It was not very long ago that Messrs Arun Shourie and Pradip Baijal were gung-ho about disinvestments. The disinvestment target is Rs 12,000 crore for 2002-03 and the planning commission talked about an average of Rs 12,000 to 15,000 crore over the next five years. But the disinvestment ministry upped the ante to Rs 50,000 crore in 2002-03, with Rs 24,800 crore from strategic sales (Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and the like) and Rs 26,300 crore through sales of government equity, with the government retaining managerial control (Oil India, Oil and Natural Gas Commission, Gas Authority of India Limited, National Thermal Power Corporation, National Hydroelectric Power Corporation Limited, Bharat Sanchar Nigam Limited and the like). There was some scepticism about the Rs 26,300 crore option. But after Videsh Sanchar Nigam Limited and Maruti Udyog, the strategic sales option might well have been possible.
The problems lie not outside the government, but within it. Of the Rs 50,000 crore, Rs 38,000 crore is controlled by Mr Pramod Mahajan (BSNL, Mahanagar Telephone Nigam Limited) and Mr Ram Naik (HPCL, BPCL, ONGC, Indian Oil Corporation, GAIL). Mr Mahajan converted the VSNL tussle into a father-in-law (Mr Mahajan) versus son-in-law (Mr Ratan Tata) battle, and if rumours are believed, there is even some prospect of the VSNL disinvestment decision being reversed. In any case, BSNL and MTNL have been pushed back, Mr Mahajan having muddied waters sufficiently through a merger proposal. However, the true strategic concern for Mr Mahajan is not BSNL or MTNL, but the post-Advani succession struggle.
Nor does Mr Naik want to give up HPCL or BPCL, having already exhibited a penchant for discretion and control in the petrol pump episode. Into the fray walks Mr George Fernandes, who is not even a member of the cabinet committee on disinvestment. There are several bogeys, the first of which is a monopoly (read Reliance). The present terms of the bid prevent the same company from bidding for both HPCL and BPCL. That apart, there are adequate competition policy instruments and Reliance has also offered not to bid for either. Second, there is the issue of initial public offers. While this may broad-base support for privatization, the Shourie argument about this reducing valuation is also correct. Third, the anti-privatization brigade talks about not selling off profit-making units. Profits for monopolies with administered pricing mean little and the relevant number is not profits made, but returns from investments in alternative ventures. And following the Mahajan lead, Mr Naik has also raised the flag of a HPCL-BPCL merger. Since the Rashtriya Swayamsevak Sangh is vehement in its opposition, the prime minister has a tough nut to crack. So far, he has refused to mediate. This bodes ill for reforms. Now that one reforming Arun has left the government, perhaps the second will follow suit. It is somewhat paradoxical that three ministers against whom resignation demands have been made (Messrs Fernandes, Naik, Mahajan) will force out a minister who should stay.