The Hindu : Disinvestment policy under a cloud

Online edition of India's National Newspaper
Wednesday, Sep 17, 2003

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Disinvestment policy under a cloud

By Our Special Correspondent

NEW DELHI SEPT. 16. The Supreme Court's decision today halting the disinvestment process in two public sector oil companies — the Hindustan Petroleum Corporation Limited (HPCL) and the Bharat Petroleum Corporation Limited (BPCL) — has had two immediate consequences.

One, the Government's disinvestment policy, on a high after the runaway success of Maruti Udyog's public issue, has come under a cloud. Second, the Centre's fiscal management could go awry as the oil companies were expected to make up a large portion of the Rs. 13,200 crore disinvestment revenue expected this year.

While the court has made it clear that its judgment pertains to the two oil companies only, the Disinvestment Minister, Arun Shourie, feels that the judgement would have far-reaching consequences for the disinvestment policy. "There may be other public sector undertakings, not only at the Central level but also at the State level, which were created through legislative Acts whose disinvestment would become more difficult,'' agency reports quoted Mr. Shourie, now in Germany, as saying.

Official sources also indicated that the court's directive to get parliamentary approval for the disinvestment of HPCL and BPCL would be practically impossible given the present parliamentary arithmetic. Apart from the Left parties, the Congress, too, is opposed to the HPCL-BPCL disinvestment and even some allies of the Government have reservations on the issue. Thus, for all practical purposes, the disinvestment of the two oil companies is stalled in the current fiscal year.

What has also become evident is that the Union Cabinet is not putting its entire weight behind the disinvestment policy. Today, while Mr. Shourie expressed apprehensions about the consequences of the judgment, the Petroleum Minister, Ram Naik, has been quoted from Mumbai as describing the judgment as "historic". While Mr. Naik's opposition to the disinvestments was known, the Chemical and Fertilizer Minister, S.S. Dhindsa, too, recently went public that he wanted the disinvestment of the National Fertilizers Limited to be put off. The expectation is that with the latest judgment, more Ministers might oppose disinvestment proposals, thus putting the whole policy under a cloud.

For the Finance Minister, Jaswant Singh, the halting of the HPCL-BPCL disinvestment exercise would add to his fiscal woes. While the revenue collections are running behind target, any lack of disinvestment would hit his fiscal deficit target. As Rs. 13,200 crores was to come through this exercise, any shortfall on this count would distort his budgetary collections.

Last year, the Government had targeted Rs. 12,000 crores through disinvestment, but ended up with only Rs. 3,360 crores. This year, Maruti Udyog's public issue is the only success story on this front so far.

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