Towards minimum government

The NDA government under Narendra Modi ended its tenure with positive numbers on the disinvestment side. That was good in so far as its ability to meet its budget targets and fill the fiscal deficit gap were concerned. For two successive years, it boasted of exceeding the disinvestment targets thanks to two “strategic disinvestments”.

The so-called strategic disinvestments were strategic in intent but the way they were carried out have left a lot to be desired. In fiscal year 2017-18 upstream player ONGC (Oil and Natural Gas Corporation) was asked to buy refining and oil marketing firm HPCL (Hindustan Petroleum Corporation Limited), which helped the government reap Rs 36,915 crore in disinvestment receipts. In a similar takeover move Power Finance Corporation bought out the government stake in Rural Electrification Corporation for Rs 14,500 crore in 2018-19.

The deals were not bad in terms of synergies, creating large oil conglomerates, etc. But the timing and execution has burdened both the organisations, and it would be a couple of years before we know if the strategic intent is realised. Thus the BJP-led government did not achieve what was promised in terms of “minimum government” in the run-up to May 2014.

Speaking at an investment forum in Singapore on Tuesday, Sanjeev Sanyal, the principal economic advisor to the ministry of finance, has said that the government in its second term will focus on privatisation and not just disinvestments. There is hope once again that the NDA under Modi could repeat what the NDA under Vajpayee had done in terms of privatisation and strategic sale.

There are quite a few albatrosses around the government’s neck like Air India, which had witnessed many twists and turns from privatisation attempts to strategic stake sale. While it may still be a long way for either the defence PSUs or PSU banks to be privatised, the government would do well to unlock the value in other PSUs and use it judiciously for many of the welfare schemes already initiated.