NEW DELHI: The policy of disinvestment of public sector units (PSUs), meant for realignment of the Indian economy, witnessed almost a complete pause during the United Progressive Alliance (UPA) regime, a detailed study of data has revealed. The disinvestment of PSUs is back in discussion under the Narendra Modi-led Central government.
The detailed study of the data has revealed that the UPA-I and UPA-II did not take decisions on disinvestment and this halted the long-term growth prospects of the country.
As per the Department of Disinvestment’s data, during the UPA period, the disinvestment policy witnessed almost a complete pause and by 2011-12, only Rs 14,000 crore could be raised against a disinvestment target of Rs 40,000 crore. The pace of disinvestment was even lower than what it was during 1991 to 2001. Between 1991 and 2001, against the disinvestment target of Rs 54,300 crore, only Rs 20,078 crore was raised.
The comparative data suggests that Modi 1.0, which came to power in 2014, fared better than UPA-I and UPA-II. During the last fiscal 2018-19 alone, the Modi-led Central government has not only achieved its disinvestment target of Rs 80,000 crore, but has surpassed it by Rs 5,000 crore. The recent announcement of sale of five PSUs by Finance Minister Nirmala Sitharaman has made it clear that Modi 2.0 is going to break its own record of surpassing the disinvestment target set by the government’s think-tank NITI Aayog.
The PSUs that recently got the nod for sale by the Cabinet Committee on Economic Affairs (CCEA) include the blue-chip oil firm Bharat Petroleum Corporation Limited (BPCL), Shipping Corporation of India (SCI), inland cargo mover Container Corporation of India (CONCOR), THDC India and North Eastern Electric Power Corp Ltd (NEEPCO). The sale of these PSUs will generate about Rs 1 lakh crore for the Modi government which is even higher than the disinvestment target set for the current fiscal that is Rs 90,000 crore.
Namrata Mathur, a Delhi-based scholar of economics, told The Sunday Guardian: “From the recent move, one can clearly derive that privatisation and disinvestment, considered the tools of economic realignment, are priorities for the Narendra Modi-led Central government.”
“The empirical data suggests that the NDA regime has always fared better than other regimes at the Centre in taking decisions pertaining to disinvestment. After the privatisation move taken in 1991, the disinvestment policy witnessed a golden period during late Prime Minister Atal Bihari Vajpayee-led NDA government. The Vajpayee government set up a department of disinvestment which executed sales of many PSUs, including ITDC, BALCO, Modern Foods, Maruti, besides others and raised Rs 21,168 crore against the target Rs 36,000 crore,” Mathur said.
In India, PSUs were created post-Independence to build a self-reliant, state-led economy. Through the 1970s’ nationalisation drive, the policy was taken forward, but the economic landscape of the 1990s forced the government to rethink its strategy which led to the implementation of liberalisation.
“It is hard to argue against the economic rationale for privatisation. There is no doubt that privatisation has created wealth. For example, Maruti, which was worth Rs 4,339 crore 17 years ago at the time of its sale, is now surprisingly worth Rs 2.18 lakh crore. Not only Maruti, most of the ailing PSUs sold during the Vajpayee era have now turned into success stories,” Mathur said. She further said: “What is the use of directing public money to save a PSU like Air India? Air India has accumulated losses of Rs 50,000 crore; there is a debt of Rs 55,000 crore and the government has already wasted Rs 30,000 crore in a bailout bid in 2012.”
More than 60% of India’s 235 Central public sector enterprises (CPSEs) are under scrutiny for possible disinvestment. The government’s think tank NITI Aayog has recommended a strategic sale in over 46 public sector undertakings and outright closure of 28 sick PSUs.