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New Indian govt may have to keep disinvestment policy

ANN/ THE STATESMAN
Whatever political noise the Left front may make, the market will ultimately rule the day and the new government may have little option but to carry the disinvestment process forward.
Though the Left parties have been making impossible demands on the yet-to-be-formed government, twice sending the capital markets into a tailspin, official sources refute the stand taken by the CPI and CPI-M.
"It is not just profit-making companies alone that have been divested," a senior official said. "In
fact, even those companies that appear to be profit-making are really not so."
The history of India's public sector shows that it generates a return that is significantly lower than the cost of capital. Profits shown by some of the public sector units (PSUs) is either because of the monopoly they enjoy or their price is determined by the government, the official said.
Moreover, attempting to revive the fortunes of loss-making units have been an extremely expensive, if not impossible, exercise.
These, as one political analyst said, are not ideological issues but
matters of simple economics.
And disinvestment appears to have stuck in the throat of the new government in the making.
No prize for guessing. But the question is, will the new Congress-led alliance partnership be able to weather the storm enough to take a pragmatic decision on this crucial turn the Indian economy has taken?
Economists advocate a pragmatic view, saying that a middle path needs to be taken.
"We cannot dismantle or buyback what has been hived off," contends Sunanda Sen, a former professor in the Jawaharlal Nehru University. "Government can be a
regulator, controlling policies on pricing, public participation and employment."
Agreeing with the stand taken by the Left parties, she said foreign exchange support is not required. Hence, the task before the new government is to find how to turn around the loss-making units.
However, the government experience has been that loss making companies are hard pressed to even find an advisor to set the disinvestment process rolling.
Notwithstanding this, government has continued to support several loss-making companies purely in public interest.