What is strategic about disinvestment?

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The top 10 profit-making public-sector enterprises (PSEs) (See Table 1) made an aggregate net profit of Rs 1.8 trillion during 2018-19. The other 168 profit-making PSEs made an aggregate total net profit of Rs 66.64 billion. So, 62% of the profits came from just 10 PSEs from the 178 profit making enterprises.

No surprises there to also learn that all 10 of them are from the energy sector). Of the 70 loss-making PSEs, just 10 of them contributed 94% of the total losses of Rs 31.64 billion (See Table 2). The balance 60 contributed a loss of Rs 1.89 billion.

Total investment in the PSEs contributed during 2018-19 was Rs 2.09 trillion. It is amply clear that mining and exploration businesses or the energy related businesses gave a return of 19.98% while the aggregate return from all sectors was 12.11% during 2018-19.

The disinvestment policy that received clearance recently has identified a list of strategic sectors requiring presence of PSEs in public interest where at least one enterprise will remain in the public sector, but private sector will also be allowed. The disinvestment targets for the current year 2020-21 seem to be way off the realisation (See Table 3).

Given the market conditions, with BSE volumes touching trades equivalent to $2.7 trillion and Sensex swinging around kissing distance of 50,000 while it tottered at 29,468 last year during March 2020, divestment needs to take a more proactive role in shoring finances for COVD hit fiscal deficit. Around 2003, during the Economic Editors? conference I asked the then Finance Minister Yashwant Sinha, ?If the job of the Government is to provide an enabling environment for business and commerce to flourish and not be in the business of business, how does the decision of holding onto ITDC Hotels make sense for the government?? Sinha was a tad annoyed and retorted that the government can remain in businesses that it can contribute to. Since then, ITDC has been shedding hotels and its divestment plan now is in a firmer position.

So, when the government decides to identify a list of ?strategic sectors?, I am worried.