government to consider disinvestment of stake in loss making public behemoths like Air India, LIC, and BSNL soon. As per Mr Parekh, these entities can help the government in unlocking huge funds. However lack of political will and union pressures have been the tumbling blocks for the divestment.

Bureaucratic hindrances, monopoly, trade unions, poor efficiency, incompetent governance and political interference have been haunting the public sector units in India. We have recently, seen that happening in Coal India, where the unions had threatened to go on strike, though the strike was called off later. The said strike is believed to have impacted production at over 75% of the coal mines. Higher dependence for sourcing coal, from one entity created the monopoly. This is not the only instance. Take another example of Air India. The airline worked its way into a mountain of debt and losses. Eventually when things got out of hand it approached government. And what did the government do? It bailed Air India out. But did it turn the company around? Not really. The pilots went on a strike and losses continued.

Owing to these shortcomings of the PSUs, it would be worthwhile for the government to divest its stake in these lo9ss making inefficient entities.

The disinvestment is not only in the interest of the government to plug its fiscal problems but it is beneficial for common tax payers. The privatization of these loss making entities could not just make them more efficient but also ensure that tax payer money is utilized in an efficient manner.

As we are approaching towards the Union Budget, we will watch out for the government's plans towards PSUs divestments.