Tentative step

The green signal given by an Empowered Group of Ministers for the sale of government stake in the Oil and Natural Gas Commission (ONGC) has brought disinvestment back on the agenda.

Stake sale in another major public sector company, Bharat Heavy Electricals Ltd, has been decided but may not immediately take place. According to the programme, 5 per cent of the shares in ONGC may be sold through the auction route and it may fetch about Rs 12,000 crore at current market price. The returns from disinvestment are far short of the target of Rs 40,000 the government had set for itself. Till now it has managed to mop up only Rs 1,150 crore and it has been officially admitted that achieving the target is impossible.

The government cannot perhaps be faulted for the inability to make the disinvestment programme a success. It had shed the ideological resistance to selling stakes in companies which were jewels in the national crown, and had successfully sold the shares in many of them in the past. It had plans to continue the process this year and some important companies like SAIL were on the radar. But the crash in the stock market for the better part of the year and the resultant lack of enthusiasm on the part of the investing public would have forced the government to sell the shares at much less than their right valuations.

Now that the market is showing signs of coming back to life it can speed up the programme, though much of it will have to be done in the coming financial year.  Making a success of the plan is important because of the high fiscal deficit and fall in government revenues. Last year there was a one-time windfall of a Rs 1,00,000 crore from 3G auctions but next year it will have to speed up things. Social welfare and anti-poverty programmes, especially the proposed ambitious food security scheme, will cost a lot and money will have to be found for them.

The auction-based offer for sale route which is being contemplated for stake sale also has advantages as it is simpler and faster than other methods and will help the company to get the best possible price in the market. SEBI has already issued the necessary guidelines so that minority shareholder interests will also be protected. 

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