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Speed, political vim galvanise India privatisation

India is injecting speed and political will into a decade-old push to privatise state-owned firms as it prepares to sell off some of the crown jewels of its public sector, analysts say.

Prime Minister Atal Bihari Vajpayee's coalition government is setting a cracking pace, analysts say, even though it has sold few firms so far.

"They (the government) are having problems but they are really taking the process forward. Their success can be really seen by the number of privatisation cases pushed by them," R Srinivasan, resident director at investment bank Chase JF, said.

Last weekend, a cabinet panel which decides on privatisation moved a step closer to selling India's largest carmaker.

It set up a panel of top officials to decide the best way to exit from

Maruti Udyog Ltd, an equal venture with Japan's Suzuki Motors Corp.

Telecom firms to be considered next

The panel held off on privatising telecom firms Mahanagar Telephone Nigam Ltd and Videsh Sanchar Nigam Ltd, but government officials say their sale will be considered at the next meeting in December.

Industry officials say the politicians mean business.

"I think there is political seriousness this time (about privatisation)," said Shekhar Bajaj, president of the Associated Chambers of Commerce and Industry, a leading industry body.

Stock markets have been unhappy at the choice of firms picked for privatisation, however.

The government has picked unlisted firms for sale and there has been little action on the actively traded firms.

Shares of state-run firms refiners and telecom firms fell on Monday as investors unwound positions built up in the hope last weekend's meeting would consider the sale of these firms.

Bids closed this month for the partial privatisation of national flag carrier Air-India and domestic airline Indian Airlines, which the government hopes to wrap up by the end of the fiscal year.

It is also likely to close the sale this fiscal year of the loss-making Hotels Corp of India, of aluminium producer Bharat Aluminium Company Ltd and petroleum marketing firm IBP Ltd.

Credibility improves

Vajpayee's Bharatiya Janata Party propagated "swadeshi", or economic nationalism, until it took power in 1998. But it has been forced to embrace privatisation, as a stubbornly high fiscal deficit makes it tough to pump funds endlessly into sick state-owned firms.

Political dithering over a consensus on privatisation and the fear of upsetting powerful labour unions also proved hurdles in the path of reforms. But many state-run firms have slipped even further into the red, making action necessary.

Between 1991-92 and 1999-2000, India raised just Rs 183.94 billion ($3.93 billion) from privatisation efforts, against a target of Rs 443 billion.

Last year, the government raised only Rs 26 billion of the targeted Rs 100 billion. Finance Minister Yashwant Sinha has set a target of Rs 100 billion for the fiscal year to March 2001.

To energise the privatisation process, Vajpayee's government has appointed a separate minister. Both holders of the portfolio -- incumbent Arun Shourie and his predecessor Arun Jaitley -- have pushed the privatisation agenda aggressively.

Analysts say the biggest change has been the state's decision to hand management control to private shareholders, and go beyond just selling minority stakes.

In January, the government sold a 74 per cent stake in its fully owned ailing confectionery firm Modern Foods to consumer products giant Hindustan Lever, a subsidiary of Anglo-Dutch Conglomerate Unilever Plc.

In August, it approved the sale of stakes in Hindustan Insectides, Sponge Iron India Ltd, Minerals Exploration Corporation and Hindustan Zinc Ltd to strategic partners by offering management control.

Bajaj said privatisation would swiftly gather momentum.

"I am only looking at one (major privatisation) taking place. Once that happens, the others will be smooth sailing. It's the first one that is the toughest," he said.

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