And, when it comes to selling these high-cost assets, the government again emerges as a poor seller. With all its state power and money muscle, the Government is a poor manipulator of the market. On the contrary, it is always a victim of market manipulation. This is despite the fact that the Government has the biggest reservoir of knowledge and intelligence or has access to it, at least on paper. And, this is the most unfortunate part.

Compare the Anil Ambani-controlled Reliance Power's initial public offering (IPO) and the price it fetched and the oversubscription it recorded with that of the Government's National Thermal Power Corporation (NTPC). Do the two entities even merit comparison with each other on the same scale in terms of size, operation and future outlook? Hardly. Reliance Power projects were in the air when the company's IPO opened. The company was not even in full possession of land on which the proposed power plants were to come up. They did not have on ground presence. Conversely, NTPC is India's biggest and most efficient electricity producer. Yet, there was not much retail interest in NTPC IPO, which could have bombed if the State Bank (SBI) and Life Insurance Corporation (LIC) had not come to the rescue of the much-touted public issue. The PSU blue chip, Rural Electrification Corporation's IPO too received a lukewarm response from retail investors.

Although the Government will most certainly meet its 2009-10 disinvestment target to raise Rs. 25,000 crore from sale of PSU shares by the end of this month, the PSU IPOs could fetch much more if they used more imagination and planning in terms of financial engineering and timing. Rs. 22,000 crore is already in the Government's disinvestment kitty from Oil India, NHPC, NTPC and REC share issues. Two more IPOs are to be completed in the course of the next few weeks. It would appear that the issues are being rushed through. The market is taking advantage of the situation. It is like a distress sale or 'must-sell' situation. Investors are taking advantage of such a situation. Clever ones are staying away from the IPOs. They wait for the shares to be listed for open market trading, may be at lower prices as happened in the case NHPC.

The Finance Minister, in his budget speech, claimed that the market capitalization of five PSUs, which has been listed since October 2004, has increased by nearly four times from the combined book value of Rs 78,841 crore to Rs. 2,98,929 crore. While such a value appreciation of stocks will be any investor's dream, it has little to excite to the disinvestor. If anything, it points at under-pricing of those PSU shares before they were offered to the public for subscription. It may not be entirely wrong to conclude that either those IPOs were poorly planned and ineptly handled, or there were vested interest in both the Government and the market to ensure under-realisation of the real value of those stocks by the exchequer at the time of IPO. The original seller or the Government is the loser. Buyers are making money, effortlessly. These PSU shares are gold. They are expected to appreciate much more in the coming years. They are excellent companies.

There is no doubt that the government's 2010-11 PSU disinvestment target of Rs. 40,000 crore will be achieved without a fuss. The shares of the companies to be on the block belong to such enterprises as Coal India, National Mineral Development Corporation, Steel Authority of India Limited (SAIL), Bharat Sanchar Nigam (BSNL) and Hindustan Copper, all world class companies and top performers in their respective areas of operation. A slice of their stocks should fetch much more than the targeted amount. The market is extremely bullish following the Finance Minister's announcement. Investors are waiting eagerly for the IPOs to open. Hundreds of off-shore funds would like to own these shares, although not many of them would like to participate in the IPO process. They may acquire the shares from the open market after the IPOs are closed, sometimes at even below offer prices. Out of some 230 PSUs, at least 60 are doing extremely well. The Government is planning to sell part of its stake in these high performing enterprises in the next three to four years.

The PSU stake selloff is the easiest way to cut down budget deficits, which reached alarming levels of close to eight percent in the last two years. The fiscal deficit target for 2010-11 is 5.5 per cent. Since the Government is not prepared to take unpopular steps such as the compression of its size, cutting down unproductive departments, changing employment and remuneration policies, productivity-oriented promotion and retention of staff and focus on efficiency, fight against black money and corruption-free administration, it has little control over the expenditure leading to mounting deficits year after. At the same time, the combined pressure of ever-bulging government borrowings - external and internal — huge debt-service commitments, alarmingly high trade deficits, negative balance of payments and growing expenditure on defence and national security have taken much of the shine off India's growth story. Among the limited choices it is left with to improve its earnings - without resorting to further borrowings and counter-productive taxes and levies - the PSU selloff seems to be the best even if it means a discount sale. (IPA Service)