BHEL the cat

The Cabinet Committee on Economic Affairs has decided to sell 10 per cent of government holding in Bharat Heavy Electricals Limited (BHEL). ...

The Cabinet Committee on Economic Affairs has decided to sell 10 per cent of government holding in Bharat Heavy Electricals Limited (BHEL). At present, the Central government holds 67.7 per cent of BHEL. The decision is welcome, even though bringing the government share down to 57.7 per cent will not change the management of BHEL, which will remain sarkari. This, incidentally, is the first disinvestment in this financial year and it is heartening that the UPA government is going ahead with this process despite the Left’s opposition. After all, all the CMP promised was that profit making PSUs will not be privatised. A ten per cent sale does not imply privatisation. It will not dilute the public sector character of the PSU, and will thus be in line with the CMP. In addition to raising about Rs 900 crore, the sale of shares will lay the ground for the further privatisation of PSUs through a wide dispersion of ownership — a worthwhile objective in itself.

The ‘strategic sale’ route to privatisation — when a public company was sold to a private one which has the managerial capacity to run it and already has interests in that industry — is a troublesome route to disinvestment. It is not merely issues of transparency in the bids that are a source of suspicion in strategic sales. The privatisation of HDFC and ICICI which happened slowly and through the public sale route has not only been politically acceptable, but has provided a far better model for management and governance, than have family run companies. This model must be followed for other PSUs to improve performance and efficiency.

It is also important to reiterate that proceeds from all disinvestment during the year are to go to the corpus of the National Investment Fund that is to be managed by public sector fund managers. Returns on these funds would be used in the social sector for education, health and employment generation and as capital outlays for the revival of ailing PSUs. The Left has, until now, objected to all efforts by the Centre to sell off any part of public sector enterprises, and the CPM has said it will oppose this one as well. However, the sale would also be consistent with the Marxist notion of public ownership of the means of production. In the Soviet system as well, public ownership took two forms — there were collective farms and state owned farms. State ownership is not the only kind of public ownership. It is unreasonable to oppose a diversified public ownership through the sale of shares to the public, including to the workers of the enterprise. The government should stick to its guns and go ahead with the sale.