Economics

ACKNOWLEDGEMENT
We would like to express sincere gratitude to Ms.
Sapna.S & all those people who have given unending
support and saw us right through the completion of
this project.
We are highly indebted to them for their
guidance, for providing the needed information and
also for the valuable suggestion in enhancing the
standard of the report and we also thank for
reviewing the entire manuscript with pain staking
attention to all details and more so for their ability to
spot and correct the minor error which inadvertently
crept in.
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Economics

CONTENTS
INTRODUCTION.
COMMON MINIMUM PROGRAMME .
CASES:
!"#$%&, '%(% )!$(.
!"#$%&, $*&+,&# (,#!-.
)(!-.

4. DISCUSSION.
5. TABLES: [1991-92 to 200-04!
M!#(,.,-,/*!S $.,+#!..
&!$-*S$#*," #(&,%/(
S#&$#!/* S$-!.
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Economics
INTRODUCTION:
Disinvestment is the action of an
organization or government of selling or
liquidating an asset or subsidiary.
E"OLUTION O# DISIN"ESTMENT POLIC$
*t has been decided that /overnment would disinvest up to 01 per cent of its
e2uity in selected public sector undertakings, in favour of mutual funds and
financial or investment institutions in the public sector. #he disinvestment,
which would broad base the e2uity, improve management and enhance the
availability of resources for these enterprises, is also expected to yield &s.
0,311 crores to the exche2uer in4554650.
#he modalities and details of implementing this decision, which are
being worked out, would be announced separately. #he policy, as enunciated
by the /overnment, under the +rime Minister Shri handrashekhar was to
divest up to 017 of the /overnment e2uity in selected +S!s in favour of
public sector institutional investors. #he objective of the policy was stated to
be to broad6base e2uity, improve management, and enhance availability of
resources for these +S!s and yield resources for the exche2uer.
PROBLEMS ASSOCIATED WIT% DISIN"ESTMENT:
$ number of problems and issues have bedeviled the disinvestment
process. #he number of bidders for e2uity has been small not only in the
case of financially weak +S%s, but also in that of better6performing +S%s.
)esides, the government has often compelled financial institutions, %#* and
other mutual funds to purchase the e2uity which was being unloaded
through disinvestment. #hese organi8ations have not been very enthusiastic
in listing and trading of shares purchased by them as it would reduce their
control over +S%s. *nstances of insider trading of shares by them have also
come to light. $ll this has led to low valuation or under pricing of e2uity.
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Economics
9urther, in many cases, disinvestment has not really changed the
ownership of +S%s, as the government has retained a majority stake in them.
#here has been some apprehension that disinvestment of +S%s might result
in the :crowding out; of private corporates <through lowered subscription to
their shares= from the primary capital market
$n important fact that needs to be remembered in the context of
divestment is that the e2uity in +S%s essentially belongs to the people. #hus,
several independent commentators have maintained that in the absence of
wider national consensus, a mere government decision to disinvest is not
enough to carry out the sale of people;s assets. *nade2uate information about
+S%s has impeded free, competitive and efficient bidding of shares, and a
free trading of those shares. $lso, since the +S%s do not benefit monetarily
from disinvestment, they have been reluctant to prepare and distribute
prospectuses. #his has in turn prevented the disinvestment process from
being completely open and transparent.
-astly, to the extent that the sale of government e2uity in +S%s is to the
*ndian private sector, there is no decline in national wealth. )ut the sale of
such e2uity to foreign companies has far more serious implications relating
to national wealth, control and power, particularly if the e2uity is sold below
the :correct; price.
*f the disinvestment policy is to be in wider public interests, it is
necessary to examine systematically, issues such as 6 the :correct; valuation
of shares, the :crowding out; possibility, the appropriate use of disinvestment
proceeds and the institutional and other prere2uisites.
.isinvestment is generally expected to achieve a greater inflow of
private capital and the use of private management practices in +S%s, as well
as enable more effective monitoring of management discipline by the
private shareholders. Such changes would lead to an increase in the
operational efficiency and the market value of the +S%s. #his in turn would
enable the much needed revenue generation by the government and help
reduce deficit financing.

(owever, to date the market experience has been otherwise. #he large
national budgetary deficit on revenue account has been increasing. #he
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Economics
government has not used the disinvestment proceeds to finance expenditure
on capital account> i.e. the disinvestment policy has resulted in capital
consumption rather than generation. $dministrative costs of the
disinvestment process have also been unduly high.
#he actual receipts through disinvestment have often fallen far short of
their target. .uring the period 4554650 to 01106011?, the government had
targeted the mobili8ation of about &s. @A,?11 crores through disinvestment,
but it could actually mobili8e only &s. ?1,54@ crores
$fter a great deal of initial excitement and reservations, disinvestment
of public sector enterprises has become an ongoing process in the country.
)ut the debate continues, with some enthusiastically endorsing it and others
expressing apprehensions and opposition. )y and large, this debate has been
at the ideological level. *deology cannot be kept out of the debate, but
disinvestment has other dimensions too. #he modalities of disinvestment are
important. So are its conse2uences.
,ne possibility is strategic sale with complete transfer of management to
an enterprise in the private sector. Modern 9ood *ndustries, )harat
$luminum ompany -imited <)$-,=, BS"-, entaur (otel $irport
Mumbai and a few others were sold off in this manner.
$ second procedure adopted was partial disinvestment whereby the
government still retained effective control by holding 34 per cent or more of
e2uity. #his has been the procedure adopted in the majority of cases. #his is
not a simple procedure, though. $ decision has to be made as to who would
be eligible to ac2uire the shares 6 other enterprises, employees or the public
at large 6 and the manner in which the shares are to be off6loaded.
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N&t'o(&) Co**o( M'('*+* P,o-,&**.
#he policy of the /overnment as stated in the "ational ommon
Minimum +rogramme of May, 011C is as followsD E#he
/overnment is committed to a strong and effective +ublic Sector
whose social objectives are met by its commercial functioning.
)ut for this, there is need for selectivity and a strategic focus. *t is
pledged to devolve full managerial and commercial autonomy to
successful, profit6making ompanies operating in a competitive
environment. /enerally, profit6making ompanies will not be
privatised.

$ll privatisations will be considered on a transparent and
consultative case6by6case basis. #he existing E"avaratnaF
companies will be retained in the public sector while these
companies raise resources from the capital market. While every
effort will be made to moderni8e and restructure sick public sector
companies and revive sick industry, chronically loss6making
companies will either be sold6off, or closed, after all workers have
got their legitimate dues and compensation. #he /overnment will
induct private industry to turn around companies that have
potential for revival.
#he /overnment believes that privatisation should increase
competition, not decrease it. *t will not support the emergence of
any monopoly that only restricts competition. *t also believes that
there must be a direct link between privatisation and social needs G
like, for example, the use of privatisation revenues for designated
social sector schemes. +ublic sector companies and nationali8ed
banks will be encouraged to enter the capital market to raise
resources and offer new investment avenues to retail investors.F

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CENTAUR/ 0U%U BEAC%
$ true6blue 3 star .eluxe, the entaur 'uhu rises sphinx
like from the golden sands of MumbaiHs famous 'uhu
beach. Shaped like a luxury liner, the hotel nestles between
the city and the rapidly developing industrial belt of the
suburbs.
.isinvestment of the hotelIflight kitchens of the (otel orporation of
*ndia, a subsidiary of $ir *ndia, was initiated by $ir *ndia under the
supervision of the Ministry of ivil $viation. $ Sub6ommittee of the )oard
of $ir *ndia was constituted by the said )oard to oversee the disinvestment
process. ,n the basis of the Sub6ommitteeHs recommendation, $ir *ndia
appointed MIs 'ardine 9leming Securities *ndia -td. <currently known as
MIs '+ Morgan *ndia +vt. -td= as /lobal $dvisors on 'une J, 0111. $n
advertisement inviting !xpressions of *nterest from the prospective bidders
was issued by $ir *ndia on ,ctober 44640, 0111 for all the businesses of the
(otel orporation of *ndia including entaur (otel, 'uhu )each, and
Mumbai. #he Sub6ommittee, with the assistance of the /lobal $dvisors,
accomplishedD
<i= 9inalisation of the transaction structure of selling the individual
businesses on slump sale basis>
<ii= 9inalisation of the onfidential *nformation Memorandum>
<iii= Shortlisting of bidders>
<iv= $ppointment of -egal $dvisors and $sset Baluers>
<v= onducting data room study and due diligence by the bidders> and
<vi= 9inalisation of transaction documents.
,n 0@th September 0114, based on a /overnment decision, the
.epartment of .isinvestment took over the process of disinvestment in
(otel orporation of *ndia. $fter taking over the process, .epartment of
.isinvestment constituted an *nter6Ministerial /roup and adopted the
transaction structure and transaction documents as finali8ed by $ir *ndia.
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9or the five businesses of (otel orporation of *ndia that were offered
for sale, the Kualified *nterested +arties had already been identified. *n
respect of entaur (otel 'uhu )each, Mumbai, !xpressions of *nterest were
received initially from 01 parties of whom three were found to be ineligible.
,f the remaining 4@ Kualified *nterested +arties, 4J did not furnish the
prescribed !xpression of *ntent -etters along with the !arnest Money
.eposit of &s. 3 lakhs, thereby withdrawing themselves from further
participation from the disinvestment process. #herefore, there was only one
Kualified *nterested +arty. ,n 0Cth ,ctober 0114, the /lobal $dvisors
addressed the Kualified *nterested +arty, vi8., namely, MIs #ulip (ospitality
Services -td asking it to submit its price bid on Jth "ovember 0114. MIs
#ulip (ospitality Services -td submitted its price bid on Jth "ovember
0114.
$n !valuation ommittee comprising the concerned 'oint Secretaries of
the Ministry of ivil $viation and the Ministry of .isinvestment and the
Managing .irectors of $ir *ndia and (otel orporation of *ndia under the
chairmanship of the 'oint Secretary & 9inancial $dvisor, Ministry of ivil
$viation met on Ath "ovember 0114. $fter detailed consideration of the
asset valuation report prepared by the $sset Baluer <MIs Lanti Lararnsey &
o., Mumbai=, the valuation report prepared by the /lobal $dvisor and the
merits and demerits of the various methods of valuation adopted by them
and the then prevailing market conditions, the !valuation ommittee
determined the reserve price for entaur (otel 'uhu beach Mumbai at &s.
414.J1 crores. #he price bid, which was in a sealed cover, was thereafter
opened by the !valuation ommittee on Ath "ovember 0114. #he bid was
for &s.43?.11 crores.
#he !valuation ommittee recommended for acceptance the
financial bid submitted by MIs #ulip (ospitality Services -td of &s.43?.11
crores for entaur (otel 'uhu )each, Mumbai, since it was above its
determined reserve price. #he *nter6Ministerial /roup, in its meeting held on
5th "ovember 0114, accepted the recommendation of the !valuation
ommittee. #he recommendations of the !valuation ommitteeI*nter6
Ministerial /roup were accepted by the ore /roup of Secretaries on
.isinvestment on 5th "ovember 0114 and by the abinet ommittee on
.isinvestment on 41th "ovember 0114. *nitially, $ir *ndia proposed to
execute the $greement to Sell by 04st .ecember 0114 and notified MIs
#ulip (ospitality Services -td. (owever, MIs #ulip (ospitality Services -td
made a series of representations from time to time, seeking extensions for
conclusion of the transaction. #hree extensions were given to MIs #ulip
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Economics
(ospitality Services -td, the last being on 0?rd 9ebruary 0110. #hese
extensions were given apparently with the view to complete the sale of
entaur (otel, 'uhu )each, Mumbai at a price of &s.43? crores, which was
above the reserve price of &s.414.J1 crores. Since some concerns had arisen
with respect to MIs #ulip (ospitality Services -imitedHs ability to meet the
financial obligations under the transaction, a decision had been taken on 04st
9ebruary 0110 to invoke the )ank /uarantee of MIs #ulip (ospitality
Services -imited and to terminate the deal. (owever, the hairman, MIs
#ulip (ospitality Services -imited met the then Minister of .isinvestment
on 00nd 9ebruary, 0110, and sought an opportunity to demonstrate MIs #ulip
(ospitality Services -imitedHs intent to complete the transaction by
producing his consortium of bankers before the Minister.
,n 0?rd 9ebruary 0110, MIs #ulip (ospitality Services -imited and the
consortium of bankers, which consisted of both public sector banks and
private banks, met the then Minister of .isinvestment and committed to
finance the sale transaction by 5th March, 0110. ,n this commitment, a
further extension was granted on 0?rd 9ebruary, 0110, until 5th March,
0110. Since, 5th March, 0110 was a Saturday, high value clearing did not
take place and, conse2uently, the transaction was completed on 44th March
0110. #he business was transferred to MIs #ulip (ospitality Services
-imited on ?4st May 0110 on completion of transaction formalities.
$s per the transaction $greement, MIs #ulip (ospitality Services
-imited was bound to offer a Boluntary &etirement Scheme to the
employees of the hotel by ?1th May, 011?. $nticipating that the
management might not offer the Scheme in time, the ,fficersH $ssociation
filed a writ in the )ombay (igh ourt on 5th May, 011? itself. ,n the
directions of the (igh ourt, MIs #ulip (ospitality Services -imited
introduced a Boluntary &etirement Scheme on 4st ,ctober, 011?. Since this
was not fully acceptable to the $ssociation, it approached the (igh ourt
again. (owever, the (igh ourt did not give any further relief. #hereafter,
on 4st 'uly, 011C, the $ssociation moved the matter before a .ivision )ench
of the )ombay (igh ourt. While the matter is before the .ivision )ench,
the ,fficersH $ssociation and the management have come to an agreement on
all critical issues on Jth $ugust, 011C. ,n the basis of this agreement, MIs
#ulip (ospitality Services -imited filed an affidavit before the )ombay
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Economics
(igh ourt on 40th $ugust, 011C. #he case now stands adjourned to 41th
'anuary 0113.

*t looks odd that it was a single bidder transaction. *t further looks odd
that the .iscounted ash 9low method of evaluation was adopted in this
case. We do not think that this method is the only method, or the most
appropriate method of evaluation in all cases. *t further looks odd that so
much indulgence was granted to the bidder by way of not invoking the bank
guarantee, which was ordered twice, and by way of granting him repeated
extensions. We personally think that as a result of its disinvestment 8eal, the
then /overnment overlooked some discomforting aspects of this transaction.
#he agreement does not permit the resale. #he matter is now sub
judice before the (igh ourt of )ombay regarding the Boluntary &etirement
Scheme. )ut, if there is a violation of agreement, certainly the Ministry of
ivil $viation will be advised to take necessary action.
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CENTAUR/ AIRPORT %OTEL
*t was an announcement that shocked even the over8ealous minister for
disinvestment, who believes nothing can go wrong with his high profile
drive to sell public properties at a rapid pace. ,n ,ctober 4A, 0110, )atra
(ospitality +vt -td announced that it had sold entaur $irport (otel at
Mumbai to the Sahara *ndia group for a sum of &s 443 crores. What was
reported as a routine commercial transaction by $ - )atra of )atra
(ospitality has triggered a controversy that is likely to prove extremely
embarrassing to the government. #his was because the $irport entaur had
been ac2uired by )atra from the $ir *ndia subsidiary (otel orporation of
*ndia <(*= for a sum of just &s A? crores, barely six months back. $t that
time, this sale of $irport entaur <along with the entaur (otels in 'uhu and
&ajgir= was presented as one more case of the highly successful and
transparent, accelerated disinvestment drive that $run Shourie had launched.
#(! issue of resale of the disinvested Mumbai airport entaur hotel at a
premium of &s ?0 crores was raised on by an independent panel that
included +* <M= Member of +arliament, Mr. .ipankar Mukherjee.
$ddressing a press conference here, Mr. Mukherjee said that the MlinksM
between )atra (ospitality that bought the hotel and resold it at a substantial
premium, and former +rime Minister, Mr. $tal )ihari BajpayeeHs son6in6law,
Mr. &anjan )hattacharya, should be probed by the entral )ureau of
*nvestigation <)*=.
#erming )atra (ospitality as a Mshell companyM that Mdid not have the
financial strength or experience in running a hotel,M Mr Mukherjee said the
hotel was sold to it because of its ownerHs experience in running .elhiHs
&adisson (otel through $) (otels -td.
M$re these links coincidental, incidental or accidentalN We are not putting
anyone in the dock. What we want is that the )* should investigate and
expose the entire scam,M Mr Mukherjee said at a press conference in which
the +* <M= /eneral Secretary, Mr +rakash Larat, was also present.
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Mr. Larat said he was only a MfacilitatorM for the three6member panel headed
by Mr. Mukherjee, which looked into the matter. ,ther members of the panel
were Supreme ourt lawyer, Mr. +rashant )hushan, and journalist, Mr.
+aranjoy /uha #hakurta, who were also present at the press conference.
&eferring to reports 2uoting )* that it was not finding much material to
proceed with the probe into the $irport entaur deal, Mr. Larat said, MWe
are releasing this material in public interest and to help the /overnment and
)* proceed in this matter.M
Oielding to demands of the -eft parties, the ongress6led %+$ /overnment
on 9riday announced an in2uiry into the controversial sale of two state6
owned entaur (otels in Mumbai in view of severe criticism made by the
omptroller and $uditor /eneral <$/= of the then )'+6led ".$
/overnment for undervaluation of the hotels.
$fter examining $/;s report, the government decided to order an in2uiry,
9inance Minister + hidambaram announced in both the (ouses of
+arliament.
#he nature and scope of en2uiry would be announced in due course, he said
in a brief suo motu statement. Significantly, when this announcement was
made, the ,pposition ".$ was not present as it was boycotting +arliament.
#he 9inance Minister;s statement was necessitated by persistent demands of
the -eft parties that the government should order an in2uiry by the )* into
the sale of entaur 'uhu and entaur $irport (otels.
#he $/ in its report had pulled up the .isinvestment Ministry under $run
Shourie during the previous ".$ /overnment for undervaluation and sale
of the hotels without the benefit of competition. *t had concluded that
assumptions made during valuation of the properties and fixation of reserve
price was not consistent with the practice followed by the Ministry in other
cases.
#he $/ even noted various relaxations allowed to the bidder and
interventions by the Ministry to facilitate sale that indicated inade2uate
efforts to mitigate the risk of transaction. #he efforts made to balance the
need and urgency to sell the properties and to obtain the best possible price
were also not evident, it had stated. Mr. Shourie had said that the
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.isinvestment Ministry did no wrong and that he was prepared to face any
in2uiry.
BHARAT HEAVY ELECTRICALS LIMITED
#he ompanyHs principal activities are to manufacture and distribute
electrical, electronic, mechanical and nuclear power e2uipment. #he
ompany operates under two segmentsD +ower sector and *ndustry
sector. +ower sector includes products and services relating to power
generation sets and its auxiliaries. *ndustry sector includes products and
services relating to transportation and transmission, electric machines,
industrial sets and ./ sets, telecommunications and other industrial
products and systems. #he plants of the ompany are located in,
&anipet, /oindwal, 'agdishpur, #iruchy, &udrapur, (yderabad,
)angalore and other places
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Economics
E*1)o2..3: C?530
B%EL DISIN"ESTMENT
!very policy decision taken by the %+$ /overnment must draw its
sustenance from the ommon Minimum +rogramme <M+= adopted by the
alliance partners, the yardstick that has also to be applied to the )(!-
partial disinvestment case.
DISINVESTMENT
Bharat
Heavy
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#his specific issue has been brewing for 2uite some time, and every time a
decision was seen to be imminent it was shelved for consideration later. ,n
#hursday, the Manmohan Singh /overnment went ahead with the decision
to sell 41 per cent of government e2uity which has, expectedly, set the cat
among the pigeons as it were.
$ccording to reports, a statement issued by the +*<M= saidD M)(!- is a
navratna public sector unit which is making significant profits in a
competitive environment. )(!- significantly contributes to strengthening of
*ndiaHs economic self6reliance.
#he M+, on whose basis this /overnment is meant to function, clearly
states that the %+$ will encourage and strengthen the navratnas to become
global players. #he M+ also categorically states that the /overnment shall
not disinvestIprivati8e the profit6making +S%s. *n the light of these
commitments made in the M+, the +*<M= considers the abinet decision
contradictory.M
$part from the fact that the 9inance Minister himself has said that the -eft
was MconsultedM before the decision was taken, /overnment MmanagersM
have been reported as saying that the step had been taken in accordance with
the norms contained in the M+.
#o 2uote them <as reported=D M#he M+ is very clear. *t has only said that
PgenerallyH profit6making +S%s will not be privatised. *n any case, even after
the decision, 3A per cent stake will remain in /overnment hands.
)esides, the M+ has said that all privatisation will be considered on a
transparent and consultative case6by6case basis. *t has also said that
navratnas will be allowed to raise resources from the capital marketM.
What does the M+ itself have to say on the subjectN #o 2uote the relevant
portion of the +rogrammeD M#he %+$ /overnment is committed to a strong
and effective public sector whose social objectives are met by its
commercial functioning. )ut for this there is need for selectivity and a
strategic focus.
#he %+$ is pledged to devolving full managerial and commercial autonomy
to successful, profit6making companies operating in a competitive
environment. /enerally, profit6making companies will not be privatisedM.
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Economics
#he document continuesD M$ll privatisation will be considered on a
transparent and consultative case6by6case basis. #he %+$ will retain existing
PnavratnaH companies in the public sector, while these companies raise
resources from the capital market. *t also believes that there must be a direct
link between privatisation and social needs Q like, for example, the use of
privatisation revenues for designated social sector schemes. +ublic sector
companies and nationalised banks will be encouraged to enter the capital
market to raise resources and offer new investment avenues to retail
investors.M
$s far as encouragement to Mretail investorsM is considered, the /overnment
has been careful enough to split the stock offered for disinvestment so that a
portion is reserved exclusively for the average citi8en.
#he details of the split6ratio are to be announced later Min consultation with
the .epartments of .isinvestment and (eavy *ndustryM and after the choice
of the lead manager.
$s regards the expenditure of the proceeds on Msocial needsM, the
/overnment has said that three62uarters of the funds <around &s 0, 011
crore= will be spent on health and education, the remaining 03 per cent going
into the revival of ailing +S%s.
Most important, the disinvestment proceeds will not be reflected in the
)udget, a euphemism for the disappearance of the funds into the bottomless
and colourless pit of the onsolidated 9und of *ndia.
#his is all very good, above board, and so on, but the basic issue appears to
be whether the 41 per cent of government e2uity which will be put up for
sale could have been leveraged to make )(!- even stronger and more
effective, furthering the objective of making the company even more
profitable in the highly competitive business world of today.
#his is the issue that needs to be gone into in some depth because what the
41 per cent sale decision could in fact mean is that )(!-Hs long6term
strategic interests have been sacrificed in the interests of garnering a few
thousand crores rupees today, which may or may not be utili8ed effectively,
and in any case will not help the company in any way.
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T%E MOST PROMINENT DISCUSSION
D W72 '3 1,';&t'3&t'o( '*1o,t&(t to I(9'&<
A,+( S7o+,'.: )ecause we have some 0C1 public sector companies in
the central government and about 4,111 in the state governments, and theyHre
not doing well. #he average rate of return from the central government
enterprises is only about C per cent, when the government itself borrows at
41644 per cent. $nd, worse than that, if you take away the areas in which the
government has a monopoly, like petroleum, then the rate of return is minus
C per cent.
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$ll efforts to revive these companies have not really succeeded. )ringing in
aggressive private partners is the best way to make them more competitive.
=: %o> >o+)9 2o+ ,&t. 2o+, o>( 1,o-,.33 3o ?&, '( 1+37'(- &7.&9 >'t7
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$D *n the last ten months, we have completed 4A transactions 6 which is
pretty big. My aim is to get privatisation off the front pages. *t should
become a routine affair. We have successfully explained our position on
privatisation in 41 debates in +arliament lasting nearly A1 hours. We have
answered about J11 parliamentary 2uestions.
We have thwarted 45 challenges in the courts and ultimately received the
strongest endorsement from the Supreme ourt of *ndia, which says that the
process being followed is completely transparent, just and fair. So weHve
made great progress.

=: %o> &:o+t 2o+, 1.,?o,*&(4. ;'3-&-;'3 ?'(&(4'&) t&,-.t3 t7.
-o;.,(*.(t 7&3 3.t ?o, ,.4.'1t3 ?,o* 1,';&t'3&t'o(<
$D * donHt work on the basis of financial targets. Some such targets have been
mentioned by the finance minister in his )udget. )ut those are
approximations. $nd even he agrees that we canHt just go on the basis of
those targets, because then we will be accused of making distress sales.
We are laying the foundations of a process that is going to last 41 years,
so we must be very thorough about this. We are satisfied at the pace at which
we are working.

=: W7&t &:o+t t7. @+&)'t2 o? t7. &33.t3 o( 3&).< It '3 &)).-.9 t7&t & )ot o?
t7.* &,. 8+(5. W7&t '3 2o+, 4o**.(t<
$D * donHt think so. Some are junk if you do nothing with them and persist
with them as they are. )ut when investors see that there is now the real
prospect of bringing in aggressive private partners to run these companies,
itHs a different story.
"ote that itHs the stocks of government6related companies that have led the
remarkable recent turnaround in the *ndian stock market. $nd we can take
credit for unlocking the hidden value in some of these companies.
=: W7&t &33.t3 9o 2o+ :.)'.;. >o+)9 :. o? '(t.,.3t to S'(-&1o,.
'(;.3to,3<
A: #he assets are across the spectrum 6 from mines and metals to telecoms,
to many others. #here was a very good prospect in aviation, but * wonHt be
reviving that very soon.
DISINVESTMENT
Economics
=: W72 (ot<
$D Well both sides missed out an a very fine opportunity. *ndia certainly
missed out. $nd Singapore, because it was a very orderly society, was not
used to the very high6decibel of debate in *ndia. * was counselling themD just
wait for 43 days.
)ut then, they started looking at other prospects such as $nsett $irlines.
$nd since then, the aviation industry itself fell into uncertain times. So *
think itHs best to first strengthen our aviation enterprises 6 both domestic and
foreign 6 before looking for strategic partners.

=: W7&t ).33o(3 7&3 I(9'& 9,&>( ?,o* t7. .61.,'.(4. o? S'(-&1o,.
A',)'(.3 &tt.*1t3 to :+2 '(to A', I(9'&<
$D * think the main lesson should be drawn by the people who participate in
our public discourse and public life. *t is that we need better partners who
will change the work culture of our enterprises. $nd if we scare them away
with our shouts then we loose. #hey may just lose a business opportunity,
but we lose an opportunity to improve our work culture. * mention this in
+arliament when the shouting was going on. * saidD M Oou are scaring away
bidders.M $nd when that actually happened, * told themD M * told you so.M
=: A(9 '3 2o+, *.33&-. -.tt'(- t7,o+-7<
$D * think so. *n the last 43 privatisations, there have been hardly any
criticisms, just some pro6forma noises. Maybe when the next +arliament
session starts on 43th there will be some shouting but * feel we are getting
the message through. We are especially getting through to labour, which
used to be instigated by others who scared them by sayingDM Oou will loose
your jobs.M
)ut labour is actually finding out that privatisation is the best way for their
enterprises to survive and become more competitive. #he new owners and
partners have entered into long term wage agreements with workers. Wages
have increased in some cases, by more than 01 per cent.
=: W7.,. &,. t7. *&'( o:3t&4).3 2o+ ?&4.<
$D #he main obstacles we face are similar to what the %S and !urope face
with agricultural subsidies. ,nly ?6C per cent of population depends on these
subsidies, but a politics and a discourse congeals around the issue. #hatHs our
main difficulty.
Second, in *ndia, we have a fractured electorate and fractured legislatures, so
everybody has power to block anything, and not many people have enough
DISINVESTMENT
Economics
power to push things through. )ut that problem will be alleviated in coming
months because state governments are now on the brink of beginning
privatisation of their own enterprises. So if they do it in their states, they
canHt oppose it at the centre.
=: B+t 9o(At 2o+ 7&;. o11o3't'o( ?,o* .;.( >'t7'( 2o+, o>( 1&,t2<
$D Well, yes, because every party is diverse and everybody has an opinion,
)ut in one or two years, with fifty enterprises privatised and the results
visible, this opposition will subside.
*t is important to remember that in *ndia, when a reform is first proposed,
there is a lot of shouting. )ut than two years later, after it has been
introduced and gone through, nobody even noticed it.
=: C&( 2o+ -';. &( .6&*1). o? t7'3<
$D When *ndia was to sign the convention on intellectual property rights,
there was a lot of opposition. )ut it was signed, and now nobody shouts.
#hen, on allowing foreign companies into the insurance sector, there was
again a lot of shouting. )ut now, foreign firms have come in, and many
people donHt even know this. So it is with privatisation. *f you ask the
original opponents M(ow many enterprises have been sold in the last ten
monthsNM * donHt think they will come up with a figure close to eighteen.
=: A,. t7.', :.(.?'t3 ?,o* 1,';&t'3&t'o( t7&t 2o+ 4&( &),.&92 1o'(t to<
$D #ake the case of Modern 9oods, which makes bread. *ts sales are about
ninety per cent higher than just a year ago. Workers average pay has
increased. #he plants are hygienic.
*n the case of )alco <)harat $luminium ompany=, an expansion
programmme of ?111 <three thousand= crore rupees <S R4.13 billion= has
been announced. "ot a single worker has been retrenched. $ five year wage
agreement has been entered into, which provided for an immediate twenty
percent increase in the basic wage.
=: W7&t 1,';&t'B&t'o( 1,o4.33 &,. 2o+ ?o))o>'(-<
$D #he initial approach was to unload some government shareholding, in the
form of minority stakes. )ut this was not changing the work culture or the
managements of enterprises. So now, the government is going in for
strategic partners and, in some cases, outright sale.
We are willing to relin2uish majority control in all but a few strategic
industries like defence, atomic energy and railways. We have also now
introduced an element in which, let;s say the government maintains 0J per
DISINVESTMENT
Economics
cent e2uity in the first round. )ut if the enterprise starts to do really well, the
government exits even sooner.
=: O;., >7&t t'*. ?,&*. 9o 2o+ 7o1. to 4o*1).t. I(9'&C3 1,';&t'B&t'o(/
&(9 >7&t >')) 3&t'3?2 2o+ t7&t 't 7&3 :..( & 3+44.33<
$D * have studied 4C countries privati8ations, and they have lasted 4164@
years. * would expect *ndia;s privati8ation to last 41 years or so. *t will
gather momentum and become a routine affairs. * have been pushing for it
for ?1 years.
* will fill vindicated when a process is in place G as it is now6 and when
there is not a single allegation of corruption or wrongdoing.
* have said many times in +arliament that if you want to make any allegation
like this, make it outside the legislature and * will sue you in court. $nd now,
those very persons who made such allegations last year are sayingD E,h, but
* never opposed privati8ation.F
D'3'(;.3t*.(t ?,o* 1991-92 to 2004-05/ t7.
*.t7o9o)o-'.3 &9o1t.9
$.&,
No. o?
t,&(3&4
t'o(3 '(
>7'47
.@+'t2
3o)9
T&,-.t ,.4.'1t
DR3. '( C,o,.E
A4t+&)
,.4.'1t3
DR3. '(
C,o,.E
M.t7o9o)o-2
DISINVESTMENT
Economics
4554650 C@ 0311 ?1?@.@C
Minority shares sold in .ec 4554 and 9eb
4550 by auction method in bundles of Mvery
goodM, MgoodM and MaverageM companies
455065? 05 0311 4540.C0
Shares sold separately for each company by
auction method.
455?65C 6 ?311 1.11
!2uity of J companies sold by open auction
but proceeds received in 5C653.
455C653 4@ C111 CAC?.41
Sale through auction method, in which "&*s
and other persons legally permitted to buy,
hold or sell e2uity, allowed to participate.
455365J 3 @111 4JA.CA !2uities of C companies auctioned
455J65@ 4 3111 ?@5.J@ /.& <BS"-= in international market.
455@65A 4 CA11 541.11 /.& <M#"-= in international market.
455A655 3 3111 3?@4.44
/.& <BS"-= I .omestic offerings with the
participation of 9**s <,",&, /$*-=.
ross purchase by ? ,il sector companies i.e.
/$*-, ,"/ & *,
3 41111 4AJ1.4C
/.&Q/$*-, BS"-6domestic issue,
)$-, restructuring, M9*-;s strategic sale
and others
0111614 3 41111 4A@4.0J
Strategic sale of )$-,, -'M> #akeover 6
L&- <&-=, +- <M&-=, )&+-
DISINVESTMENT
Economics
0114610 S A 40,111 3J?0.03
Strategic sale of M G 347, (#- G@C7,
BS"- G 037, *)+ G ??.3A7, ++-66 @C7,
and sale of hotel properties of *#. & (*>
receipt from surplus cash reserves from S#
and MM#
011061? S A 40,111 ??C@.5A
Strategic saleD (T- <0J7=, *+- <037=,
(*, *#., MarutiD control premium from
renunciation of rights issue, +ut ,ption 6
M9*- <0J7=, Shares to employees in (T-,
M and BS"-.
011?61C 0 4C,311 433C@.C4
'essop & o. -td.<@07 Strategic Sale=, (T-
<4A.507 all ,ption=, through +ublic ,ffer6
Maruti <0@.37=, ** -td. <5.07=, *)+ <0J7=,
*+- <0A.5C37=, M <0J.037=, .*
<017=, /$*- <41.7= and ,"/ <5.5J7=
011C613 ? C,111 0@JC.A@
"#+ <3.037 ,ffer for Sale=, *+- <37 to
!mployees= and ,"/ <1.147=
Tot&) 9FG00 4HF4F.4
I #'-+,.3 &,. '(4)+3';. o? 4o(t,o) 1,.*'+*/ 9';'9.(9J9';'9.(9 t&6/
,.3t,+4t+,'(- &(9 t,&(3?., o? 3+,1)+3 4&37 ,.3.,;.3 1,'o, to
9'3'(;.3t*.(t.
R.&)'3&t'o( t7,o+-7 3t,&t.-'4 3&). 9+,'(-
1999-2000 to 2004-05
DISINVESTMENT
Economics
Sr.
No
Name Percentage of
Government
Equity sold
Realisation
Rs. in crore
Profit/Loss
Making during
the year of
disinvestment
a. Modern !ood "ndustries
#"ndia$ Ltd. #M!"L$
%& '(.&( Loss Making
). #M!"L$ Phase "" *(.++( &&.'%
,a. -M- Ltd. ( (* Profit Making
, ) -M- Ltd. ..'%
& /0L %& (( Profit Making
(. Lagan 1ute Machinery
-or2oration
%& *.(, Loss Making
"03-4+ /50ELS
.. /otel 6gra 6shok 7+.+% ,.. Loss Making
% /otel 8odhgaya 6shok 7+.+% .7 Loss Making
7. /otel /assan 6shok 7+.+% *.*% Loss Making
+. 0868R Mamalla2uram 7+.+% .., Loss Making
DISINVESTMENT
Economics
'. /otel Madurai 6shok 7+.+% &.+% Loss Making
. /otel 6shok 8angalore 9 7+.+% ,+.& Loss Making
*. :uta) /otel; Ne< 3elhi 7+.+% ,&.&. Loss Making
,. Lodhi /otel; Ne< 3elhi 7+.+% %.+, Loss Making
&. L=P/; >dai2ur 7+.+% ..%% Loss Making
(. /otel Manali 6shok 7+.+% ,..( Loss Making
.. ?68R; ?ovalam 7+.+% &'.,+ Loss Making
%. /otel 6uranga)ad 6shok 7+.+% ..(' Loss Making
7. /otel 6ir2ort 6shok;
?olkata
7+.+% +.,+ Loss Making
+. /otel ?ha@uraho 6shok 7+.+% *.+ Loss Making
*'. /otel =aranasi 6shok 7+.+% 7.,7 Loss Making
*. /otel ?anishka; Ne< 3elhi 7+.+% +*.,% Loss Making
**. /otel "ndra2rastha ; Ne<
3elhi
7+.+% &,.,+ Loss Making
*,. -handigarh /otel 2ro@ect 7+.+% %.*% Loss Making
DISINVESTMENT
Economics
*&. /otel Ran@it; Ne< 3elhi 7+.+% *+.*7 Loss Making
*(. /-" 4 -entaur /otel 1uhu
8each; Mum)ai
'' (, Loss Making
*.. /-"4"ndo /okke /otels
Ltd.#-entaur Ra@gir$
'' ..( Profit Making
*%. /-" 4 -entaur /otel
6ir2ort; Mum)ai
'' 7, Loss Making
*7. "8P -o Ltd ,,.(7 (,..7 Profit Making
*+. =idesh Sanchar Nigam
Ltd.
*( ,.7+ Profit Making
,'. Paradee2 Phos2hates Ltd. %& (.%' Loss Making
,
#a$
/industan Ainc Ltd. *. &&( Profit Making
,
#)$
/industan Ainc Ltd. ..+
,
#c$
/industan Ainc Ltd. 7.+* ,*,.77
,* Maruti >dyog Ltd. &.* ''' Profit Making
,,. "ndian Petrochemicals *. &+'.7& Profit Making
DISINVESTMENT
Economics
-or2oration Ltd.
,&. State 0rading -or2oration
of "ndia
&'
,( MM0- Ltd. .'
,. 1esso2 B -o Ltd %* 7.7 Loss Making
Grand Total 10257.19
DISINVESTMENT
Economics
DISINVESTMENT