However, on ground, the privatisation of PSUs is easier said than done. Government stake sale in major public sector corporations — nearly all boasting large net worth and respective consumer market share — has so far generated little interest from Indian private investors and foreign portfolio investors (FPIs). There is very little chance of such a disinvestment policy becoming a success in the near future unless the government is ready to sell them to foreign buyers with total management control, including those from India’s diplomatically and strategically rival countries, directly or through their front outfits based elsewhere.

Even a distress sale of government stocks in large PSEs may not find many serious Indian private buyers. In the past, such a measure evoked positive response only from a handful of politically-chosen business houses, including the Ambanis in the case of Gujarat-based Indian Petrochemical Corporation and UK-lodged Anil Agarwal of Vedanta Resources. Agarwal has big interest in non-ferrous and ferrous metals and petroleum in India, mostly through acquisitions. Both were lucky to cheaply acquire controlling government stakes in IPCL, Vadodara, the country’s largest petrochemical complex, and Bharat Aluminium Company (BALCO) in Madhya Pradesh. That was during the Atal Behari Vajpayee government. The disinvestment minister was Arun Shourie. Interestingly, take-over tycoon Agarwal’s rise has been much faster than the legendary Dhirubhai Ambani’s. If Dhirubhai started as a petrol pump employee in Aden, Anil Agarwal began life as a scrap dealer. Among Agarwal’s most significant acquisitions are BALCO, Sesa Goa, Cairn India, Hindustan Zinc and, lately, Electrosteel Steels (June, 2018). Subsequently, Vedanta Resources delisted itself with both the London and New York stock exchanges.

Some of India’s fortune hunting private entrepreneurs may be greedily waiting for more distress sale of strategic PSU assets, though it is unlikely to happen this time, except probably for Air India, as the government desperately needs money — big money. This poses a problem. There are hardly any private entrepreneur with large spare funds to buy out controlling government stakes in big and strategically placed PSUs. Most of the large business enterprises are neck deep in debt, largely from government banks. Some of them may have to borrow several times their net worth to take over government stakes in these giant PSUs.

These PSUs are too large for easy take-over by India’s private industrial groups. Notably, five of India’s top 10 companies by sales in 2019 are in the public sector. They include the country’s largest company, Indian Oil Corporation recording a turnover of over Rs.4.24 lakh crore, well ahead of the second ranked Reliance Industries (Rs.4.10 lakh crore). ONGC Limited ranked third (Rs.3.33 lakh crore). Bharat Petroleum (Rs.2.39 lakh crore), Hindustan Petroleum (Rs.2.21 lakh crore) and Coal India (Rs.1.32 lakh crore) were the other public sector undertakings in the league of the country’s top 10 production enterprises. Other private sector companies in the list are: Tata Motors, Tata Steel, Larsen & Toubro and Hindalco. Suffice it to say that it is not easy to find private buyers for such heavyweight PSUs within the country.

While planning strategic sale of PSUs, the government may have failed to recognise the fact that India has not produced any new large production enterprise in the private sector over the last two decades or more. It is true that in recent times there have been a few good startups in the services sector . However, their entrepreneurs showed little courage to continue for long against external competition. Some of them were happy to seek exit routes to sell their highly promising startups to large foreign buyers at huge profits. Few are investing in new units in the core sector, dominated mostly by PSUs, or making large capacity expansion. This is despite the fact that India continues to be a major importer of steel, coal, non-ferrous metals, fertilisers and pesticides, petroleum, gas and chemicals, merchant marine vessels and, of course, micro-chips, batteries and electronics products.

There is little interest or capability from India’s private entrepreneurs to lock in large funds to enter these vital areas of manufacturing in India. Instead, many would like to operate as importers in order to make quick bucks. The sources of imports and their impact on economy are of little concern to this growing band of Indian importers. Under the circumstances, the government has little choice but to force large PSUs use their own reserves to buy state holdings in each other in the name of restructuring or strategic stake sale. This will, in a way, help the government retreat of PSUs even across ‘strategic sectors’. Unfortunately, such a measure by the government carries a big risk factor. Drained out of reserves to acquire big government stakes at inflated prices, several big PSUs may, in due course, turn sick for want of funds for modernisation and expansion to keep pace with the market. Such a situation will also pose a big challenge to the country’s future economic stability and growth. (IPA Service)