Readers would remember that even though the issue of the government moving out of public sector units is a key pillar of the reforms, successive governments under PV Narasimha Rao, Deve Gowda and IK Gujral had vandalised the concept. They had cynically used the PSU disinvestment route to somehow or other sell shares and raise resources. Even expectations that the funds raised from such an exercise would be used to improve the performance of the public sector as a whole has been misplaced. The funds were merely used to pay the salaries of babus and generally reduce the fiscal deficit.

That the PSUs have been a major drag on the economy is something which iswell-recognised. It a big dis-saver and incurred net losses of about five per cent last year on the capital employed. If the cost of money to the government is around 11 per cent today, this represents a 16-per cent loss to the government. No wonder that the economic value addition (EVA) of the aggregate of public sector units is a whopping negative Rs 16,000 crore!I often hear specious arguments by bureaucrats that the public sector is not that unprofitable and is helping in the welfare of the people.

The profitability figures which are put out are misleading because they include profits made by the oil companies using administered prices. The human welfare argument is ridiculous. I recently heard an argument that while coal companies in eastern India made losses, it should not be forgotten that the central schools there produce excellent students! It does not need much imagination for one to understand that if the Rs 1,500 crore of losses of one of the coal companies is used to promote primary education,we would be educating far more students than what the central school in the coalfield area can educate in a thousand years.

The point being made is that simplistic arguments have been used successfully by the bureaucracy for the last several years to stall PSU sale and that is why the latest cabinet decision is to be welcomed by all well-wishers of free market economies.

It is heartening that India Tourism Development Corporation is to be sold lock, stock and barrel. When this author had said this about eight years back, there were no takers because the Ashok Group of Hotels and the duty-free shops were such a piece of cheese cake that the bureaucrats would not dream of letting them go. When ITDC is sold, it will fetch an enormous price and this can be used by the government to build rural roads, hospitals and primary schools. Equally importantly the hotels would be better run and will not have that stale stench which one normally associates with a government hotel. Another good part of the recentdecisions is that highly thought of companies like MTNL will offer their shares to the Indian public.

Many multinationals would have loved to buy into MTNL and it is good that the government has decided to keep these valuable shares with itself and with the public.

Restructuring of public sector is no different from the restructuring of the private sector since in the reformed environment they both constitute the national sector. The problems of the workers are the same whether they are fired from a private or a government company. The bad loans made by banks are going to affect their balance sheets whether they are PSU loans or private loans. Hence the philosophy that should permeate in handling PSU sale is that they are no different from the sale of private units.

We have fallen woefully behind in our PSU disinvestment programme. Tanzania is a small African country which was liberated from British colonialism like us. They do not have pundits with great ideas like we have. But it started itsdisinvestment programme some five years ago with a hit-list of about 300 companies. It has already sold 70 per cent of that including the railways and several others. They also have trade unions and poor people and their interests have been safeguarded.

What they had was the political will to handle the bureaucracy and other interests who would be the big losers if the public sector was cut down to size. Hopefully the present rulers in India will continue to show the will to dismantle the PSUs and leave behind only those where the government has to be.

The author is owner of a Delhi-based investment banking firm and a former country head of Citibank's merchant banking division.