SEPTEMBER 22, 2020

By V Ranganathan

MUCH is being discussed about the fiscal situation, de growth, deficit, stimulus and source of funding to meet all needs including fulfilling promises made to states on GST compensation. Disinvestment is often deeply discussed but it is largely non-starter and even when implemented it is handled in a highly ham-handed fashion.

LIC has figured in the list for the first time in the budget papers of 2020. It may be many years away considering the more than normal challenges it may face. But one aspect which somehow has not attracted much discussion is the shares in listed companies held predominantly by LIC, PSU insurance companies and the erstwhile UTI. Perhaps there may be other players but that can surface later. Between these entities, the shareholding in some of the top companies can be a strategically significant percentage. Historically, whenever opportunities arose to make strategic sale by these government bodies, the incumbent promoters would somehow pull political strings and ensure the stakes were retained and they held on to their driving seats. Interested persons can search the archives to find past instances, some reported but many may not have been.

It is quite possible such strategic sale by PSUs can help generate lot more funds with no disinvestment of any kind, presently. The point may not be misunderstood as if disinvestment is being discouraged. 

Not only can funds be raised for the government, significant foreign capital may come in, but most importantly some of the incumbent management which has destroyed shareholder value can be replaced. If the idea makes sense, the money so raised can be used to plug deficits to Compensation cess funding as ultimately the States pooled their taxing powers and subsumed in view of a larger guarantee in spirit. It is time for a resurgent India and GOI to shake off the slack, degrowth and morbidity with something out of its own hat and the above suggestion can be seriously considered.

[The author is Former Director, Tax, E&Y Chennai and the views expressed are strictly personal.]