In the past few days Central Government has been forced to withdraw disinvestments in Naveli Lignite Corp by belligerent allies. Media has branded that the reforms have come to a standstill given the developements. Such comments by the media sometimes make me wonder whether disinvestments in super profitable PSU's only means reforms. Such views only give a lopsided and false view of structural adjustments needed for the Indian economy.
SO what can the government do in face of stiff opposition from the allies? Can the reforms be made in current situation where government has the constraint of allies and left.
Well...It is all about creating options... being sincere to the purpose
I think using disinvestment as a tool to bridge fiscal defecit is not going to solve any purpose. Britain sold it's most profitable PSU's in 80's under Iron Lady Margaret Thacher now find that they now control none of them. I don't know how much did this selloff help to bridge fiscal defecit, but selling these companies at bargain price is not a good idea.
The fiscal hole is too big to be bridged by selloff of profitable stocks. This will neither help solve the fundamental probs faced by PSU's.
I think government has to look at the option of strengthening the PSU's by:
allowing to raise money from the market rather then selling own share
This will raise money for PSU's which they can use for their expansion plans and investments etc. In fact even common minimum prog of UPA supports this.
Giving operational autonomy to PSU's
This is an old and off repeated issue. But franky speaking without giving autonomy to PSU's and asking them to face the competion is like hitting a person with his hands tied in the back.
I sicerely believe that PSU's have never been allowed to run as business ventures. What PSU's require are good management and consequently good resources . The very first step is then bringing all PSU's under one ministry I call PSU ministry.This ministry can also act as an agency to make the PSU's to follow best practices that it can itself set. I hope this will also free PSU's from 750 odd laws and regulations that they have to follow currently.
The second step would be to lift the ristriction on salaries though I think this can be achieved by the proposed ministry.
Looking at these options I do not think any ally will oppose these reforms as they are inherently do not cause any opposition.
