A time to disinvest?

by Manshu on August 22, 2013

in Uncategorized

Rupee has been in a free fall for quite some time now and the government and RBI reaction to the daily price movement is far more frustrating than the Rupee fall itself.

From banning TV imports to squeezing out liquidity – the authorities have not taken a single step to address the structural problems that exist in the economy.

The stock market is also in a free fall since the past few days, and disinvestment is the last thing on anyone’s mind right now. Like most other things, disinvestment has been a total failure in the past few years not just for the money it raised but also because of the nature of divestments that the government has done so far.

Because of the deficit situation the focus on disinvestment has become getting the most money out of share sales, and somehow privatization has been completely forgotten.

If you look at the coal situation, and not even think about Coalgate, even then the whole environment is completely ridiculous.You have a monopoly in Coal India that is the world’s largest producer of coal but the demand is such that India imports massive amounts of coal and these imports have grown this year draining the forex reserves. Why should there be a government monopoly in coal production, and would there ever be a good time to disinvest? Isn’t it better to let private players take charge and have many companies operating in this important sector?

Perhaps the government is not ready to disinvest or privatize big stakes in companies like Coal India but what about companies like Scooters India? Why does the government need to be involved in manufacturing three wheelers and isn’t it better privatize such companies to raise cash instead of creating funds to help sick PSU – it’s not like the government is flush with cash anyway.

No one wants to talk about disinvestment or privatization right now, but a few steps in the direction of privatization and showing that the government is getting out of business will send positive signals, and will be better than increasing import duties on televisions.

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