The Telegraph
Since 1st March, 1999
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Shourie, selloff frozen in their tracks

New Delhi, Sept. 7: Two rounds of parleys among Cabinet ministers spread over a total of four hours resulted in a logjam in the divestment process with a decision to stop all work on diluting government stake in key oil, telecom and energy companies for the next three months.

A morose-looking disinvestment minister Arun Shourie announced late this evening that the government had decided to stall privatisation of oil companies Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL).

The dilution of government equity through market offerings in Indian Oil Corporation, Gas Authority of India Ltd, Oil & Natural Gas Corporation, Bharat Sanchar Nigam Ltd and National Thermal Power Corporation has also been frozen.

Even sale of National Fertiliser Ltd, a company whose privatisation the Akali Dal, a partner in the BJP-led coalition, had opposed, will be deferred till a fertiliser policy has been chalked out by fertiliser minister S.S. Dhindsa, an Akali nominee.

However, the government will go ahead with the sale of Orissa-based Nalco, Shipping Corporation of India, Madras Fertilisers Ltd, a public issue in car-maker Maruti Udyog Ltd and some smaller companies.

The two meetings, the first an informal meeting of senior Cabinet ministers and the second of the Cabinet committee on disinvestment, also decided that public sector units and cooperatives where the government has a majority stake will be allowed to bid for other PSUs only as special cases where the ministry which runs them asks for permission on their behalf to do so. In the normal course, they will stand debarred from bidding for PSU stake.

Shourie, who refused to comment on the decisions or admit that this marked a defeat for him, said: “Let us see what happens over the next few months... but I don’t think we will now be able to reach our disinvestment targets.”

The only silver lining for the minister, who has made privatisation a mission, was an agreement to sell Delhi’s government-owned Hotel Ranjit for Rs 30 crore to a consortium, in which Reliance has an interest, and a decision that the finance ministry will come up with a plan to set up an asset management company for PSUs that are being put up for sale.

Even an annual calendar for divestment, which Shourie had proposed, was shelved at the meeting, where those who opposed the selloff and especially the disinvestment minister’s favoured route of strategic sales had the upper hand.

“There was a well-structured route for disinvestment, it was working well... but it did not in this case,” Shourie said.

He, however, emphasised that the definition of strategic firms — such as defence and rail transport companies — which were not to be sold by the government had not been expanded yet. In the same breath, he added: “The government can well give a new definition to the term but nothing has been done right now.”

Defence minister George Fernandes, petroleum minister Ram Naik and human resources development minister Murli Manohar Joshi, who were present at the meetings, had demanded a change in the definition of the term “strategic industry” to include oil, telecom and power sector firms. They had also sought an end to the policy of strategic sales to private companies, favouring divestment through open market offerings to retail investors.

Joshi was the most vocal of Shourie’s opponents and stood firm on the issue of not allowing any strategic sale of oil firms, pointing out that if this was done, it would result in a monopoly which would benefit a single corporate group.

The entire concept of strategic industry may well have been altered totally if foreign minister and former finance minister Yashwant Sinha and commerce minister Murasoli Maran did not intervene. They pointed out that the concept had evolved over time and had been accepted by the Cabinet in the past and therefore should not be reopened now, especially as this was not a meeting of the entire Cabinet but just of a part of it.

Despite Sinha and Maran supporting Shourie, the Cabinet remained divided on whether strategic sales should at all take place or not. This prompted Prime Minister Atal Bihari Vajpayee to stall all divestment in the sector, which Fernandes, Naik and Joshi were keen to keep under government control.

Shourie, who was asked on how the government proposed to settle the deadlock, simply said: “I do not know. Nothing has been decided on what is to be done right now.”

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