Faced with increasingly recalcitrant and belligerent opposition from communist allies to disinvestment plans, the Government is apparently proposing to sell all its residual 10.24% stake in Maruti Udyog Limited (MUL) to net Rs. 2500 crore (USD 543 million). Last year, the Government sold 8% to net about Rs. 1500 crore (USD 326 million) to fund populist programs. At current stake, the Government does not even have a director on the board of the company.
The Government plans to use Rs. 350 crore of this expected tranche to pay arrears of workers of loss making public sector enterprises (PSE). With this amount, the Government would have spent Rs. 800 crore to finance loss making units. The proposal is to accost profit-making PSE to help loss-making ones. At present the help stops at handouts but it may be a bit prudent if the boards of the loss making companies are vectored under the management of some profit-making PSE so they can learn best practices and turn around. Thus, Bharat Heavy Plates and Vessels (BHPV) which gets financial help Bharat Heavy Electricals Limited (BHEL) and Engineers India Limited should be made to report into them. Similarly, Bharat Pumps and Compressors Ltd must be vectored under BHEL
or Oil and Natural Gas Corporation (ONGC).
In addition to financing salaries at these units, the Government plans to invest in the tractor unit of Hindustan Machine Tools (HMT)
which has now started to book profits. However, it is not clear how it plans to
compete with superior and better priced tractors from companies such as Mahindra and Mahindra.
Instead of throwing good money after bad, the Government must plan to exit areas where there is intense private participation. In large-scale production and manufacturing units, it can use management oversight of well managed companies to provide guidance to loss makers and turn them around.