POLICY OF SALE OR DISINVESTMENT OF PUBLIC SECTOR UNDERTAKINGS

UPDATED ON 2ND NOVEMBER 2020

There is a strong policy initiative of disinvestment of PSUs like BPCL, Air India, Hindustan Copper Limited, and many more Defence PSUs initiated by India's Government.

 Such a policy is fundamentally flawed.

1) An Indian Private Sector entity will make an outright acquisition of a PSU from the Indian Banking sector's funding. The burden is then borne by the banking sector, already suffering from enormous NPAs. 2) During the Covid period, all the airlines in the world are in deep financial distress. It is irrational to dispose of Air India, despite its accumulated losses of Rs 50000 crores or so, at a massive discount in the name of progressive reforms.

 3) The sale of some of the Indian airports to corporates has raised questions on the entire modus-operandi and whether terms of the sale are commercially viable.

 4) The transparency of the sale or the actual evaluation of PSUs will have an element of subjectivity and seen or unseen preferences leading to controversial debate on undervaluing the assets. 

 5) Indian Defence PSUs have only one buyer—Indian Army, Airforce, Navy. Indian defense forces need weapons of the latest and established technology that may not be feasible through the privatized Defence PSUs. However, the intent to buy these Defence PSUs will facilitate comfortable credit facilities from the banks that will be perpetually sunk.

 6) Post disinvestment intervention by the Government or third-party opposition is sure to transmute any sale-purchase agreement into a dispute. 

7) Can Indian courts provide objective decrees of verdicts, especially when the GOI is a respondent or a petitioner? 

8) Foreign investors participation directly in the sale process is extremely doubtful, especially when the sword of retrospective laws threatens to exterminate them any time.

 Disinvestment for the sake of reform is sure to deform the Economy. Hope privates and Indian Banks will be more prudent this time.

AIR INDIA SALE --EDITORIAL INDIAN EXPRESS-- 2ND NOVEMBER 2020