The best laid plans of mice and men often go awry is an expression almost as old as Aravali Hills. In politics, it holds true and for the present dispensation at the Centre, it is even truer. We know that there is no secret sauce to getting it right. One can beef up as much on television oxygen as possible, but it doesn't alter the reality of non performance. The broad daylight between vaulting ambition and low performance parameters can be best exemplified by the metrics in disinvestment.
Without doubt, bank recapitalisation, transportation and urban development have been key beneficiaries of the major oil savings that have accrued to India, courtesy the oil glut: With rising Non Performing Asset concerns, the government had earlier decided to recapitalise banks in-order to strengthen the capital requirements. In Finacial Year 16, the government has allocated an additional Rs 155bn (FY16: Rs 250bn) to recapitalise banks. Also, on a FYTD cumulative level, ministries such as urban development (38%), transportation infrastructure related sectors (road sector spending up 34%YoY and shipping up 19%YoY) and Power (35%) have shown sharp hike in spending while ministries such as Labour & employment (-4%), steel(-42%) and petroleum (- 49%) have experienced slowdown.
However, failure on the disinvestment front has been galling. The additional ballast that was expected from an aggressive disinvestment target has fallen woefully short. In its Budget for 2015-16, a disinvestment target of Rs 69,500 crore was set. It was to be a combination - bring in Rs 41,000 crore from minority share sale sale in profitable listed PSUs and the balance from strategic sale in sick state-owned companies. But look what happened, a a global commodity rout meant that between April 2015 and February 2016, the government has managed to garner only Rs 18,390 crore by selling stakes in six PSUs via the offer for Sale (OFS) route. The last being the NTPC OFS last week which was pressed into service to bridge the huge deficit. Price deflation ruining the government's plans.
More than anything else, it is the haphazard approach to disinvestment which has cost the government dear. Knowing fully well that a vicious commodity down cycle has wrecked commodity companies worldwide, it did not have a Plan B to undergo a course correction. As always fixated on Plan A like the overarching obsession with legislation for economic reform despite the tyranny of numbers in the upper house, the government has shown no inventiveness, but only a lip service to recycling of old ideas. So, another financial year is on the verge of closing out, without anything substantive to show for it. The government's tableaux on disinvestment - 10 per cent stake in IOC through the OFS route to raise Rs 9,400 crore. PFC (Rs 1,700 crore), REC (Rs 1,600 crore), Engineers India (Rs 600 crore) Dredging Corporation (Rs 100 crore) and finally NTPC (Rs 5050 crore). No wonder that the share prices of the companies that went for OFS are trading over 53 per cent below their floor prices.
The tired and jaded approach of asking domestic financial institutions to Lack of clarity on the way forward in terms of where the money should be deployed has also played a part in this mess. Earlier, it used to go into the Consolidated Fund of India, a black hole, then a National Investment Fund was created in November 2005 which was outside the Consolidated Fund, from where the funds were to be channelised into select social sector schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Accelerated Irrigation Benefits Programme (AIBP), Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY), Accelerated Power Development and Reform Programme, Indira Awas Yojana and National Rural Employment Guarantee Scheme (NREGS).
Difficult global economic conditions and repeated droughts meant that the government was forced to extend the NIF's monies for social sector schemes till March 31, 2013. Then in mid January, 2013, in another policy correction, it was decided to use the disinvestment proceeds to recapitalise the bleeding Indian Railways, ailing public sector banks, equity infusion in various Metro projects et al.
On thought, a direction had been given to the utilisation of the funds, but with the core itself rotten and the modus operandi chosen by governments of different hues unsure on how to deal with the political hot potato, a hit and miss model is what we have ended up with. Angel Broking summed up this year's performance matrix as like this "A majority of the companies lined up for disinvestment are commodity-linked PSUs such as Coal India, ONGC, OIL, Nalco. With the downturn in commodities and market conditions not being conducive for share sale, we expect the revised estimate for proceeds from stake sales to be scaled down closer to Rs 25,000 crore. Having repeatedly missed its disinvestment targets, we expect the government to set a more rational target of around Rs 50,000 crore for FY2017." (according to Economic Times).
By shirking away from the strategic sale route completely, the government has refused to show either appetite or gumption to do something bold and innovative. So, while several loss making ITDC hotels have been lined up for outright sale for over a year, the silver bullet is lost and a compass required to find it. Ditto for the vast swathe of loss making PSUs -- both central and state owned companies with bonafide assets, but losing money for 10 years in succession. But no stomach for their divestiture. Will this budget now see the return of the Disinvestment Commission which will oversee transfer of management of government companies.
Resorting to gradualism and incrementalism has been the bane of the Modi government, recycling old ideas its intellectual death. As the scramble to achieve a modicum of the target begins, the only recourse is the usual dividend stripping of haemorrhaging public sector entities, remember how Coal India was asked to fork out Rs 18,000 crore by P Chidambaram, of which the government received Rs 16,000 crore. Offloading minority shareholding is a ridiculous idea which ultimately results in over ownership by PSU banks and domestic financial institutions, which basically translates into money moving from the right to left pocket. The original idea was wider dispersal of shareholding and enhancing the equity cult, but it has met with a F on both counts.
It is agreed that you can't time the markets, but indecision is the greatest bugbear. Throw in inertia and you have apolitical class which somehow fails to grasp the nuances of free market economics.
The author is a senior journalist and commentator based in New Delhi.
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