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TUESDAY, FEBRUARY 23, 2010, DELHI ° WWW.LIVEMINT.COM
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ger makes sense for the government to keep its capital in areas where the private sector has managed well. Instead, this needs to be deployed in areas where private participation has not yet produced adequate results or is unlikely to do so for a long time. Merely by listing public sector companies on stock exSEBASTIAN D’SOUZA/AFP changes, there could be productivity gains through indiIt has perhaps rect channels such as engenerated more hanced transparency and controversy than any accountability, economists such as Kelkar have argued. A other policy decision linked argument is that the since the reforms began current structure of government ownership has yielded B Y S ATISH J OHN & meagre returns on capital. S ANJIV S HANKARAN “They give you a return ························· which is around 2%. If these MUMBAI/NEW DELHI PSUs (public sector units) hen Videsh Sanchar were in education and health, Nigam Ltd (VSNL) then a return of around 2% is was sold to the Tatas, understandable,” Gangopadthe telecom company’s then hyay said. “Most of these PSUs chairman and managing direcare in areas where private sector S.K. Gupta used a metator units operate, and they phor that partly explains why don’t earn 2% on their capital. disinvestment hasn’t always So clearly, there is a waste.” had a smooth ride in India. For the moment, it would ap“It is like an arranged marpear there has been grudging riage of a daughter,” Gupta acceptance of disinvestment as said on 13 February 2002 at Strategic sale: A 13 February 2002 photo of Tata group chairman Ratan Tata (right) holding a replica of a an inevitable development by Bombay House, the Tata head- cheque for Rs1,439.25 crore with then communications and technology minister Pramod Mahajan (centre) all sections. However, the UPA quarters. “The daughter and VSNL’s managing director S.K. Gupta in Mumbai. government has clearly indicatshould continue to deserve all ed it would retain the public the love and affection.” strong balance sheet that ena- increased the magnitude of re- sector nature of its companies Gupta was alluding to the bled it to expand into new ceipts finance minister Pranab by keeping majority ownership. fears of millions of public secbusiness areas and markets,” Mukherjee can anticipate The stand appears conservative tor employees about job cuts Addepalli said. The Tatas used through disinvestment in the when juxtaposed with the sugaccompanying privatization, than a single year’s service tax that cash astutely, putting coming Budget from estimated gestion by the chairman of the especially when he collection. some of it into Tata Teleservic- receipts of Rs1,120 crore in the Prime Minister’s economic adpleaded for patience D.K. Srivastava, director es Ltd and making a few current year. visory council, C. PINCODE from the Tatas for “acof the Madras School of big-ticket acquisitions such as This new phase Rangarajan, in climatization”. Economics, who was a Tyco Global Network and Tele- has also been April 1993. Ratan Tata, chairman member of the 12th Fi- globe that transformed the In- marked by econoRangarajan, as of Tata Sons Ltd, was nance Commission dian firm into a global opera- mists with experihead of a comimpassive, merely say(2002-04), said money tor of undersea cable networks ence in governmittee on disinBANDRA ing that the “profesfrom asset sales couldn’t and satellite links. ment putting (Maharashtra) vestment in sional organization” be relied upon as it wasn’t “VSNL has successfully forth a clear intel1993, suggested 2020 would be leveraged ful“a steady stream”. transformed itself from a sin- lectual and ethithe government ly in the coming years. Disinvestment has per- gle-market, single-business cal case for disinsell 74% or all of BANDRA A large replica of a cheque for haps generated more contro- company to becoming a lead- vestment. a public sector (Mumbai) around Rs1,439 crore was versy than any other policy de- ing global provider of commuIn January unit if it was not handed to then communica- cision since 1991. nications services,” Addepalli 2010, Vijay Keloperating in an tions minister Pramod MaPradip Baijal, who became said. “Tata Communications kar, chairman of area explicitly hajan to symbolize the money secretary in the disinvestment has invested over Rs10,000 the 13th Finance reserved for the the Tatas had paid. ministry in 1999, was in charge crore over the last seven-eight Commission, public sector. These concerns that Gupta at the time of the VSNL sale. years in building infrastruc- said: “When the The jury is out referred to translated into the He recalls the current Prime ture and services capabilities, state chooses to own Re1 of on where the fourth phase of stout resistance to asset sales Minister cautioning him about in India as well as globally. something, this comes at the disinvestment will go. Baijal by the Communists, which ef- the pitfalls. Tata Communications has also cost of owning Re1 of some- said “it will evolve into privatifectively put disinvestment “Manmohan Singh told me more than doubled its organi- thing else.” zation” of the kind India saw into cold storage during the that you can get into trouble,” zation size during this period.” Kelkar pointed out the almost a decade ago. SrivastaUnited Progressive Alliance’s Baijal recalled. “People could The VSNL strategic sale came state’s assets need not remain va, on the other hand, said dis(UPA) first term from 2004 to question your motives.” during the height of India’s dis- static for all time. In his investment would be marked 2009. Now that the CongressEight years have passed investment experience, which speech, he cited analysts who by an incremental approach, led government doesn’t need since VSNL was privatized. Baijal demarcated into three had valued the Central public even in the absence of political Communist backing, privatiza- The Tatas transformed the or- phases: The first was between sector companies at between opposition. tion is back on the agenda. ganization into a multinational 1991 and 1998 when small $400 billion and $500 billion For the moment, disinvestDisinvestment first caught enterprise even as its monopo- holdings of public sector com- (Rs18.5-23 trillion), or close to ment appears set to live up, at the public’s attention when ly over international long-dis- panies were sold; the second 50% of the size of the economy. least partially, to the promise it Yashwant Sinha, finance min- tance telephony was ended lasted from 1998 to 2006 and Kelkar’s views were echoed showed in 1991 as a source of ister in the short-lived Chan- ahead of the promised dead- featured the strategic sale of by Shubhashis Gangopadhyay, revenue. For VSNL and Balco, drashekar government, pro- line. Much else has changed at firms such as VSNL, Indian who was economic adviser to growth may be stymied in the posed in the interim budget of VSNL, including its name; the Petrochemicals Corp. Ltd and the Union finance minister in future if the government con1991 to disinvest 20% of hand- company is now called Tata Bharat Aluminium Co. Ltd 2008. “If we can logically and tinues to hold a sizeable equity picked public sector firms. Communications Ltd. (Balco). In the third phase since consistently argue that we stake. Unless the government A few months later, Sinha’s “VSNL had a strong position then, the government has been need education and health for decides either to retain or alsuccessor as finance minister, in the international long-dis- back to selling small chunks. every citizen, since it is their low their stake to get reduced, Manmohan Singh, started the tance voice and Internet segIn 2009, disinvestment birthright, then it is the re- the new promoters may find it process and surpassed budget ments of the telecom business,” moved to what could possibly sponsibility of the government tough to continue with their estimates by raising Rs3,037.74 said Srinivasa Addepalli, senior be classified as the fourth to find the resources,” he said, ambitious expansion plans, crore in fiscal 1992. However, vice-president, corporate strate- phase. The UPA government providing an ethical context because there is only so much since then, disinvestment re- gy, at Tata Communications. explicitly linked disinvestment for disinvestment. you can raise as debt. ceipts have generally fallen It also came with a robust in- to investments in social sector The essence of the argument satish.j@livemint.com short of budget targets. Since frastructure as well as a sound areas such as education and by Gangopadhyay and Kelkar 1991, aggregate proceeds from technical team that managed health. Opposition to disinvest- is that a huge amount of govdisinvestment (excluding the the international and Internet ment seemed to fade as the re- ernment capital is locked up in www.livemint.com recent NTPC Ltd issue) have networks, apart from generat- ceipts were directly linked to industries where private com- For all of Mint’s Budget coverage, go to been Rs57,682.93 crore, less ing cash. “The company had a benefiting the poor. That has petitors are thriving. It no lon- www.livemint.com/budget
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purred in part by the controversy over Bt brinjal, the government is planning a regulatory board that will oversee all the new nanotechnology devices that come to market. “The reason we had problems with Bt brinjal is because we don’t have a strong regulatory body,” said T.N. Rao, director of the Centre for Nanomaterials at the International Advanced Research Centre for Powder Metallurgy and New Materials, a Hyderabad-based lab. “Nanotechnology is being used for medicine and health. We must be sure that it is being used safely.” Nanotechnology, the study of materials on a sub-microscopic scale, is one of the hottest trends in global science. The government has already spent part of a special Rs1,000 crore fund for nanotech research. Nanoparticles are at least 1,000 times smaller than a human hair, and have huge potential in medicine, agriculture and lifestyle products. But products based on nanotechnology have also created controversy. When Samsung released a “Nano Silver” washing machine in the US, environmental groups claimed the silverlaced waste water might damage the earth. The US’ Environmental Protection Agency temporarily banned the machine, and is in the midst of drafting regulations specifically for nanotechnology. A version of that machine is available in India. Regulation will present its own set of challenges. “We don’t even have standards for judging what makes a product dangerous,” said Rao. “On what basis will they regulate?” There’s also the risk nanotechnology might end up in the same stew at Bt brinjal. The genetic engineering approval committee, a statutory body formed under the Environment Protection Act, conducted a series of tests on Bt brinjal but passed the final decision on to the ministry of environment and forests. The resulting debate went on for months and involved politicians, nonprofit organizations and courts. “The regulatory board will have experts from all different fields, including medicine and agriculture,” said Rao, who heads the department of science and technology’s Nano Mission, responsible for giving out the research funds. Rao first announced the potential regulation over the weekend at the International Conference on Nano Science and Technology, a nanotechnology conference at the Indian Institute of Technology, Bombay. He said the board will be formed sometime next month.