Even as the government has adopted a cautious approach to disinvestment after setting itself ambitious targets in the past three Union Budgets, a working paper published by a government-funded think tank National Institute of Public Finance and Policy (NIPFP) has called for a bold roadmap for exit of the government from the business of running companies.
The working paper titled “Public Sector Undertakings – Bharat’s Other Ratnas” has said a 10-year plan is needed to divest at least 50 per cent of the government shareholding in public sector undertaking, preferably through strategic disinvestment.
The government should privatise the 17 Navratnas enterprises, go for strategic disinvestment of the Miniratna companies and retain the seven Maharatnas, the paper said. It has added that the proceeds, roughly $250 billion could be shifted into strategic investments fund.
The proceeds could then be used to leverage private funding of same magnitude, allowing the country to invest additional $50 billion per year in public infrastructure for the next 10 years.
The suggestions in the paper contrasts sharply with the strategy so far adopted by the government, although the NITI Aayog has recommended that government should sell outright some of public sector units, particularly the loss making ones.
Some strategic sales are under consideration, however, disinvestment in recent years were dominated by buyback of shares by the enterprise and sales of minority shareholding.
“The business of the government is public infrastructure, not public companies. Transforming public assets into public infrastructure would be a lasting reform,” the authors have said in the working paper.
The paper was authored by Ajay Chhibber, a distinguished visiting professor at the institute, and Swati Gupta, a project associate at the think tank.
Making a case for strategic disinvestments, the authors noted that enterprises that were sold to private sector by the Vajpayee-led National Democratic Alliance government had done exceedingly well, enhancing their efficiency and improving the return on assets.
They added that the Modi government needs a clearer medium-term strategy which is based on performance, size and sector. “Ad hoc expediency based on yearly targets is not going to work,” they have said in the paper.
The authors noted that the seven Maharatnas such as BHEL, Coal India and ONGC could remain in the state hands for now, although some such as SAIL, BHEL and Indian Oil were in serious need for restructuring and better leadership. These enterprises have more or less reported return on capital and return on assets that are comparable to those of private companies, although in recent years there have been reversal in their performance.