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Disinvestment of PSUs across sectors: Legal Position and Economic Reasons

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INTRODUCTION

Set the rules of the game to maintain a vibrant playing field
and vibrant competition
1


Soon after independence in 1947, the country tried to adopt a policy of speedy economic
growth with social justice, as enshrined in the Constitution of India
2
, as its prime aim.
Hence, it tried to achieve its developmental objectives through a mixed economy. Then
on, there were several occasions of disenchantment with the performance of Public
Sector Enterprises that failed to live up to the expectations that were sought from them.

The public sector in India has been the chief appliance for fulfilling the role of the state
as an entrepreneur. State intervention in the economy arose out of two main reasons.
Firstly, the market did not exist at all, as was the case with most developing countries that
had acquired independently from colonial rule, mainly located in Asia, Africa and Latin
America. Besides this there were cases of severe market failures, which required
Governments to intervene resolutely in public interest, as was the case in many
developing, and even developed countries like United Kingdom, France, Italy
3
.

It cannot ever be doubted that PSUs (Public Sector Units) have played a very important
role in the economic development and progress of the country all these years. PSUs are
often criticized by advocates of disinvestment as being unproductive and white
elephants as some of them are indeed a burden on the States resources.

1
As once quoted by Prof. Joseph Stiglitz in favour of privatisation, former Chairman of the Council of
Economic Adviser to then President of USA Bill Clinton.
2
The preamble of the Constitution says that India shall be a socialist republic. Art. 38 of the Constitution
says State shall strive to promote the welfare of the people by securing and protecting as effectively as it
may a social order that ensures justice social, economic and political, shall inform all the institution of
national life.
3
See generally, Alak Ghosg, Indian Economy its Nature and Problems, 28
th
Edition, August, 1999,
The New Book Stall, Calcutta, Pg no 299
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The criticism of PSUs is not entirely unfair as it is only but natural for a country to
expect returns from something into which huge investments have been made. The poor
performance of many PSUs is a major factor for the present clamour for disinvestment.
This is because many of the developmental and social objectives that the PSUs intended
to achieve still remain unfulfilled.

However, whether PSUs must be disinvested or not is an extremely fascinating
economic question. One must take into account the fact that private investment is simply
for profit anywhere in the world and disinvestment would simply make the rich richer
and the poor worse off. Also, private hands would downsize their workforce
4
and employ
only the minimum number of people required to perform the job. This would add to the
current predicament of unemployment in the country.

On the other side of the same coin advocates of disinvestment say that the actual
performance of the PSUs has not conformed to the role that was envisaged for them. Far
from providing private sector development and channelling it in socially desirable
direction, there has been poor performance in supplying key inputs in appropriate
amounts at the time and place were demands arise. Also, they opine that there is low
operational efficiency and a lack of resilience to change production patterns and
technology in PSUs
5
. Pro-reformers are of the view that so-called commercial PSUs
have been run on anything but commercial lines. Many economic thinkers feel that PSUs
are the fiefdoms of bureaucrats and politicians who treat the PSUs as their own fiefdom.

4
A perfect example of this is the pink slips that were given to several engineers in the software industry,
who were being laid off, when the boom that the industry was experiencing was over.
5
See generally, Eight lectures on Indias Economic Reforms, T.N Srinivasan, Oxford University
Press, 2000

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The process of disinvestment has been legally challenged in the Courts of the country.
This happened when the employees of BALCO filed a writ petition challenging the sale
of the cash rich PSU. The Centre for Public Interest Litigation also challenged in the
Supreme Court, the governments decision to privatize HPCL and BPCL without
Parliaments approval. In the case of VSNL, there too was certain legal controversy as
the company trying to acquire VSNL filed a case against the Government for eroding the
market value of VSNL shares in the Delhi High Court.


























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THE ECONOMICS OF PUBLIC SECTOR UNDERTAKINGS



PROBLEMS PLAGUING PSUS

PSUs are often termed as being unproductive as very often they are judged simply on the
basis of their balance sheets. This yardstick is common in the private sector as
maximisation of profits is their sole aim. Profits, therefore cannot be the only parameter
to assess the performance of a PSU as there are many factors involved
6
:
Such units are usually started in those sectors where profitability is high and
gestation period is long.
Heavy investments like the ones made in PSUs are not likely to bring in early
returns and profits in the beginning could be very low.
Sometimes, prices are intentionally kept low to retrain inflation or perhaps these
firms may have been asked to breakeven rather than maximize profits.

Because of these considerations, PSUs should not be judged on the strengths or
weaknesses of their balance sheets alone, but must be instead evaluated on the basis of
what they contribute to the social pool of goods and services in the countrys economy.
Hence, the index for the measurement for the performance of a PSU should be the total
value of the sales of an enterprise.

Due to the above factors stated above it is evident that conditions never existed for PSUs
to become vibrant, profitable organisations, based on commercially oriented operations
with a profit-making motive at the nucleus. Moreover, a large number of projects in the
public sector were plagued by time and cost overruns of an astonishing magnitude
damaging their viability badly and making them almost prematurely sick
7
.

6
See generally, Mishra and Puri, Indian Economy, 28
th
Edition, 2002, Himalaya Publishing House,
Mumbai, Pg nos. 487- 491
7
See generally, Ibid
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The lack of sufficient autonomy to PSUs in contemplating their operations, current as
well as future, denied them the opportunities for initiating and implementing short term
as also radical long term moves for removing their operation and to place the on a viable
setting. Due to lack of budgetary support and their incapability to generate sufficient
profits, most PSUs were unable to invest required amounts of money to upgrade and
modernise technology, as a result of which they had accumulated a massive backlog in
this respect, especially in the 1990s
8
. Hence, the problems that PSUs are being faced
with are in abundance and the existing situation is really formidable one to come to grips
with.

The public sector is probably one of the most imperative means of the Government to
fulfil its pre-election promises of employment. The public sector has contributed
incalculably to recuperating the overall employment situation in the country and has
acted as a model employer by providing its workers with better remuneration and other
amenities as compared to the private sector. Industries in the public domain, which have a
huge workforce, include coal, steel, textiles, heavy engineering, etc. The PSUs also
many a time contribute to the development of townships in the areas in which they are
situated.





8
See generally, Supra 3,Pg no. 299
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WHY THE CLAMOUR FOR DISINVESTMENT?

Unlike privatisation a la Margaret Thatcher, the Indian policy was initially enthused
largely by the need to raise resources for the budget. Very little has been done in regard
to the treatment of sick public sector units in the country. Many Indian PSUs have been
chronically loss-making units for a number of years and one can say that turning them
around would be extremely difficult. Hence these make such PSUs unlikely candidates
for a revival
9
.

In the Indian context, many leading economists are of the view that privatisation would
yield substantial efficiency and bring several fiscal benefits. The reason why the
disinvestment programmes of recent Governments have met with little success is because
the Government has insisted on retaining a majority of the shares for the foreseeable
future. The leading economist Vijay Joshi is of the view that a well-structured
privatisation programme could easily contribute fiscal savings of about 1.5 Gross
Domestic Product (GDP) to the Indian economy
10
. Private ownership establishes a
market for managers, which improves the quality of management. Private firms are
subject to capital market disciplines and scrutiny by financial experts
11
.

In the current era of globalisation and competitiveness, it is essential that PSUs (sick
ones) must be divested to save the current situation of the Indian economy. India can take
the example of China in this regard, which despite being ruled by a communist regime

9
India in the Era of Economic Reforms, Edited by Jeffrey Sachs, Ashutosh Varshney, Nirupam Bajpai,
See generally in the article, Indias Economic Reforms, an Appraisal, by Montek Singh Ahluwalia, Pg.
Nos. 62, 63
10
See also, Vijay Joshi, Indias Economic Reforms and Development, Essays for Manmohan Singh,
Oxford University Press, 1998, Pg nos. 158 - 160
11
See also, Jalan, Bimal, Indias Economic Policy:Preparing for the 21
st
century, Penguin India,
1996, Pg 37

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has spared no pains to make the market free and reduce its liabilities with its intense
privatisation.

On studying the nature of privatisation in various countries across the world, one can
come to the conclusion that though privatisation is the need of the hour in India, the
strategy of disinvestment that should be adopted must be different from that of the
countries of Latin America, Central Europe, and East Asia
12
. Disinvestment must be done
taking various social factors into account and should be preferably by selling the
chronically loss-making enterprises, either domestic or foreign
13
.




12
Disinvestment world over is a heavily debated subject and several comparisons have been drawn
between the various strategies of different countries in this regard. Disillusionment with too much planning
increased through the 1970s and 1980s. This was due to apparently heavy handed planning in countries
like India on hand, and the rapid advance of countries of countries such as South Korea, Taiwan, Hong
Kong, and Singapore on the other hand which, it was argued, followed more laissez faire policies. Concern
with the deficiencies of planning generally came along with a criticism of the price distortions, associated
particularly with protectionist and import substitution policies, which usually accompanied planning. In
fact, the low performance of great many countries in Asia, Africa, and Latin America was cited as proof
that it does not pay the government to interfere with the market mechanism. Since the 1980s, in Europe
and Japan there has been a feeling that the government should be involved less in production, and there has
been widespread wave of privatisations of public enterprises. USA is one of the countries, where most of
the enterprises already in the private sector, went in for weakening the role of government in regulations.

13
See generally, Raj Kapila, and Uma Kapila, A Decade of Economic Reforms in India: The past,
present, and the future, Academic Foundation, Pg. no. 43

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SHOULD STRATEGIC SECTORS SUCH AS OIL AND PETROLEUM BE
DIVESTED?

Huge debate has ensued in our country over whether the strategic sector of oil and
petroleum must be divested. There have been several arguments against the privatisation
in this regard. One has been that oil infringes on security and that selling such a crucial
sector into private hands would compromise the governments ability to manage things in
case of a war and possible interruption of supplies. Some however opine that strategic
reserves of oil should be made and there should be an institution of a regulatory structure
that ensures appropriate behaviour by all companies in times of war
14
.

Another economic objection raised is that privatisation would create private monopolies,
as many make the inherent assumption that public monopolies are always better. This is
said because in private monopolies, the maximised profits always go to the private firm,
whereas, in the case of public sector companies, the profits can be used for social and
public good. To understand this hypothesis better one must understand the concept of a
natural monopoly first.

In some industries (oil is a perfect example), there are relatively few firms. This does not
imply the absence of competition in that industry. If there are a large number of entrants,
the existing firms may not be able to exercise monopoly power. In other instances, there
are barriers to entry arising from what economists refer to as increasing returns of scale.
These are referred to as natural monopolies, where the cost of production declines with
an increase in the scale of production
15
.




14
See generally, Disinvestment: Means and Ends, Economic and Political Weekly, September 14
th
,
2002
15
See generally, Naib, Sudhir, Disinvestment in India: Policies, Procedures and Practices, Sage
Publications, New Delhi, 2004, Pg 43
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Under certain circumstances it may be more viable to have one firm producing instead of
many. Hence, the argument that oil sector must not be disinvested because private
participation in this field would not help the countrys cause is propounded by many.


CAN THE PRESENCE OF COMPETITION IN THE MARKET IMPROVE THE
PERFORMANCE OF PSUS?
Often, the public sector in India and the absence of India are seen to go hand in hand.
One must agree that public ownership is one of the main solutions to the problems that
arise in industries where competition in industries where competition is impractical or
objectionable. However, in face of technological advances, sectors that were earlier
considered monopolies remain monopolies no longer. An ideal example of this would be
the electricity sector where generation, distribution, and selling are now decoupled
16
.

Competition in the market brings in several benefits that might improve the performance
of the entire industry besides aiding in resurrecting public enterprises. They are
17
:
Internal efficiency may be enhanced by the disciplining effect of competitive
threats upon the public sector.
Competitive forces break the monopoly of information about industry
conditions that may otherwise exist, and which tends to hamper the effectiveness
of the regulatory regime.
There would be a creation of opportunities for innovation as rival firms might
have the incentive to introduce new products or processes, which in turn acts as a
spur to the public firm to be more innovative itself.
Even if competition may not exist, threat of entry can itself have a major
influence on industry conduct. Hence, such threats would make PSUs behave
very differently from what they would in normal circumstances.


16
See also, The Electricity Act, 2003
17
Supra 15, Pg no. 89
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LEGAL CONTROVERSIES REGARDING DISINVESTMENT OF
PSUS

In the recent past, there have been a few instances, of the disinvestment of certain PSUs,
being disputed in the courts of the country. Below are the facts of the relevant cases and
what the courts opined in the scenario:


BALCO employees Union v. Union of India
18


BALCO is a classic example of the Indian government disinvesting a cash rich PSU
which was employing a sizeable workforce. BALCO was one of the petroleum firms that
had been contributing to the Central exchequer consistently for the more than a decade.
Many thought that when the Central government was running not merely a fiscal deficit
but on its revenue account, it would make little sense for it to dispose of assets that was
earning it regular profits
19
. The procedure of disinvestment of BALCO in which it was
sold to Sterlite industries was alleged to be hasty and the entire process did not seem
transparent to many.


18
BALCO Employees Union v. U.O.I, 2001 AIR SCW 5135: AIR 2002 SC 350

19
Entire judgement available at, http://divest.nic.in/judgementbalco.htm, Page last visited on 15
th

December, 2004
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In this case, Court shrewdly avoided any conflict that could have arisen between the
legislative and the judiciary
20
, in its ruling, while observing that when a Government
chooses to manage an industry by forming a company and it becomes a shareholder, then
under the provisions of the Companies Act as a shareholder, it would have a right to
transfer its shares. The Court was of the opinion that the decision of the government to
disinvest BALCO was purely an administrative on relating to the economic policy of the
state, and hence the judiciary had no role to play here
21
. The Court said it would not step
in unless there is complete certainty on the illegality of the decision. Hence, the Supreme
Court judgement in this regard proved to be a landmark one for governments with a pro-
reform or aggressive disinvestment policy.



20
The Court then referred to an earlier decision in the case of R.K. Garg vs. Union of India and Others,
(1981) 4 SCC 675 where there was an unsuccessful challenge to a law enacted by Parliament and held at
page 413 as follows: -"What has been said in respect of legislations is applicable even in respect of policies
which have been adopted by Parliament. They cannot be tested in Court of Law. The courts cannot express
their opinion as to whether at a particular juncture or under a particular situation prevailing in the country
any such national policy should have been adopted or not. There may be views and views, opinions and
opinions that may be shared and believed by citizens of the country including the representatives of the
people in Parliament. But that has to be sorted out in Parliament that has to approve such policies.
Privatization is a fundamental concept underlying the questions about the power to make economic
decisions. What should be the role of the State in the economic development of the nation? How the
resources of the country shall be used? How the goals fixed shall be attained? What are to be safeguards to
prevent the abuse of the economic power? What is the mechanism of accountability to ensure that the
decision regarding privatization is in public interest? All these questions have to be answered by a vigilant
Parliament. Courts have their limitations because these issues rest with the policy makers for the nation.
No direction can be given or is expected from the courts unless while implementing such policies, there is
violation or infringement of any of the constitutional or statutory provision.

21
As observed by the Supreme Court in Balco Employees Union (Regd.) V. Union of India and others
2001 (8) SCALE page 541 the process of disinvestment is a policy decision involving complex economic
factors. The Courts have consistently refrained from interfering with economic decisions as it has been
recognized that economic expediencies lack adjudicative disposition and unless the economic decision,
based on economic expediencies is demonstrated to be so violative of constitutional or legal limits on
power of so abhorrent to reason, that the courts would decision, right to trial and error as long as both
trial and error are bona fide and within limits of authority. Hence the court held that applying the aforesaid
principles, it couldnt be said that any action of the respondents either lacked boba fides or was arbitrary,
illegal or uniformed.


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THE LEGAL SPAT IN THE CASE OF PROPOSED DISINVESTMENT OF HPCL
AND BPCL
22


The proposed disinvestment of HPCL (Hindustan Petroleum Corporation Limited) and
(Bharat Petroleum Corporation Limited) was the case in which probably attracted the
most attention as regards to the cases filed against privatisation in India. The decision to
disinvest both these PSUs was taken in February 2002. An interesting point to note
would be that these PSUs were referred to the Disinvestment Commission for its
observations. The privatisation came in the face of the fact that both were highly
profitable PSUs and were from the petroleum sector. Also, the country was deeply
divided over the issue, as even elements from the then ruling coalition were at odds over
whether the disinvestment should take place or not
23
.

The Centre of Public Interest Litigation challenged the Governments decision (an
executive one) to privatise both these PSUs without a nod from the Parliament. It was
argued that before any disinvestment of HPCL and BPCL takes place, there should be
repealing or amendment of the laws which nationalised the two PSUs
24
. This was
because both these PSUs had been created under a nationalisation law, the preamble of
which clearly stated that oil distribution would be state owned.

The two-judge bench of the Supreme Court in its judgment asked the Government to seek
Parliaments approval before proceeding with privatisation. However, it must be taken
into account that the Court did not confront the Government on the issue of disinvestment


22
Refer to the case, Centre for Public Interest Litigation v. U.O.I, A.I.R 2003, S.C.W 4671

23
The Courts verdict in favour of the appellants was termed as a major setback by the then
Disinvestment Minister Arun Shourie, while his ministerial colleague, the then Petroleum Minister Ram
Naik termed hailed the Courts verdict as a historic judgement.
24
The fact that created the controversy was that Acts of the Parliament created HPCL and BPCL
24
. These
Acts were passed so as to facilitate the transfer of the assets of the foreign companies namely Shell,
Burmah and Caltex to HPCL and BPCL which these statutes had created as per the Indian Companies Act,
1956.
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in this case
25
. It simply ruled in favour of the appellants on a purely procedural and legal
ground that the two PSUs were created by Acts Of Parliament and hence could not be
privatised without prior legislative approval.







25
Supra 17, Pg no. 375
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Modi Corp. v. Union of India and Videsh Sanchar Nigam Ltd.
26


The entire controversy regarding the disinvestment of VSNL (Videsh Sanchar Nigam
Ltd.) had two components. The first part dealt with the stripping down of reserves of
VSNL prior to its disinvestment. The second part of the controversy had Tata group
(which paid Rs. 2600 crores for a 45 per cent stake in VSNL which it owned after the
divestment of VSNL) investing Rs. 1200 crores in Tata Teleservices, a wholly owned
subsidiary of the Tata group.

About a year before the process of the disinvestment of VSNL, the Government did
appropriation of impressive amounts from the reserves of VSNL. This was done by 500
per cent annual dividend and another 750 per cent special dividend. Thus, the
government stripped the company of its assets and depleted its market value. Modi
Corporation who was bidding for the stake for VSNL, challenged the disinvestments
process of VSNL, saying that the precise capital value of the company was unavailable
due to the maneuvers made by the Government a year before the proposed sale of the
stake
27
. The High Court of Delhi ruled in favour of the respondents saying that the money
the company had paid of as dividend had returned to the government
28
and the petitioner
had made the issue a mountain out of a molehill.

26
Delhi High Court, Extraordinary Civil Jurisdiction, Civil Writ Petition No. 180, 2002

27
Learned counsel Dr. A.M Singhvi, submitted that petitioner was not assailing the disinvestment process
or challenging the eligibility criteria, rather its endeavour and effort was to introduce more competitiveness.
It would also be in the interest of the Government to get the maximum valuation for VSNL dis-investment,
especially in view of the change in the business environment, including the end of ILD monopoly of the
respondent/VSNL by March 2002. Petitioner, therefore, ought to be permitted to bid for the dis-investment
process, which would be in the larger public interest. Dr. Singhvi, by way of illustration, stated that the
present case was akin to the advertised sale of a fully loaded car with accessories, such as Refrigerator,
Video, T.V. Air conditioner etc. However, before the sale, the owner strips it of all the accessories and
leaving it with the engine, steering with hub and bare essentials. In view of this changed situation an
interested buyer who was not in the fray earlier should be permitted to make an offer.

28
Regarding disbursement of the dividends, it was ruled that dividend of 500 per cent was approved by the
shareholders in the General Meeting of VSNL held on 27.9.2001. Apart from the Government of Indias
shareholding of approximately 52.97% there were a large number of public shareholders and institutional
shareholders who have received the dividend. Therefore, it would not be correct to state that the Union of
India has taken out money from one pocket and put in another.
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In the second part of the VSNL controversy, soon after the Tata group acquired the 45
percent stake in VSNL, it decided to invest Rs. 1200 in Tata Teleservices, its subsidiary.
This became more of a political controversy and the then Telecom Minister, Pramod
Mahajan came out with a furious reaction against this move of the VSNL Board. This
controversy also raised important queries as regards to role the Government has as a
shareholder and not as an owner
29
.





29
See generally T H Chowdary, VSNL Investment in Tata Teleservices, ECONOMIC AND POLITICAL
WEEKLY, June 8, 2002.

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COMPARISON OF THE RECENT JUDGEMENTS OF PSU DISINVESTMENT
RELATED CASES

If one looks at the recent judgments in detail, one can find a very interesting pattern in the
following judgements. In the BALCO case, the Supreme Court, very astutely avoided any
clash between the judiciary and the executive, and thereby said that disinvestment was
simply an administrative function of the Government and the Court had no say in the
matter as its role was not extended to any economic policies of the Government.

In the HPCL and BPCL case, the judiciary ruled against the privatisation of the two cash
rich PSUs. However, this they did not on account of any judicial activism, but by simply
sticking to the law. Their ruling was based on the fact that both these PSUs were created
under an Act of Parliament and hence any disinvestment must be done only by either
taking approval of the Parliament or by amending the Nationalisation Act under which
they were created.

The VSNL case brought to the fore the several blemishes that are generally seen to be
associated with the disinvestment process in the country. Modi Corporations plea that
the Governments pre-disinvest moves had severely dented the cash surplus had. The
Court however disagreed with the petitioners and ruled that their plea was based on
frivolous grounds and did not warrant any merit in a court of law.








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CONCLUSIONS AND ANALYSIS

PSUs must not simply be judged on the basis of their balance sheets; instead an
assessment should be made on the basis of what they contribute to the economy in
terms of social goods and benefits. One must also take into account the millions
of jobs that PSUs provide, thereby sustaining the lives of many in the country.

Only PSUs that are chronically sick must be privatised and those, which can be
revived, must be given adequate budgetary support till they reach conditions of
decent efficiency and profitability.

Privatisation of the chronically sick would also benefit market conditions in that
particular industry in which that PSU is operating. The Government must
encourage competition in sectors that PSUs dominate, as the benefits competition
brings are many. The threat of competition in the industry would make PSUs
much more responsive to market needs as they would be wary of the competition
all the time.

Strategic sectors such as oil and petroleum must not be divested because of
security reasons or the fact that one cannot be certain about the situation about the
availability of oil supply during times of war if the sector is dominated by private
hands. Also, the presence of natural monopoly exists in this sector and hence, it
would be more preferable for a country like ours, to have such a sector in public
control, as even if there is a monopoly, the profits would be used for social good.

The current legal position in the country as far as disinvestment goes is very clear.
In the light of the recent decisions of the Courts of the country, it is clearly
inferable that the Court will not interfere in any of the Governments
disinvestment policies, only unless it is clearly violative of any law. From, the
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HPCL and BPCL case, it is evident that the Court is only likely to step in and
prevent disinvestment if the ongoing process goes against any law that is related
to the existence of a PSU.

As regards to the many arguments against disinvestment by reference to the
provision in Article 38 of the Indian Constitution, the researcher is of the view
that the at the time of the framing of the Constitution, the fathers of the
Constitution could simply not have foreseen the current economic scenario which
is dominated by globalisation, and hence the fact that they then envisaged India to
be a socialist state does not hold water today.







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BIBLIOGRAPHY

PRIMARY SOURCES:
http://divest.nic.in/judgementbalco.htm
http://divest.nic.in/judgementvsnl.htm
http://divest.nic.in/psuapp/bpcl.htm.
http://divest.nic.in/psuapp/hpcl.htm
ESSO (Acquisition of Undertakings in India) Act (4 of 1974)
BURMAH SHELL (Acquisition of Undertakings in India) Act (4 of 1974)

BOOKS AND ARTICLES REFERRED:
Indias Economic Reforms (1991-2001), Vijay Joshi and I.M.D Little, Oxford
University Press, 2002, New Delhi
Indias Economic Reforms and Development (Essays for Manmohan
Singh)Article by Vijay Joshi, Book edited by Isher Judge Ahluwalia and I.M.D
Little, Oxford University Press, 1998
A Decade of Economic Reforms in India: the past, the present and the future.
Raj Kapila and Uma Kapila, Academic Foundation

Eight lectures on Indias on Indias Economic Reforms T.N Srinivasan,
Oxford University Press, 2000
India in the Era of Economic Reforms Edited by Jeffrey Sachs, Ashutosh
Varhney, Nirupam Bajpai, Essay by Montek Singh Ahluwalia,
Indias Economic Policy; Preparing for the 21
st
Century, Bimal Jalan,
Penguin India, 1996
Disinvestment: Means and Ends, Economic and Political Weekly, September
14
th,
2002
Disinvestment Hiccups, Kumar Murlidharan, Frontline, September 27, 2002

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VSNL Investment in Tata Teleservices, T H Chowdary , Economic and Political
Weekly, June 8, 2002.
Disinvestment and Parliament, Rajeev Dhavan, The Hindu, Friday, September
19, 2003.
Indian Economy its Nature and Problems, Alak Ghosg, 28
th
Edition, August
1999, The New Book Stall, Calcutta
Modern Macroeconomics, A. Koutsoyiannis, English Language Book Society,
London, 1985
Indian Economy, Misra and Puri, 28
th
Edition, 2002, Himalaya Publishing
House, Mumbai


Final Draft
Disinvestment of PSUs across sectors: Legal Position and Economic Reasons
Economics II

APPENDIX

STATISTICS OF DIVESTED PSUS
The Government had finalized the privatisation/disinvestment of the following 12
companies through strategic sales and 18 hotels of ITDC and 3 of HCI through demerger
/ slump sale (till 15
th
July 2002)
30
.




Strategic Sale of PSUs Year 2000 Onwards
Sr.No Name of PSU Date
Ratio of
paid up
Equity
Sold %
Face
Value of
Equity
Sold (Rs.
in Crore)
Realisation
(Rs.
Crores)
1a
Modern Food Industries Ltd.
(MFIL)
Jan-00 74 9.63 105.45
1b MFIL - Phase II 26 3.38 44.07
2
Lagan Jute Machinery
Corporation
Jul-00 74 0.70 2.53
3 BALCO ^ Mar. 2001 51 112.52 826.50
4a CMC Oct. 2001 51 7.73 152.00
4b CMC $ 61 0.91 6.07
5 HTL Oct. 2001 74 11.10 55.00
6 VSNL ^ Feb. 2002 25 71.20 3689.00
7 IBP Feb. 2002 33.6 7.40 1153.68
8 PPL Feb. 2002 74 320.10 151.70
9 Jessop Aug. 2003 74 68.10 18.18
10a HZL Apr. 2002 26 109.80 445.00
10b HZL *** Nov. 2003 18.92 79.90 323.88
10c HZL $ Apr. 2003 1.5 6.17 6.19

30
SOURCE: http://www.divest.nic.in/performance.htm, page last visited on 12
th
December, 2004


Final Draft
Disinvestment of PSUs across sectors: Legal Position and Economic Reasons
Economics II

11 IPCL May. 2002 26 64.50 1490.84
12a Maruti Udyog Phase I Mar. 2002 - - 1000.00
12b Maruti Udyog Phase II Jul. 2003 27.5 39.73 993.34
13
State Trading Corporation of
India (STC)#
Mar. 2003 40.00
14 MMTC Ltd.# Mar. 2003 60.00
15-17 HCI (3 Hotels)
2001-02
various dates
100 14.70 242.51
18-36 ITDC (19 Hotels)
2001-02
various dates
100 27.10 444.17
37 ICI Oct. 2003 9.2 3.76 77.10
38 IPCL Mar. 2004 28.95 71.85 1202.85
39 IBP Co. Ltd. Mar. 2004 26 5.80 350.66
40 CMC Ltd. Mar. 2004 26.25 3.98 190.44
41 DCI Mar. 2004 20 5.60 221.20
42 GAIL Mar. 2004 10 84.60 1627.36
43 ONGC Mar. 2004 10 142.60 10542.40
Total 1272.86 25462.12
^ Including dividend & Divi. Tax/withdrawal of surplus cash prior to disinvestment.
*** Realisation from call option
$ Disinvestment in favour of
employees

# The receipt is on account of transfer of cash
reserves.















Final Draft
Disinvestment of PSUs across sectors: Legal Position and Economic Reasons
Economics II



Following are the cases of Privatization in India till date
31
:
S.No. Name of the Privatised PSU
1 Lagan Jute Machinery Company Limited (LJMC)
2 Modern Food Industries Limited (MFIL)
3 Bharat Aluminium Company Limited (BALCO)
4 CMC Ltd. (CMC)
5 HTL Ltd. (HTL)
6 IBP Co. Ltd. (IBP)
7 Videsh Sanchar Nigam Limited (VSNL)
8 Indian Tourism Development Corporation (ITDC)
9 Hotel Corporation of India Limited (HCI)
10 Paradeep Phosphates Limited (PPL)
11 Jessop and Company Limited
12 Hindustan Zinc Limited(HZL)
13 Maruti Udyog Limited (MUL)
14 Indian Petrochemicals Corporation Ltd.(IPCL)













31
SOURCE: http://www.divest.nic.in/pvtpsu.htm, Page last visited on 10
th
December, 2004