The process of privatisation in India has been full of verbal clutter, false hopes and blatant insincerity. In fact, ever since the Congress government gingerly began the reform process in the early 1990s, every major political party has either been in the ruling coalition at some point or supported it from outside. And all of them, without exception, have deliberately stymied if not bungled the process with far too many ideas and terms, such as strategic sale, open auction, golden shares, lock-in period, floor price and control premium. All finely worded but least understood. The myriad interpretations have allowed lobbyists to delay decision-making. A case in point being the Gas Authority of India Ltd, another being Videsh Sanchar Nigam Ltd. Had we sold either of these in time, the country would have been richer by at least a billion dollars.
So, does the recent announcement regarding the partial sell-off of VSNL and IBP indicate a turning point Sadly, no. There remain huge problems that dilute hope otherwise inspired by Arun Shouries tireless efforts and the recent Supreme Court judgement. There are many opponents even within the ruling alliance, not just Sharad Yadav and Ramvilas Paswan. The petroleum minister Ram Naik has long opposed privatisation of any petroleum major on account of the strategic importance of the oil sector. Manohar Joshi, ruled out privatisation of Bharat Heavy Electricals Ltd because it is critical to the economy. Rita Verma is on record as saying the public sector will continue to play a dominant role in future in coal mining. K R Malkani wrote a letter two years ago to the PM against disinvestment of Indian Petrochemicals Corporation Ltd. And on the sidelines are RSS ideologues many of whom have on numerous occasions demanded that foreign ownership be either zero or minimal in any privatisation. Within the NDA, only the Telugu Desam Party has offered fairly generous support so far.
Political imperatives will slowly but surely move the Congress back to a left-of-center plank, especially after an expected rout in Uttar Pradesh assembly elections. The socialist lobby within Congress has received a boost with the likes of Jaipal Reddy and Srikant Jena. The long-term trend is that the Congress is fast losing appeal among urban and better-educated citizens. However, having itself initiated the opening of the Indian economy it will be a tricky act to oppose privatisation. But the Congress is quite adept at too-clever-by-half means to oppose without appearing to do so. For instance, last year the party demanded that the NDA government should first recover $15 billion of defaulted loans from Indian companies before privatising PSU banks. Coming back to the present, the government still retains 26 per cent ownership of VSNL. While it can be argued that some privatisation is better than none, it is also a stealthy approach that neither provides greater operational space to VSNL nor meets any impressive fiscal targets. The government last tried it with IFCI, the result being that its shares have lost over 90 per cent of their pre-partial privatisation value.
In the end, it is worrying to see the pace of privatisation so closely dependent upon few key individuals. The bottomline is that Indias doctrinal shift from extensive government involvement in the economy is still new, and most political actors have not fully been converted. In the immediate future, there does not lie much hope for a real thrust to privatisation. Meanwhile, an idea to add value to state owned enterprises is for them to start collecting their own Tender ads. I have a feeling that in future they will make a hilarious, museum-worthy and ultimately saleable item.
Subhhash Agrawal is an analyst of Indian political and business trends and the editor of India Focus, a political risk report for international investors