Q: Let’s come to some of the reform measures that the government has hinted at. To begin with they have spoken about disinvestment. The economic survey says that we should have disinvestment of an order of Rs 25,000 (crore) a year. In an earlier interview Montek Singh Ahluwalia that the government needs to sketch out a three-four year schedule of disinvestment and he says that the only limit is 51%. How important a measure in your eyes would disinvestment be?

A: I think the programme of disinvestment is very much needed. You may recall that in 1991, I chaired the committee on disinvestment. That was the first committee that really talked about disinvestment. I think the government without sacrificing its control over the companies can still add to the exchequer by disinvesting. That is what we call minority disinvestment.

But I would say that looking at the way in which things have happened in the case of commercial banks, even if the private sector, for a minority shareholder it has a significant impact on the way in which the company functions.

Therefore both from the point of view of augmenting the revenues and also from the point of view of improving the efficiency, of the functioning, of the working of the enterprises, disinvestment is a good idea. I think we really need to set out in some detail which companies in which we will invest up to 10%, in which companies we may disinvest more than 10%.

But roughly about 5-10% of the total invested capital can be disinvested and that would add significantly to the revenues, which we need very badly.

Q: But if we are only disinvesting somewhere around 5-10% and the government remains in complete and total control of the concerned PSU, will we get the best price for the shares we are disinvesting? Surely to do that, you need to actually privatise it?

A: The whole question is that we are talking about profit making enterprises. If the enterprises are making profits then it really implies that they are being run reasonably efficiently. Therefore we need to make a distinction between profit making enterprises and non-profit making or loss making enterprises.

In the case of loss making enterprises, the suggestion that you make is very valid. Probably we need to find a strategic partner or probably the government should sell the enterprises through some mechanism of auctioning or something similar to it.

But in the case of profit making enterprises, it is only a question of improving the accountability of the enterprise. The accountability can be increased or enhanced by disinvesting a portion. I think minority disinvestment as it is sometimes called, is not a bad idea at all.

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