The government’s decision to ask all profit-making public sector units to list their shares in the stock exchanges to the extent of 10 per cent is to be seen largely as a revenue raising measure. Apart from providing resources, it will subject the PSUs to the discipline, including the push to maintain profits, that listing in the market would entail but will not fundamentally alter the way they function. In his budget speech, the Finance Minister emphasised the importance of disinvestment more from the viewpoint of ushering in widespread shareholder participation and less from the revenue angle. The budgetary target was just Rs.1,120 crore. The latest decision paves the way for a substantially larger mobilisation of resources through the sale of a small portion of its equity stake in select undertakings. Each undertaking will have to offer at least 10 per cent of its paid up capital to comply with the current stock exchange listing norms. Only 48 of the estimated 248 central government enterprises are listed on the stock exchanges. Since profitable companies can collect substantial sums by way of premium on the shares offered, the government can expect a sizable mop up. To make the disinvestment process more acceptable, the government has undertaken to deploy the proceeds in approved social sector schemes, possibly including flagship programmes such as the Bharat Nirman and the NREGS.
A successful disinvestment exercise of the magnitude contemplated will help in reining in the fiscal deficit, now estimated at around 6.8 per cent of the GDP. It might allow the government a greater leeway in continuing the stimulus packages that have so far delivered good results. Yet it is both early and unwise to bet on the outcomes of such a major policy decision. The disinvestment programme has always been controversial. Apart from building a political consensus, the government should preferably co-opt the employees of the undertakings listing the shares. Besides the government, several others will benefit from the exercise. The retail investors stand to gain by way of access to quality stocks. Individual undertakings will benefit through wider exposure that a listing confers. They will also be subject to the accountability norms enforced by public shareholders. Ahead of the public offer, certain critical steps — notably the “corporatisation” of the PSUs recommended by the erstwhile disinvestment commission — will help in achieving a higher market capitalisation. Finally, the programme contemplated ought not to be evaluated over the short-term. Lessons from the recent past reinforce the view that the process of disinvestment is as important as any particular transaction.