Public sector reforms

PRIVATISATION IN INDIA: G. Ganesh; Mittal Publications, A-110, Mohan Gardens, New Delhi-110059. Rs. 650.

THIS BOOK is the fifth in a series on concepts and application in management, edited by the well-known management expert, Prof. Iswar Dayal. Of the five books published so far in the series, Mr. Ganesh has authored three and - most interestingly - all of them have been on privatisation/divestment of state-owned enterprises. That is not surprising considering the rich background of the writer in the chosen field. A senior IAS Officer, Mr. Ganesh was the Member-Secretary of the Disinvestment Commission, set up by the United Front Government and now disbanded. Apart from having a thorough hands-on experience in advising official policy on privatisation matters, he has amply demonstrated the much needed conceptual skills, through academic dissertations and two well- received books.

The first, Privatisation Experience Around the World was published in 1998 and the second, Privatisation, Competition and Regulation in the U.K. a year later.

Privatisation in a general sense refers to the policy that dictates the sale of government-owned units. Most countries who now have such a policy had a strong public sector once. It may not have been ``of the commanding heights'' (of the economy) as in India but still undertaking activities which, according to later day thinking, is better done by the private sector. Yet in India and in many other countries public sector continues to have enormous relevance and there is no unanimity as to how soon and in what form the government should divest its stake.

In a specific sense privatisation is different from disinvestment. The former aims at a total sale of government stake while the latter is a calibrated approach with the government-owner selling its stake in instalments. In India there has been no privatisation of any unit in the strict sense. Both in Modern Foods and now Balco the government has shed its majority stake but still keeps a portion of its equity. (In Balco it is at 49 per cent). Most of the controversy has been over the point at which the government cedes management control by selling its majority stake. Despite being an official policy for nearly a decade, the sell-off programme has resulted in only two units passing off into private hands. But the rationale to press ahead seems compelling from many standpoints including of course the fiscal angle.

The author has done extremely well once again, to present the reader with a readable book on the nuances of the privatisation programme. This time the focus is quite appropriately on the Indian experience. Practically everyone connected with the subject - officials, trade unions, stake holders such as equity holders as well as students, will benefit by reading the book. With big ticket privatisation announced - involving names such as Air India, Indian Airlines and the VSNL - there is a strong and urgent need to understand the subject. The Balco strategic sale - so called because the government ceded management control along with a large chunk of equity - is still mired in controversy. There are numerous lessons to be learnt from that experience. Nobody could have anticipated the political card which Mr. Ajit Jogi played. Although forced to backtrack, he has added an extra dimension to the already complex issue. Future buyers of, say the VSNL or the two airlines, will in all probability build a risk premium or ask for suitable covenants to lessen the effect of such unanticipated and untoward happening.

All these strongly suggest that the literature on the subject will keep expanding. There can be few people more qualified or experienced than Mr. Ganesh to keep us updated.

C. R. L. NARASIMHAN

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