Caring cover

Updated: Jan 29 2005, 05:30am hrs
The UPA governments decision to divest upto 49% of its equity in profitable public sector enterprises (and park the investment proceeds in a National Investment Fund) will hopefully restore some of the lost momentum to the governments disinvestment programme. To the extent that the proceeds from disinvestment are to be earmarked in a separate dedicated fund and will operate outside the Consolidated Fund of India, it addresses the fear that the government will use it as an easy option to bridge its fiscal deficit. At the same time, to the extent that returns from the Fund will be used for social sector projects and for revival of PSUs it is bound to appeal to the Left.

Reformers within the government had long been pressing for a politically acceptable model that would make selloff palatable to the Left. Now that this has been done, inaction on divestment will become harder to justify to those pressing for progress, within and without. In reality, government money being fungible, it makes little practical difference which head the proceeds are parked under.

The main cause for hope is the removal of a hurdle to divestment in PSUs, even if it wont be of the majority stake. It is now for the Prime Minister and finance minister to live up to their reformer credentials. Ditto for all those in the ruling party whove been insisting all along that the Congress was the real parent of reforms and how theyd ensure India keeps progressing as a strong player in a globalising planet.

A reason for retaining some scepticism about change in the coming months is the plethora of gear shifts required before anyone can step on the D-accelerator. Each administrative ministry has to first go along with a company-wise programme on how many shares to sell and how and when. Each of these proposals has to go to the CCEA for approval. A green signal then has to be referred to a group of ministers for fixing a price band and then the final price. Anyone with little enthusiasm for divestment their numbers and influence will swell after the next by-election reversecould use this series of checks to delay meaningful action all the way till the run-up to the next general election. Which brings the spotlight back to those in the government who insist theyre reformers. Start proving it.