Introduction

The Concept Disinvestment as on date in simple terms means 'privatisation'. This term has been in use of recent times. The study of Indian Economy can be broadly be classified in two phases. One was post independence and inculcated thereafter changes to welcome better grip by starting many number of good Business for social interest and running them on its own under the name of nationalization and which were called PSU (Public Sector Undertakings).

DEFINITION AND MEANING:

Privatization is defined as the exit of the government as a producer in a given market, and complete transfer of the government ownership to the private player. Disinvestment on the other hand is defined as the reduction in government equity in public sector enterprises. And there will be some strategic sectors are those industries that are reserved for public sector enterprises. The term disinvestment refers to withdrawal of Govt. shares of capital invested in Public Sector Undertakings (PSUs). Government controlled Public Sector undertakings were formed with the object of providing necessary infrastructure for the fast growth of economy. Privatization of Public Sector Undertakings is giving the desired results. It results in efficient use of resources whereby scarce resources like land, capital and machinery are put to more efficient use. The economy as a whole is benefited by increase efficiency of the units and the fiscal mess is reduced by lessening of liabilities. Inefficient PSUs were largely responsible for the macro-economic crisis faced by India during 1980s although they were set up for the purpose of providing employment and the same time generate revenue surplus. Political parties of the country have been debating the sale of PSUs mainly due to the controversy about the valuation of assets and their acquisition by companies with doubtful credentials. There is opposition against the sale of profit giving establishments. It is also argued that disinvestment would lead to massive unemployment which is already so high in the country. Experts are of the opinion that disinvestment is unavoidable for the success of second generation reforms. Health of the stock market is essential with the progress of economic reforms. To make the disinvestment process a success it is essential that profit making companies be distinguished from loss incurring companies. There must be transparency in the deals made in disinvestment. Method and basis of valuation of assets must be revealed to the public when a public undertaking is sold off. This would eliminate suspicions of any malpractice as would also fetch competitive price of assets. Further, legitimate demands and expectation of labor force should not be overlooked and care must be taken that either they are not thrown out of employment
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or alternate jobs are provided to them. Hence social implications of labor structuring should be properly studied. The Government started to deregulate the areas of its operation and subsequently, the disinvestment in Public Sector Enterprises (PSEs) was announced. The process of deregulation was aimed at enlarging competition and allowing new firms to enter the markets. The market was thus opened up to domestic entrepreneurs / industrialists and norms for entry of foreign capital were liberalized. Employing about 19 million persons, public sector currently contributes about a quarter of Indias measured domestic output. Administrative departments (including defense) account for about 2/5th of it, the rest comes from a few departmental enterprises (like railways and postal services), and a large number of varied nondepartmental enterprises producing a range of goods and services. These include, close to 250 public sector enterprises (PSEs) owned and managed by the central government, mostly in industry and services (excluding the commercial banks and financial institutions). At the state level, production and distribution of electricity and provision of passenger road transport form the principal activities under public sector, run mostly by autonomous boards and statutory corporations. Though public investment in irrigation would perhaps rank next only to electricity in most states, it is generally viewed as public service, hence counted as part of public administration. Besides, there are about 1,100 state level public enterprises (SLPEs) that are relatively small in size. While the contribution of all these varied publicly owned and managed entities to national development is widely acknowledged, their poor financial return has been a matter of enduring concern especially since the mid-1980s when, for the first time, the central governments revenue account turned negative an imbalance that has persisted ever since. In 1991, a small fraction of the equity in selected central PSEs was sold to raise resources to bridge the fiscal deficit. Though quantitatively modest (as will be seen later), the disinvestment signaled a major departure in Indias economic policy 1. While there have been instances of sale of publicly owned enterprises as running concerns on pragmatic considerations, it is only in the last decade that such sales (and sale of limited equity) acquired the status of public policy. Table 1 summarizes what successive union finance ministers have said about the policy intent in their budgetary speeches, how they wished to pursue it, and what they planned to use the proceeds for.

Such a shift in policy is in tune with the widespread move away from public ownership since it was initiated in the late 1970s in the UK, and in the early 1980s in Chile a
1

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change that has swept the world since then. Structural adjustment lending that was initiated around the same time by the Bretton Woods institutions included privatisation as an integral component of the policy based lending for the economies in financial distress. Such an initiative was buttressed by the World Banks influential official publication, Bureaucrats in Business (1995), which was a serious indictment of how the extension of the state in provision of private goods and services resulted in serious loss of efficiency, waste and lost growth opportunities for many less developed economies. In macroeconomics, especially after the Latin American debt and inflationary crisis in the 1980s, privatisation was widely advocated as a quick and sure means of restoring budgetary balance, to revive growth on a sustainable basis (Dornbusch, 1991). At the micro level, the change in ownership is often advocated to increase domestic competition, hence efficiency; and encourage public participation in domestic stock market all of which is believed to promote popular capitalism that rewards risk taking and private initiative, that is expected to yield superior economic outcomes. Thus, these changes are part a wider reversal in perception and policy in the recent times. Without attempting a detailed appraisal of the analytics and evidence of privatisation, this report briefly reviews the Indian experience in Part I, and examines the policy options in Part II. The study is largely restricted manufacturing and nonfinancial enterprises owned and managed by the central government.

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Should the new government go in for disinvestment of public sector enterprise? Disinvestment, if not outright privatization, is back on the agenda it figures in the Congress election manifesto, and the Left parties are no longer in the ruling formation to oppose the move. This spells good news for the stock markets and government finances. With disinvestment set to come out of the deep freeze after five years, officials in the finance and administrative ministries for various public sector enterprises have already started working on a roadmap.

Main objectives for setting up the Public Sector Enterprises

OBJECTIVES: The public sector aims at achieving the following objectives: i. To promote rapid economic development through creation and expansion of infrastructure ii. To generate financial resources for development iii. To promote redistribution of income and wealth iv. To create employment opportunities v. To promote balanced regional growth vi. To encourage the development of small-scale and ancillary industries, and vii. To promote exports on the one side and import substitution, on the other.

Role of Public Sector:

The public sector has been playing a vital role in the economic development of the country. Public sector is considered a powerful engine of economic development and an important instrument of self-reliance. The main contributions of public enterprises to the country's economy may be described as follows: 1. Filling the Gaps in Capital Goods: At the time of independence, there existed serious gaps in the industrial structure of the country, particularly in the fields of heavy industries such as steel, heavy machine tools, exploration and refining of oil, heavy Electrical and equipment, chemicals and fertilizers, defense equipment, etc. Public sector has helped to fill up these gaps. The basic infrastructure required for rapid industrialization has been built up, through the production of strategic capital goods. In this way the public sector has considerably widened the industrial base of the country. 2. Employment: Public sector has created millions of jobs to tackle the unemployment problem in the country. Public sector accounts for about two-thirds of the total employment in the organised industrial sector in India. By taking over many sick units, the public sector has protected the employment of millions. Public sector has also contributed a lot towards the improvement of working and living conditions of workers by serving as a model employer.
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3. Balanced Regional Development: Public sector undertakings have located their plants in backward and untrodden parts of the county. These areas lacked basic industrial and civic facilities like electricity, water supply, township and manpower. Public enterprises have developed these facilities thereby bringing about complete transformation in the socio-economic life of the people in these regions. Steel plants of Bhilai, Rourkela and Durgapur; fertilizer factory at Sindri, are few examples of the development of backward regions by the public sector. 4. Contribution to Public Exchequer: Apart from generation of internal resources and payment of dividend, public enterprises have been making substantial contribution to the Government exchequer through payment of corporate taxes, excise duty, custom duty etc. In this way they help in mobilizing funds for financing the needs for the planned development of the country. In recent years, the total contribution from the public enterprises has increased considerably, between the periods 2002-03 to 2004-05 the contribution increased by Rs 81,438 crores on the average. 5. Export Promotion and Foreign Exchange Earnings: Some public enterprises have done much to promote Indias export. The State Trading Corporation (STC), the Minerals and Metals Trading Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics Ltd., the Hindustan Machine Tools, etc., have done very well in export promotion. The foreign exchange earnings of the public sector enterprises have been rising from Rs 35 crores in 1965-66 to Rs 42,264 crores in 2004-05. 6. Import Substitution: Some public sector enterprises were started specifically to produce goods which were formerly imported and thus to save foreign exchange. The Hindustan Antibiotics Ltd., the Indian Drugs and Pharmaceuticals Ltd. (IDPL), the Oil and Natural Gas Commission (ONGC), the Indian Oil Corporation Ltd., the Bharat Electronics Ltd., etc., have saved foreign exchange by way of import substitution. 7. Research and Development: As most of the public enterprises are engaged in high technology and heavy industries, they have undertaken research and development programmers in a big way. Public sector has laid strong and wide base for self-reliance in the field of technical know-how, maintenance and repair of sophisticated industrial plants, machinery and equipment in the country. Through the development of technological skill, public enterprises have reduced dependence on foreign knowhow. With the help of the technological capability, public sector undertakings have successfully competed in the international market. In addition to the above, the public sector has played an important role in the achievement of constitutional goals like reducing concentration of economic power in private hands, increasing public control over the national economy, creating a socialistic pattern of society, etc. With all its linkages the public sector has made solid contributions to national self-reliance.

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The following represents a broad summary of the liberalization agenda

(1) Steady reduction in the number of strategic sectors (Today there are three strategic sectors: Defence, Atomic Energy and Railway Transport) and selling equity stakes in public sector units. (2) Liberalization of financial markets. (3) Decontrol of price regimes. (4) International integration (5) Promotion of pro market reforms and move towards a market economy.

WHY NEEDED?
An important and ongoing component of the reform process consists of privatisation and disinvestment. With growing acceptance of libertarianism, the government is
increasingly cautious of its burgeoning size and its unnecessary involvement in commercial activities. The government is changing its role in markets; from that of a market participant to that of a market regulator. In this constructive deconstruction it is trying to attain several objectives such as

government efficiency, revenue generation, promotion of market mechanism and economic development. Sometimes objectives contradict each other and have to be balanced. Disinvestment plays an important role in revenue generation. Disinvestment receipts can help the government reduce fiscal deficit not only by way of equity sale in PSUs (public sector units) but also by the subsequent cap in government transfers to bleeding PSUs.

But has the government been successful in its disinvestment endeavor? Trends in the past few years present an abysmal picture. There are wide differences in disinvestments targets and actual receipts.

YearTargeted ReceiptsActual Receipts2007-200810,00018292008200910,00018702009-201012,0005632

Political hurdles in disinvestment, intervention of stakeholders and poor financial state of sold PSUs have all contributed to this performance.

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Review of Disinvestment and Privatisation

Disinvestment was initiated by selling undisclosed bundles of equity shares of selected central PSEs to public investment institutions (like the UTI), which were free to dispose of these shares in the booming secondary stock market. The process however came to an abrupt halt when the market collapsed in the aftermath of Harshad Mehta led scam, as the asking prices plummeted below the reserve prices. Since the stock market remained subdued for much of the 1990s, the disinvestment targets remained largely unmet. The change of government at the Centre in 1996 led to some rethinking about the policy, but not a reversal. A Disinvestment Commission was constituted to advise the government on whether to disinvest in a particular enterprise, its modalities and the utilization of the proceeds. The commission, among other things, recommended (Disinvestment Commission, 1997): Restructuring and reorganization of PSEs before disinvestment, Strengthening of the well-functioning enterprises, and to utilize the disinvestment proceeds to create a fund for restructuring of PSEs. The new government that came to power in 1998 preferred to sell large chunks of equity in selected enterprises to strategic partners a euphemism for transfer of managerial control to private enterprises. A separate ministry was created to speed up the process, as it was widely believed that the operating ministries are often reluctant to part with PSEs for disinvestments as it means loss of power for the concerned ministers and civil servants. The sales were organized through auctions or by inviting bids, bypassing the stock market (which continued to be sluggish), justified on the grounds of better price realization. Notwithstanding the serious discussion on the utilization of disinvestment proceeds, they continued to be used only to bridge the fiscal deficit. Strategic sale in many countries have been controversial as it is said to give rise to a lot of corruption, discrediting the policy process. Aware of such pitfalls, efforts were made to be transparent in all the stages of the process: selection of consultants to advice on the sale, invitation of bids, opening of tenders and so on. Between 1999 and 2003, much greater quantum of public assets were sold in this manner, compared to the earlier process, though the realised amounts were consistently less than the targets except in 2003. Nonetheless, there are series of allegations of corruption and malpractice in many of these deals that have been widely discussed in the press and the parliament. Instances of under pricing of assets, favouring preferred buyers, noncompliance of agreement with respect to employment and retrenchment, and many incomplete contracts with respect to sale of land, and assets have been widely reported.
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Thus, during the last 13 years Rs. 29,520 crores were realised by sale of equity in selected central government PSEs, (in some cases) relinquishing managerial control as well. This formed less than one per cent of central governments cumulative fiscal deficit in this period.

Legal issues in the D-P process:

Legality of the disinvestment process has been challenged on a variety of grounds that slowed the sale of public assets. However, there were two significant judicial rulings that broadly set the boundaries of the D-P process. These are: 1. Privatisation is a policy decision, prerogative of the executive branch of the state; courts would not interfere in it. 2. Privatisation of the PSE created by an act of parliament would have to get the parliamentary approval. While the first ruling gave impetus for strategic sale of many enterprises like Hindustan Zinc, Maruti, and VSNL etc. since 2000, the second ruling stalled the privatisation of the petroleum companies, as government was unsure of getting the laws amended in the parliament.

Privatisation at the state level:

A sizable proportion of the state level enterprises are welfare corporations largely intended to meet social welfare objectives, and to secure resources from public sector banks and development financial institutions. However, many SLPEs are also involved in manufacturing and mining activities to utilize local resources and to cater to the regional markets. SLPEs as a whole make sizable financial losses. Privatisation at the state level began somewhat earlier than at the Centre. Sale of the state governments equity holding in Allwyn Nissan Limited in Andhra Pradesh in 1989, UP State Cement Corporation to Dalmia Group, and Auto Tractors in 1991 were precursors to the national level policy changes (Bajaj, 1994). By 2003, 35 such SLPEs have been privatized. But, interestingly, over five times as many enterprises (180) were shut down during this period

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Employment in PSEs:
As Figure 1 shows, employment in the central PSEs has declined from about 2.2 million in 1991-92 to about 1.7 million a decade later. A marginal rise in 2001-02 is on account of the shift of employment from department of telecommunication to incorporation of BSNL as a corporate entity. If one traces employment in a set of same enterprises over the 1990s, perhaps the decline would be greater. The fall in employment is clearly the result of voluntary retirement scheme (VRS) initiated using the National Renewal Fund, as part of the structural adjustment programmed. What has happened to employment after privatisation? Perhaps it is too early to get firm evidence since substantial privatisation occurred only during the last four years. However, popular reports suggest some retrenchments and compulsory retirement of workers. Reportedly some private firms have violated their contract in this regard (Modern Foods, for instance). There are also reports of employment generation at BALCO on account of capacity expansion.

Performance of PSEs after disinvestment and privatisation:

In principle, disinvestment is unlikely to affect economic performance since the state continues to be the dominant shareholder, whose conduct is unlikely to be influenced by share prices movements (or return on equity). Privatisation can be expected to influence economic outcome provided the firm operates in a competitive environment; if not, it would be difficult to attribute changes performance sole or mainly to the change in ow

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Assessing the principles, premises and performance of the D-P process:

Right from the beginning in the UK, privatisation has been a policy in search of an economic rationale to borrow the title of Kay and Thompsons (1986) well-known contribution. Mainstream economics is largely agnostic about the role of ownership, focusing mainly on how market structure affects performance of firms (Vickers and Yarrow, 1991). If privatisation is seen as a means of raising resources for the budget, it can be analytically shown to be cheaper to sell public bonds than public assets (Yarrow, 1986). Instead of seeking the reasons for privatization, one could instead ask why a certain firm should remain in public sector. Some would contend that with rapid technological change, natural monopoly, as a powerful argument for public ownership has simply disappeared. Such an argument would surely hold for telecommunications, not but for the rest of public monopolies. Based on studies of privatisation of natural monopolies, Ravi Ramamurthi (1999) contended. Sectors such as railways, however, are harder to regulate after privatization (see Ramamurthi, 1997). The regulatory task can be especially difficult in sectors such as highways, or water or sewage, where competition is weak or totally absent, investments are lumpier, externalities are much more important, and pay back periods run 8-10 years or more, thereby increasing uncertainty and risk for contracting parties. Renegotiations are likely to be the rule, brought on by unanticipated developments or simply opportunism on the part of investors or governments. History is full of examples in which such arrangements have fallen apart a few years after they were signed (Ramamurthi, 1999: 149). In fact, it is mainly the property right theorists who have underlined the role of ownership on economic performance (Fama, 1980). But in the twentieth century, with the separation of ownership from control in modern industry, there is a serious agency
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problem regardless of its ownership. The view that the secondary capital market and the market for managers provide adequate discipline on a firms performance is at variance with evidence, especially the US experience (more about it later). What is the evidence on the efficiency effects of privatisation? It is highly mixed, to put it mildly. Florio (2004), perhaps the most recent and definitive quantitative account covering the longest time period of the UK experience, does not show any measurable efficiency gains on account of the changes in ownership. World Banks official study (Ghalal et al, 1995), perhaps the most careful exercise at making pairwise comparisons of comparable firms in many countries, was extremely cautious in suggesting welfare gains. In fact, one of the authors of the study, Pankaj Tandon, in an independent paper was more categorical in rejecting the hypothesis of efficiency gains from privatisation in less developed countries (Tandon 1997). If this selective review of evidence is anything to go by, then one should have a modest expectation from whatever privatisation that has happened in India. Britain, the cradle of modern capitalism, has witnesses the public policy pendulum swing from nationalisation to privatisation (or denationalization) many times over, in the 20th century. While the US has a model of private ownership, and control with public regulation, continental Europe and Japan have, by and large, stayed steady with greater public ownership in such industries. Although there have been some privatisation in these economies, such attempts have remained relatively modest with limited changes in ownership and control of national assets. Thus, there seems to be no unique model that is universally sound for promoting efficiency of resource use. Perhaps it has a lesson for us: we have to search for a solution suited for our conditions that are broadly consistent with economic reasoning. Before seeking evidence on the effects of the D-P in India, perhaps it would be useful to ask how valid the premises of the disinvestment policy were to begin with. It is widely believed, as large and growing share of the fiscal deficit was on account of PSEs financial losses getting rid of them would restore the fisc back to health. How valid was such a diagnosis? Nagaraj (1993) had shown, using a widely accepted a methodology that PSEs financial losses were not the principal cause of the growing fiscal deficit in the 1980s, and in fact PSEs share in the fiscal deficit had steadily declined in the decade. In other words, the government per se was largely responsible for the growing fiscal deficit, not the enterprises owned by it. It is widely believed that PSEs respectable profitability ratio (gross profits to capital employed) is mainly on account of the surpluses of the petroleum sector enterprises whose pricing includes an element of taxation. Interestingly, as shown in Figure 5, the profitability ratio has improved since the 1980s even excluding the petroleum sector enterprises clear evidence on improvements in PSEs financial performance. But could it be merely due a faster rise in administered prices of PSEs output (on account of their monopolist position in the domestic market)? This is not so, as evident from the fact that the ratio of deflators of public sector output and GDP has declined since the mid-1980s
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If PSEs financial performance has improved as shown above, what then accounts for the growing deficits? The problem seems to lay in poor financial returns in electricity boards, road transport corporations and railways, which are probably not adequately reflected in the above measures. For instance, revenue-to-cost ratio in SEBs has remained less than one for much of the 1990s, a decade of much talked about reforms, despite a steady rise in physical efficiency of thermal power plants (as measured by plant load factor). If the above reasoning and evidence is persuasive, then they suggest that the empirical premises for the ownership reforms were rather thin. While undoubtedly public sectors financial performance needed an improvement, they were not, in the main, on account of the central PSEs that were the targets of the D-P. They mainly lay in (i) the growing expenditure and subsidies of the government, and (ii) poor return on investment in electricity, irrigation and road transport. In all these cases, the real problem is not so much public ownership, but pricing of public utilities and government s inability to collect user charges, for a variety of political and social reasons. To sum up, as the sale of equity has been quantitatively a modest, in relation to the size of public sector in India, it is hard to judge the efficacy of the reform effort. Moreover, it is perhaps too early to be definitive about the outcomes. Analytical bases of the policy reform were fragile to begin with, and comparative experience does not give much optimism for measurable efficiency gains from these changes in ownership of industrial assets. Above all, if the evidence reported is anything to go by, the premises of the D-P policy were rather weak.

What successive Finance Ministers have said about D-P in their budget speeches? Year Finance Minister Key phrases used in the Budget speech
For broad-based equity Improve management Raising resources for the PSUs Long-term disinvestments policy for enhancing budgetary receipts For improving productivity and profitability of enterprises Developing capital markets To unlock production potential of undertakings

Why disinvstment? 1991-92 Yashwant Sinha Manmohan Singh 1997-98 1999-2000 P Chidambaram Yashwant Sinha

2003-04

Jaswant Singh

Which PSUs to disinvest? 1991-92 Yashwant Sinha

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Manmohan Singh 1997-98 P Chidambaram 1999-2000 Yashwant Sinha 2000-01 Yashwant Sinha How to Disinvest and to whom? 1991-92 Yashwant Sinha

Selected PSUs Silent Non-strategic PSUs Non-strategic PSUs Up to 20 per centequity to MFs/investment institutions in public sector Do Government to retain majority equity in strategic PSUs Do Though gradual disinvestments or strategic sale Bring down government equity to 26 per cent or less Not in small lots Asset management Co. to hold residual shares post disinvestments NRF for assistance to workers (specially women)in unorganized sector; Also, for special employment schemes in backward areas After meeting VRS needs, create a Restructuring fund for PSUs. To fund social and infrastructure sectors PSU restructuring For creating workers safety net Public debt reduction Social and infrastructure sector Create Disinvestment Fund to direct proceeds for specific uses.

1991-92 1997-98 1998-99 1999-2000 2000-01 2001-02 2003-04

Manmohan Singh Chidambaram Yashwant Sinha Yashwant Sinha Yashwant Sinha Yashwant Sinha Jaswant Singh

How disinvestments proceed be used? 1992-93 Manmohan Singh

1999-2000 2001-02

Yashwant Sinha Yashwant Sinha

2003-04

Jaswant Singh

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Status of Privatisation of SLPEs (as on March 31, 2010)

State

No. of enterprises

No. privatized

No. Proposed to be privatized

C lo s e d
2 2

Working enterprises Profit making

15 34

Loss making
25 47

Andhra Pradesh Tamil Nadu Arunachal Pradesh Assam Bihar Delhi Goa Gujarat Haryana Himachal Pradesh

128 82 5 42 54 15 16 49 28 21

30 39

1 1 2 5 3 0

3 8 5

36

3 1

6 2

22 12 8

24 16 13

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JammuKashmir Karnataka Kerala Lakshwadeep Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Pondicherry Punjab Rajasthan Sikkam Tripura UP West Bengal Total

23 79 109 1 34 66 16 13 6 6 67 11 53 29 11 9 104 81 1158 35 24 10 103 1 1 4 1 3 5 15

2 1 2 2 3

3 32 34

16 38 59

6 18 2 1 3 1 10 4 3 1 14 5 2 4 1 2 10 11 10 5 25 11 44

2 3 5 1 8 0

30 20 288

68 62 519

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Ministry Of Disinvestment
Set up in 1999 Assisted by Advisors Business Allocated to Ministry of Disinvestment All matters related to disinvestment Decisions on the recommendations of the Disinvestment Commission Implementation of disinvestment decisions

Merits and Demerits of Disinvestment Merits of Disinvestment:

1. 2. 3. The capital market has fairly well-developed because of disinvestment and has encouraged the buying of the shares by the public. The National shareholding trust of disinvestment commission is advancing funds to the government against shares transferred to them without any inequality. Disinvestment is raising the resources to pay for the cost associated with the closure of enterprises declared terminally sick by the Board of Industrial and Financial Reconstruction (BIFR). Private enterprises are more concerned with consumer satisfaction. Thus disinvestment has benefitted the consumers in India in the form of lower price, better quality, and wider variety. Disinvestment has helped in improving the quality of decision of making of managers because their decision will be made without any political interference.

4.

5.

Demerits of Disinvestment:
1. 2. The large national budgetary deficit on revenue account has been increasing. The government has not used the disinvestments proceeds to finance expenditure on capital account i.e. the disinvestment policy has resulted in capital consumption rather than generation.
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3. 4.

Administrative costs of the disinvestments process have also been unduly high. There have been some apprehension that disinvestment of public sector unites might result in the Crowding Out of private corporate. 5. Total disinvestments of the public sector units would naturally concentrate economic and political power in the hands of private corporate sector. 6. The sale of equity to foreign companies has far more serious implications relating to national wealth control and power, particularly if the equity is sold below the correct price.

PSUs Approved for Disinvestment:

(1) Air India Ltd (AI) (2) Balmer Lawrie & Co. Ltd. (3) Bharat Heavy Plates & Vessels Ltd. (BGPV) (4) Bharat Ophthalmic Glass Ltd. (BOGL) (5) Bharat Petroleum Company Ltd. (BPCL)/ (6) Braithwaite & Co. Ltd. (7) Burn Standard Co. Ltd. (8) Engineering Projects (India) Ltd. (EPIL) (9) Engineering India Limited (E1L) (10) Fertilisers and Chemicals Tranvacore Limited (FACT) (11) Hindustan Cables Ltd. (HCL) (12) Hindustan Copper Ltd (HCL) (13) Hindustan Organic Chemicals Ltd. (HOCL) (14) Hindustan Petroleum Co, Ltd. (HPCL) (15) Hindustan Salt Ltd. (HSL) (16) Hotel Corporation of India Ltd. (HCI) (17) Indian Airlines (IA) (18) Indian Tourism Development Corporation (ITDC) (19) Instrumentation Ltd. (IL) (20) Madras Fertilizers Ltd. (MFL) (21) Maruti Udyog Ltd (MUL) (22) MeconLtd. (23) Minerals and Metal Trading Co, Ltd. (MMTC) (24) MSTC Ltd. (MSTC) (25) National Aluminum Co. Ltd. (NALCO) (26) National Fertilizers Ltd. (NFL) (27) National Instruments Ltd. (NIL)
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(19) NEPALtd. (20) Shipping Corporation of India Ltd. (SCI) (21) Sponge Iron India Ltd. (SI1L) (22) State Trading Corporation (STC) (23) Tungbhadra Steel Products Ltd. (24) Tyres Corporation Ltd.

Dr. M. Singh former finance minister, Govt, of India targeted Rs. 2500 crores in 199192 while actual receipt recorded Rs. 3038 crores. In the immediate following year. The Govt, targeted as to invert Rs.2500 crores but it yielded Rs. 1913 crores. It is a mystery that the Govt, expectation while was Rs. 3500 crores in the year 1993-94. It fetched nothing out of its' investment. On the other hand surprisingly enough that in 1994-95 Govt, expected an earning of Rs. 4000 crores while the realization actually was Rs. 4843 crores. 1996-97 because of a change in the Central Govt, it automatically affected the disinvestments policy in 1999-2000 Mr. Yashawant Sinha the finance minister Govt, of India made a provision in the budget Rs. 10000 crores for disinvestments but because of some unwanted turmoil and disputed Government got only Rs. 1892 crores for disinvestments. In the budget for 2002-2003 the Government desired for disinvestments issue Rs. 125000 crores.

A comparison in between different countries India China Indonesia Thailand 56 43 40 30 Road

Transport

Korea
25 16

Malaysia
19 30

Railways Air Transport Ports Internet

Access

25

32

36

39

40 51
50

30 46
56

42 38
32

32 32
46

36 29
23

26 21
26

Airport Privatization Delhi and Mumbai Airport

Objectives of Airport Privatization Providing world class infrastructure without the need to invest heavily on the part of the government Increasing the operational efficiency of the airports

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Meeting the rapid growth in Passenger Numbers Bringing International Expertise in Airport Development and Management Increasing the capacity of the present airports

Government Objectives and Decisions Key Transaction Objectives World Class Development and Expansion World Class Airport Management Timely completion and certainty of closure Appropriate regulation - achieving economic regulation of aeronautical assets that is fair, commercially andeconomically appropriate, transparent, predictable,consistent and stable while protecting the interests of usersand ensuring that the airports are operated in accordancewith world standards Fair and equitable treatment of AAI employees, includingpreservation of accrued entitlements Diversity of ownership between Delhi and Mumbai

Privatization in Power Sector

Need for Reforms Most of the electric power utilities are vertically integrated monopolies with large losses and other operational shortcomings Government's interference in the sector makes itdifficult to enforce collection and prevent theft, and increases the cost of supplying electricity to very high levels. The resulting overall subsidies to the sector are so large that they crowd out other public expenditures. Low tariffs, particularly for households and farmers, leave utilities without sufficient resources to address problems of poor quality, availability, and reliability so customers are unwilling to pay the higher tariffs needed to remedy these problems.
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Industrial consumers in India are made less competitive because of the large cross-subsidies and poor conditions of power supply, i.e., frequent power outages and unreliable availability.

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