But can a controlling interest in the private sector, for example, take the SPV route to pay itself and saddle the company under its control with debt topay for divestment? Is this permissible under the company law? If not, what is sauce for the goose must be sauce for the gander. This apart, the price at which the government will transfer equity to SPV (theoretically) will have to be low in order to ensure that the shares sell at a premium to the public. There is, however, no guarantee that the final price will be sizable enough to free ex-PSUs from trouble; their share of 21 per cent (after claw back by the government) in realisations from equity sale may fall short of the amount required for debt servicing. In any case, why should the debt servicing cost of divestment be foisted on the ex-PSUs?

However clever the idea, SPV does not give the PSU ratnas a good deal. It is based on flawed assumptions. The disinvestment proposed will raise funds for the government, but not as much as claimed by proponents. This is because the controlling interest will remain with the government. Equity in excess of 49 per cent will be a trade sale--to widely dispersedinvestors. This will not fetch the mega premium associated with strategic sale where the controlling interest passes on to private hands. It is wrong to describe such disinvestment as privatisation. For the latter, a new controlling interest is a must, if the objective is to thus make ex-PSUs vibrant and dynamic. But the SPV objective is to raise money for the government; period. The government wants to raise mega funds in two years--forcing PSUs to resort to mega borrowings--and at the same time use the equity divested to SPV as collateral for guarantees for infrastructure projects. But can the government square a circle?Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.