There are welcome indications that the UPA government may resume its stalled disinvestment agenda to raise resources for funding part of its budgetary farm loan waiver commitment. These indications come from none other than the man of the moment himself: Finance Minister P. Chidambaram. Such partial sales of equity in public sector undertakings (PSUs) have been on hold during most of the government’s tenure due to opposition from its allies and the Left. The big question is whether the communists will permit such a programme even if the proceeds are to be used for purposes they are largely in agreement with — helping the ‘agricultural labour class’ to lift itself by its bootstraps being top on that list of purposes. It is most unlikely that Left leaders will say yes, as their opposition stems from their view of PSUs as representing family silver that must not be sold to finance government expenditure. Their resistance to disinvestment has not diminished even though the government constituted a National Investment Fund into which the proceeds from these sales are to be channelised for priority social sector spending.
The government’s compulsions for kick-starting PSU disinvestments are obvious. Since there is no budgetary provision for the Rs 60,000 crore farm loan waiver, from where will the resources come from? There has only been some loud-thinking on its part that the banks will be compensated over a three-year period; that this will be in the form of cash rather than bonds; that there are several other options being considered and so on and so forth. With the Sixth Pay Commission award and general elections looming large, the point is that the government doesn’t have the fiscal headroom to fund the massive farm loan waiver. Disinvestments clearly provide an easy way out to raise resources in this regard, provided, of course, the stock markets are bullish. In his latest budget speech, Mr Chidambaram announced that it was government policy to list more PSUs “to unlock their true value”. He was testing the waters already.
Interestingly, the latest budget documents estimate disinvestment receipts at Rs 10,165 crore for 2008-09. Of this, Rs 1,165 crore will come from small sales of the government’s equity in the Rural Electrification Corporation and National Hydroelectric Power Corporation while the remaining Rs 9,000 crore will be from the Specified Undertaking of the Unit Trust of India. Even during the current financial year, the government raised Rs 1,651 crore from such sales despite the widespread impression that PSU disinvestments being on the backburner.
Prima facie, these numbers clearly indicate the government’s determination to push ahead with partial sales of its equity in PSUs to fund its expenditure commitments. The resources raised through this route will, of course, be much larger if the Left and allies stop railing against disinvestments. That is a big if. So far, the Left has stated that the government is yet to approach them on this issue. But the UPA government appears ready to press ahead regardless. We wish the government luck.