Dis-investment of PSU enterprises

With the success in the trust vote in Parliamant by UPA without the support of the Left, has opened up various avenues for the Government to raise the budgetary shortfall through divestment of stake in loss making PSU enterprises. The Governmnet was very open in commenting that it would take forward the almost stalled economic reforms process and made bold statements on banking de-regulation few days back.

With the agri loan waiver scheme alone has taken close to Rs60,000 crores from the Government's kitty, it would be an appropriate time for the Government to look at alternatives like divestment to raise the required revenue.

The market has taken scent of that and today all possible candidates of divestment like ITI, HOCL, RCF, HMT were locked in the upper circuit. Even other profit making and well run PSU's like Engineers India and STC were up by more than 15% in today's trading.

The time is right for the Government to proceed ahead with divestment without the hassles of a constantly pestering Left, but it all depends how they manage the process of divestment. They bungled in the case of IFCI when they tried to rope in a strategic partner.

We believe that the Government may not go for a big-bang divestment process at this stage because the Left and their new found partners would take the issue to the streets and may lead to large scale public protests. Already the macro-economic scenario in the country looks gloomy with rising inflation, high interest rates and economic slowdown. This may turn very negative for the Government who has to face the public in another 9 months time (at the maximum).