Privatisation Serves A Public Purpose–the economic times

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The finance minister’s budget speech was unabashedly bold on strategic sale and privatisation of central public sector enterprises (CPSEs). The FM did state that a ‘bare minimum’ of CPSEs would operate in four strategic sectors and the rest privatised, and all CPSEs in non-strategic areas would be privatised.

The welcome divestment strategy makes perfect sense, policy designed as it is to better leverage private sector efficiency, provide resources for developmental purposes and generally redeploy valuable assets earning suboptimal returns.

The fact is that CPSEs post modest returns on equity, over two-thirds of profits of CPSEs are confined to just three sectors, petroleum, coal and power; over 150 CPSEs incur huge losses amounting to Rs 45,000 crore annually. The political class must reach a clear consensus on privatisation and wider shareholding in public sector assets, even as CPSEs step up their productivity levels with transparent board-managed corporate governance. In tandem, the Centre must reach out to CPSE trade unions and communicate that greater investment space for the private sector is for the greater good.

The disinvestment target for next fiscal,  Rs 1.75 lakh crore, seems daunting, but note that divestment of BPCL, Air India, Shipping Corporation of India, IDBI Bank and Container Corporation, among others, is a carry-over from this pandemic-affected fiscal, and so can well be expected to be completed soon. Two public sector banks and one public sector general insurance company will also be privatised. The Centre’s resolve to form a special purpose vehicle for unlocking asset value in CPSEs, like real estate, is sensible, as would timely closure of sick and loss-making units. Privatisation serves a public purpose.

This piece appeared as an editorial opinion in the print edition of The Economic Times.


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