The two issues in the budget that gave the stock market a nasty turn — the missing disinvestment timetable and a gargantuan government borrowing programme — have over the past few days been talked down by the finance minister, Pranab Mukherjee, and his officials. A schedule for the sale of stakes in state-owned enterprises should emerge in four weeks after discussions with the administrative ministries concerned. The government is in talks with its debt manager, the central bank, to frontload borrowings to ease the pressure on interest rates as the economy revives. The stock market sees the wisdom of both moves; it has recovered all its losses of budget day. The equity market has an appetite for a steady stream of public sector issues but the government is not so sure about the bond market and may need some deft footwork to finance a fiscal deficit that is nudging 7 per cent of the GDP.
Though no target has been set, the government can generate upwards of Rs 25,000 crore a year through minority stake sales in the companies it owns, the Economic Survey points out. The temptation to re-route this money into the Consolidated Fund of India will be strong as the season of fiscal profligacy draws to a close, especially because budgetary support to public enterprises shows up as expenditure in the government’s books. As a one-off, increasing the floating stock of 100-odd profitable companies will shore up the fisc by lowering their demands for capital expenditure. Public sector ship-building companies, for instance, have immense order books, they cannot at present raise equity capital from anyone but their owner.
Purists might argue the disinvestment being undertaken 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, both local and global, imposes a higher discipline in boardrooms and makes political interference a shade less pervasive. The autonomy being considered for the boards of ‘maharatnas’, the big daddies of the public sector like Bhel, NTPC and Sail, is overdue and ought to be accompanied by immediate productivity gains.