The UPA government has finally got its divestment programme moving. The announcement of the sale of 5 per cent of National Thermal Power Corporation’s (NTPC) stock marks the beginning of what could be five years of a significant revenue stream for a government embarked on an ambitiously expansionary fiscal policy. The equity market seems to have an appetite for a pipeline of public sector issues and could help bridge a fiscal deficit nudging 7 per cent of the gross domestic product. Tied to a move to have more floating stock — from private as well as State-owned companies — disinvestment dons a market-reform halo that its fiercest critics will find difficult to strip. The positive side-effect of a more robust capital market with greater immunity to manipulation is inarguable. The government will have to lead by example if it wants India Inc to float a greater share of its stock to remain listed on bourses.
Though no target has been set, the government is well on its way to generating upwards of Rs 25,000 crore this year, as in subsequent years, through minority stake sales in the companies it owns. The temptation to re-route this money into the Consolidated Fund of India is strong as the fiscal profligacy season draws to a close, especially with budgetary support to public enterprises showing up as expenditure in the government’s books. As a one-off, increasing the floating stock of 100-odd profitable State-owned companies will also shore up the fisc by lowering their demands for capital expenditure — Steel Authority of India (Sail) is in line for a follow-on issue as it needs to raise its capacity by 60 per cent over the next two years.
Purists may argue that sell-off is faux privatisation — the managerial efficiencies built into the latter do not obtain in the former. But public enterprises stand to gain from even minority stake sales. Listing requires quarterly disclosure, a more accountable way of doing business than the annual statements presented by these companies to their single shareholder. The tighter scrutiny of market players imposes a higher discipline in boardrooms and makes political interference a shade less pervasive. The autonomy being considered off and on for the boards of ‘Maharatnas’, the big daddies of the public sector like Bharat Heavy Electricals, NTPC and Sail, is overdue and will be accompanied by immediate productivity gains.