ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Disinvestment Fiasco

THE fiasco of the ninth round, the first of this fiscal year, of disinvestment of shares of public sector undertakings (PSUs) is another case, after the exchange rate and money market turmoils, of the adverse consequences of the government's narrowly focused macro-economic adjustment policy. As a revenue-raising exercise to help reduce the fiscal deficit, the government first decided upon disinvestment of its holdings in select PSUs in 1991. Though the original decision was to allow PSUs also to dilute the government holding by fresh issue of shares, subject to such holding not being reduced below 51 percent, the emphasis has throughout been on disinvestment of the government's existing shareholding to raise budgetary resources, as recommended by the Rangarajan Committee. In the first four years of disinvestment from 1991-92 to 1994-95 the centre's budgets have shown actual receipts of Rs 10,188 crore on this count. To fulfil the target of Rs 7,000 crore for the current year, the government decided on three rounds of bids, but market conditions did not allow it to issue the first bid till October. It did try to test the market with a proposed public issue of equity by MTNL of Rs 570 crore at a premium of Rs 180 per share, but the issue had to be postponed due to fear of a poor market response. Apart from the decline in share prices and persistent shortage of liquidity in the capital market, the response to the government's own market borrowing and to bond issues by many PSUs has been poor. But with the government in dire fiscal traits and with time running out in the fiscal year, the disinvestment process could not be held up indefinitely.

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