Privatisation can check drought's effect on economy

NEW DELHI: Faster privatisation can help to offset the adverse impact of the drought on the economy, according to Pradip Baijal, secretary, Ministry of Disinvestment.
This could be done through a well-structured privatisation programme that would make funds available for investment into the economy, especially at a time when many parts the country was facing a drought, Baijal said.
He was delivering the keynote speech at the Delhi edition of the seminar series on "Strategy Under Uncertainty", presented by IL&FS Mutual Fund and Economictimes.com, in association with IBM. Over 250 head-honchos and industry captains attended the seminar.
The disinvestment secretary pressed for stepping up the pace of privatisation as that would help to counter the slackness in agricultural growth caused by the drought situation in the country.
The disinvestment secretary took the critics of the government’s privatisation programme by the horns, pointing out that the privatisation effort has yielded over Rs 11,000 crore to the exchequer in the last two years. Baijal said strategic sale of public sector units with change in management has yielded better results than the previous strategy of sale of minority shares.
"In the first phase of privatisation – between 1991-92 till 1999-2000, divestment in 39 companies led accruals of around Rs 19,500 crore. This phase was marked by divestment through sale of shares. However, in the second phase – post 1999-2000 – the government has earned over Rs 11,000 crore through strategic sale in 16 public sector companies," he said.
Baijal pointed out that the government has in the last decade sold a little over one per cent of it’s equity in the public sector that is valued at around Rs 80,000 crore. "The entire equity has the potential to yield an income of about Rs 10 lakh crore. However, at the current rate of privatisation it would take the government over 250 years to unlock the value of this equity," Baijal said.
Stressing on the need to accelerate the privatisation effort, Baijal pointed out that Germany had completed privatisation of over 30,000 government-owned units in a matter of two years. "A more aggressive disinvestment programme would also provide relief to the tax payer who need not pick up the tab for inefficiencies in government-run units," Baijal added.
Speaking on the occasion, Vikram Mehta, chairman, Shell India, said that in times of uncertainty it is important for corporates to widen their stakeholder base. "This would help create challenges for the corporate to create an operating environment for maximising the interests of all the stakeholders," Mehta said. What helps any corporate most at times of uncertainty are qualities such as being cost leaders, technology innovators and stress on customer relationship, he added.
According to Arun Seth, managing director, British Telecom India, it is important for corporates to take cognizance of opportunities thrown by uncertain business environment. A pointer to that are the business opportunities offered by IT-enabled services industry, Seth said.
"Public sector organization in the throes of privatisation should recognise that competitors or rivals can also become clients in certain sectors," Seth pointed out.
Arun Kaul, managing director, PNB Gilts, highlighted the need for pro-active leadership at the times of uncertainty.