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Saturday, October 1, 2011

Revised disinvestment target in November: Official Going full throttle to woo SC and ST voters, chief minister Mayawati on Saturday wrote to Prime Minister Manmohan Singh demanding increase in quota for them as per their population and job reservatio

Revised disinvestment target in November: Official

Going full throttle to woo SC and ST voters, chief minister Mayawati on Saturday wrote to Prime Minister Manmohan Singh demanding increase in quota for them as per their population and job reservation in the private sector and the judiciary.Our old friend UDIT Raj has been demanding Reservation in  the Private sector and Government response always seemed Positive. Justice Party Man Udit Raj raised the Issue during NDA Government at a time while Disinvestment Ministry was Instrumental for Privatisation. Udit Raj did NOT Oppose Disinvestment or Privatisation rather he tried to mobilise the Excluded Communities in favour of economic Reforms! Mayawati is doing the Same demanding Quota in Private Sector!A day after demanding constitutional amendment for introducing reservation for Muslims in government jobs and educational institutions, UP chief minister Mayawati on Sunday shot off a letter to Prime Minister Manmohan Singh seeking quota for poor members of the upper castes. Just see, how Mayawati Undermines the Constitutional safeguards Ensured by Dr. Ambedkar! BSP supremo Mayawati shot off yet another letter to prime minister Manmohan Singh demanding inclusion of Jats in Central government's list of other backward classes (OBC). This is the third letter to prime minister from Mayawati in three consecutive days. It is the latest modification in her Social Engineering and Casteology!

On the other hand, as Bengali Brahamin Pranab heralded the latest agenda of Mass Destruction and Ethnic cleansing with his Budget commncing the Second Phase of Economic Reforms.The India Incs Government is Implementing Plan B to Push for Reform Drive and Divestment. Hence, the role of Mayawati who is Remote Controlled by the Brahaminical Hegemony, may NOt be judged only as a Electoral Equation of Casteology. It is Deeper Maning as the activities of Uditraj also suggest. Both of them, in fact, Supporting the Cause of Free market Economy and LPG Mafia Rule Manusmriti Apartheid, Justifying the PRIVATISATION!

Full FDI freedom in drug research!

Cabinet approves new mining bill calling for sharing profits, royalties with local communities!

UID tender delay: IT companies like Accenture, HCL Infosystems, Wipro and Mahindra Satyam jittery over vendor selection for Rs 2,000-cr contract

Indian Holocaust My Father`s Life and Time - SEVEN HUNDRED THIRTY FOUR


Palash Biswas


http://indianholocaustmyfatherslifeandtime.blogspot.com/


1 OCT, 2011, 05.17AM IST, ET BUREAU

Rising deficit: Government must do more than a mere delaration

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The government will borrow an extra Rs 52,872 crore from the market this fiscal due to a lower pool of small savings and a dip in its cash balances carried over from the previous year. It is not enough to declare that the government will meet its fiscal deficit target, regardless.

Concrete cuts in expenditure and additional revenue mobilisation must be announced. Of the extra borrowings, Rs 18,000 crore is due to a shortfall in small savings collections. This, in any case, was a government claim on private savings, even if not mediated by banks.

So, the additional, unanticipated demand from the government on private savings is for Rs 35,000 crore. Rightly, the announcement has raised concerns over interest rates hardening and crowding out of private investment. However, given the fragile state of the world economy, India cannot afford to slip on growth. Reforms are needed to maintain growth. One, the government should cut mounting fuel subsidies.

It must implement the decision taken, in principle, to deregulate diesel prices. This would keep fiscal deficit under check and stem inflationary expectations. It would release, for others, a sizeable amount of loans that oil companies secure now from banks to make up for under-recoveries - the difference between the claimed cost price and realised price.

Two, it should allow third parties, such as organised retail players, into oil marketing. An end to cartelisation in oil marketing will compel public sector oil companies to stop padding costs and lower claims on under-recoveries. Three, the government should also push for divestment even if the markets are depressed. Four, the tax base must be widened to raise more resources.

The way ahead is to implement the goods and services tax. With inflation close to double digits, the real returns from small savings are negative. Investors are, instead, betting on gold, an unproductive asset. The government could try to mop up at least the shortfall in small savings through new inflation-indexed bonds.

These could draw in investors in these volatile times. The political leadership must take time out from perpetual crisis management to attend to the needs of the economy.

http://economictimes.indiatimes.com/opinion/rising-deficit-govt-must-do-more-than-a-mere-delaration/articleshow/10191122.cms

Revised disinvestment target in November: Official

Going full throttle to woo SC and ST voters, chief minister Mayawati on Saturday wrote to Prime Minister Manmohan Singh demanding increase in quota for them as per their population and job reservation in the private sector and the judiciary.Our old friend UDIT Raj has been demanding Reservation in  the Private sector and Government response always seemed Positive. Justice Party Man Udit Raj raised the Issue during NDA Government at a time while Disinvestment Ministry was Instrumental for Privatisation. Udit Raj did NOT Oppose Disinvestment or Privatisation rather he tried to mobilise the Excluded Communities in favour of economic Reforms! Mayawati is doing the Same demanding Quota in Private Sector!A day after demanding constitutional amendment for introducing reservation for Muslims in government jobs and educational institutions, UP chief minister Mayawati on Sunday shot off a letter to Prime Minister Manmohan Singh seeking quota for poor members of the upper castes. Just see, how Mayawati Undermines the Constitutional safeguards Ensured by Dr. Ambedkar!BSP supremoMayawati shot off yet another letter to prime minister Manmohan Singh demanding inclusion of Jats in Central government's list of other backward classes (OBC). This is the third letter to prime minister from Mayawati in three consecutive days. It is the latest modification in her Social Engineering and Casteology!

On the other hand, as Bengali Brahamin Pranab heralded the latest agenda of Mass Destruction and Ethnic cleansing with his Budget commncing the Second Phase of Economic Reforms.The India Incs Government is Implementing Plan B to Push for Reform Drive and Divestment. Hence, the role of Mayawati who is Remote Controlled by the Brahaminical Hegemony, may NOt be judged only as a Electoral Equation of Casteology. It is Deeper Maning as the activities of Uditraj also suggest. Both of them, in fact, Supporting the Cause of Free market Economy and LPG Mafia Rule Manusmriti Apartheid, Justifying the PRIVATISATION! 

Keep up to date with these results:




As on 30 August 2011, the 50 Central Public Sector Enterprises (CPSEs) listed on the stock exchanges contributed about 22% of the total market capitalization.

CompanyMarket Capitalisation
(Rs.crore)
COAL INDIA LTD.2,36,832.08 
OIL & NATURAL GAS CORP.LTD. 2,25,137.72 
NTPC LTD.1,39,801.85 
NMDC LTD.87,481.46 
BHARAT HEAVY ELECTRICALS LTD.86,532.45 
INDIAN OIL CORP.LTD.74,428.88 
MMTC LTD. 69,755.00 
GAIL (INDIA) LTD.52,083.68 
POWER GRID CORP.OF INDIA LTD.46,413.00 
STEEL AUTHORITY OF INDIA LTD.44,567.02 
Click here for Market Capitalisation of all CPSEs
What's New   What's New
http://www.divest.nic.in/
PSUs
Investors
Intermediaries
Disinvestments through Public Offers-Highlights
Disinvestments through Public Offers-Highlights
  • CPSEs constitute 22.11% and 22.58% of the total market capitalisation of companies listed at BSE and NSE respectively (as on 30 August 2011)
  • The CPSE with the highest market capitalisation is Coal India Ltd. at Rs.2,36,832 crore (BSE) and Rs. 2,37,243 crore (NSE) (as on 30 September 2011)
  • VSNL was the first CPSE to be divested by way of a Public Offer in 1999-00
  • ONGC Public Offer in 2003-04 has been the largest CPSE FPO, raising Rs. 10,542 crore
More..

KOLKATA: The central government will come up with a revised disinvestment target and determine the revised number of public sector enterprises whose stake will be divested in the current fiscal in November, a top official said Saturday.


"Numbers (of companies which will go ahead with disinvestment) will be cleared when the revised estimate is prepared. Revised estimate targets are initiated some time around November. I think we will go along with that," Mohammad Haleem Khan, secretary in the disinvestment department (finance ministry), told reporters on the sidelines of a programme organised by the Indian Chamber of Commerce (ICC) here.


Disinvestment plan of the central government for the current financial year has been hit due to uncertainty in the stock market fuelled by global economic slowdown.


The government has raised just Rs.1,145 crore from disinvestment from the first five months of the current fiscal, while the target for the entire fiscal is Rs.40,000 crore.


Khan said the his department was going through the preparations for the divestment in Bharat Heavy Electricals Limited (BHEL), Oil and Natural Gas Corporation (ONGC), Steel Authority of India Limited(SAIL) and Rastriya Ispat Nigam Limited (RINL), among others.


"The department is going through the preparations for all those companies which got authorization from the cabinet. We will keep them in ready condition. When we will feel that it is the right time, we will enter into the market," he said.


He said that BHEL and ONGC were currently ready for disinvestment.


"We will continue to prepare cases for all those companies which fall within the policy," he said.


Khan said disinvestment process in this fiscal differed not only for the current economic scenario, but also for other matters.


"Like some companies are not prepared... they may not have full number of independent directors," he added.


Disinvestment

The disinvestment of Government equity in Central Public Sector Enterprises (CPSEs) began in 1991-1992. Till 1999-2000, it was primarily through sale of minority shares in small lots. From 1999-2000 till 2003-04, the emphasis of disinvestment changed in favour of Strategic Sale viz. sale of a large block of shares along with transfer of management control to a Strategic Partner identified through a process of competitive bidding. After 2004-2005, disinvestment realisations have been through sale of small portions of equity. The total proceeds from disinvestment between 1991-1992 and 31st May, 2008 amounted to Rs.53.423.03 crore, consisting of the following:

Disinvestment between 1991-1992
Item Amount Realised (Rs. In Crore) Per cent
Receipts through sale of minority shareholding in CPSEs 35,358.01 66.18
Receipts through sale of majority shareholding of one CPSE to another CPSE 1317.23 2.47
Receipts through Strategic sale 6,344.35 11.88
Receipts from other related transactions 4,005.17 7.50
Receipts from sale of residual shareholding disinvested CPSEs/companies 6,398.27 11.98
Total 53,423.03 100

Policy Framework: The National Common Minimum Programme (NCMP) adopted by the Government outlines the policy of the Government with respect to the public sector including disinvestment of Government equity in CPSEs. The salient features of NCMP in this regard are as follows:

  • The Government is committed to a strong and effective public sector whose social objectives are met by its commercial functioning. But for this, there is need for selectivity and a strategic focus. The Government is pledged to devolve full managerial and commercial autonomy to successful, profit-making companies operating in a competitive environment. Generally profit-making companies will not be privatised.
  • All privatisations will be considered on a transparent and consultative case by-case basis. The Government will retain existing "navratna" companies in the public sector while these companies can raise resources from the capital market. While every effort will be made to modernize and restructure sick public sector companies and revive sick industry, chronically loss-making companies will either be sold-off, or closed, after all workers have got their legitimate dues and compensation. The Government will induct private industry to turn around companies that have potential for revival.
  • The Government believes that privatisation should increase competition, not decrease it. It will not support the emergence of any monopoly that only restricts competition. It also believes that there must be a direct link between privatisation and social needs - like, for example, the use of privatisation revenues for designated social sector schemes. Public sector companies and nationalized banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors.

At present, the Government has decided, in principle, to list, large profitable CPSEs on domestic stock exchanges and to selectively sell small portions of equity in listed, profitable CPSEs, other than the navratnas.

Source: National Portal Content Management Team, Reviewed on: 27-01-2011 

Sectors:
http://india.gov.in/sectors/finance/disinvestment.php

Disinvestment of India�s Public Sector Units
L M Bhole, Department of Humanities & Social Sciences
  

 

 

The role of the State vs. Market has been one of the major issues in development economics and policy. In a mixed economy such as India, historically the public sector had been assigned an important role. However, in the year 1991 the national economic policy underwent a radical transformation. The new policy of liberalization, privatization and globalization de-emphasized the role of the public sector in the nation�s economy. The faculty at IIT-Bombay has been studying various aspects of the New Economic Policy such as financial sector reforms, fiscal implications of reforms, and of globalization.

To date several arguments have been proffered by the apologists of market-oriented economic structures:

  • the government must not enter into those areas where the private sector can perform better

  • market-driven economies are more efficient than the state-planned economies

  • the role of the state should be as a regulator and not as the producer

  • government resources locked in commercial activities should be released for their deployment in social activities.

It is also contended that the functioning of many public sector units (PSUs) has been characterized by low productivity, unsatisfactory quality of goods, excessive manpower utilization, inadequate human resource development and low rate of return on capital. For instance, between 1980 and 2002, the average rate of return on capital employed by PSUs was about 3.4% as against the average cost of borrowing, which was 8.66%. Disinvestment (or divestment) of the PSUs has therefore been offered as one of the solutions in this context.

Disinvestment involves the sale of equity and bond capital invested by the government in PSUs. It also implies the sale of government�s loan capital in PSUs through securitization. However, it is the government and not the PSUs who receive money from disinvestment.

The fixation of share/bond price is an important aspect of disinvestment. Now, the Disinvestment Commission determines the share/bond price. Disinvested shares are listed, quoted and traded on the stock market. Indian and foreign financial institutions, banks, mutual funds, companies as well as individuals can buy disinvested shares / bonds.......more on next page

http://www.ircc.iitb.ac.in/~webadm/update/archives/August_2003/disinvestment1.html


Disinvestment

From Wikipedia, the free encyclopedia
This article is about a form of political sanction. For the privatization of state assets in India, see Privatization in India. For the routine business practice, see divestment.

Disinvestment, sometimes referred to as divestment, refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change. The term was first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid. The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, and Israel.

Contents

 [hide]

[edit]Targets

[edit]Nations

[edit]Iran

Eighteen American states have passed laws requiring the divestment of state pension funds from firms doing business with Iran.[1]

[edit]South Africa

Main article: Disinvestment from South Africa

The most frequently-encountered method of "disinvesting" was to persuade state, county and municipal governments to sell their stock in companies which had a presence in South Africa, such shares having been previously placed in the portfolio of the state's, county's or city's pension fund. Several states and localities did pass legislation ordering the sale of such securities, most notably the city of San Francisco. An array of celebrities, including singer Paul Simon, actively supported the cause.

Many conservatives opposed the disinvestment campaign, accusing its advocates of hypocrisy for not also proposing that the same sanctions be leveled on either the Soviet Union or the People's Republic of China. Ronald Reagan, who was the President of the United States during the time the disinvestment movement was at its peak, also opposed it, instead favoring a policy of "constructive engagement" with the Pretoria regime. Some offered as an alternative to disinvestment the so-called "Sullivan Principles", named after Reverend Leon Sullivan, an African-American clergyman who served on the Board of Directors of General Motors. These principles called for corporations doing business in South Africa to adhere to strict standards of non-discrimination in hiring and promotions, so as to set a positive example.

[edit]Northern Ireland

There was also a less well-publicized movement to apply the strategy of disinvestment to Northern Ireland, as some prominent Irish-American politicians sought to have state and local governments sell their stock in companies doing business in that part of the United Kingdom. This movement featured its own counterpart to the Sullivan Principles; known as the "MacBride Principles" (named for Nobel Peace Prize winnerSean MacBride), which called for American and other foreign companies to take the initiative in alleviating alleged discrimination againstRoman Catholics by adopting policies resembling affirmative action. The effort to disinvest in Northern Ireland met with little success, but theUnited States Congress did pass (and then-President Bill Clinton signed) a law requiring American companies with interests there to implement most of the MacBride Principles in 1998.

[edit]Cuba

Though in place long before the term "disinvestment" was coined, the United States embargo against Cuba meets many of the criteria for designation as such — and a provision more closely paralleling the disinvestment strategy aimed at South Africa was added in 1996, when the United States Congress passed the Helms-Burton Act, which penalized owners of foreign businesses which invested in former American firms that had been nationalized by Fidel Castro's government after the Cuban revolution of 1959. The passage of this law was widely seen as a reprisal for an incident in which Cuban military aircraft shot down two private planes flown by Cuban exiles living in Florida, who were searching for Cubans attempting to escape to Miami.

[edit]Sudan

During the late 1990s and early 2000s several Christian groups in North America campaigned for disinvestment from Sudan because of the Muslim-dominated government's long conflict with the breakaway, mostly Christian region of Southern Sudan. One particular target of this campaign was the Canadian oil company, Talisman Energy which eventually left the country, and was supplanted by Chinese investors.[1][2]

There is currently a growing movement to divest from companies that do business with the Sudanese government responsible for genocide in Darfur. Prompted by the State of Illinois - the first government in the U.S.A. to divest - scores of public and private-sector entities are now following suit. In New York City, Councilman Eric Gioia recently introduced a resolution to divest City pension funds from companies doing business with Sudan.

The recent divestment of assets implicated in funding the government of Sudan, in acknowledgment of acts of terrorism and genocideperpetrated in the Darfur conflict. In the United States, this divestment has taken place at the state level (including Illinois, which led the way, followed by New Jersey, Oregon, and Maine). It has also taken place at many North American Universities, notably Cornell University,Harvard University, Case Western Reserve University, Queen's University, Stanford University, Dartmouth College, Amherst College, Yale University, Brown University, the University of California, the University of Pennsylvania, Brandeis University, the University of Colorado,American University, University of Delaware, Emory University, and the University of Vermont. The Sudan Divestment Task Force [3] has organized a nationwide group which advocates a targeted divestment policy, to minimize any negative effects on Sudanese civilians while still placing financial pressure on the government. The so-called 'targeted divestment approach' generally permits investment in Sudan, and is thus radically different from the comprehensive divestment that ended apartheid in South Africa. Because targeted divestment permits investment in hundreds of multinational corporate and private-equity firms that support, lend legitimacy to, and pay taxes and graft to the government of Sudan, policy experts suggest that this "feel good" approach will have little impact on the Sudanese government's sponsorship of terrorism and genocide. Because of the massive deficiencies in the so-called 'targeted divestment approach,' human rights advocates recommend the more comprehensive approach to divestment that has been taken by the State of Illinois.[citation needed] Under this approach, sponsored by State Senator Jacqueline Collins, public pensions are prohibited from investing in any corporation or private equity firm that conducts business in Sudan, unless authorized to do so by the U.S. Government.

[edit]Israel

Main article: Disinvestment from Israel

[edit]Others

Myanmar (formerly Burma) has also been the target of disinvestment campaigns (most notably one initiated by the state of Massachusetts.) Divestment campaigns have also been directed against Saudi Arabia due to allegations of "gender-apartheid." The University of California, Riverside's Hillel chapter has a Saudi Divestment petition circulating as of 2007.

Since 2007, several major international and Canadian oil companies had threatened to withdraw investment from the province of Albertabecause of a proposed increase in royalty rates.[4][5]

[edit]Industries

[edit]Companies

  • Talisman Energy - because of its status as the main Western oil company in Sudan in the early 2000s.

[edit]Criticism

Some hold that divestment campaigns are based on a fundamental misunderstanding of how equity markets work. John Silber, former president of Boston University, observed that while boycotting a company's products would actually affect their business, "once a stock issue has been made, the corporation doesn't care whether you sell it, burn it, or anything else, because they've already got all the money they're ever going to get from that stock. So they don't care." [2]

Regarding the more specific case of South Africa, John Silber recalled:

...when the students were protesting the South African situation, I met with them, and they said BU must divest in General Motors and IBM. And I said, "Why should we do that? Is it immoral to own that stock?" Absolutely immoral to own it. And I said, "So then, we're supposed to sell it to somebody? We can't divest unless we sell it to somebody. And if we burn the stock, that just helps General Motors, because it reduces the amount of stock outstanding, so that can't be right. If we sell it to somebody, we have just gotten rid of our guilt in order to impose guilt on somebody else." [2]

The common perception about the effectiveness of divestment lies in the belief that institutional selling of a certain stock lowers its market value. Therefore, the company's networth becomes devalued and the owners of the company may lose substantial paper assets. In addition, institutional divestment may encourage other investors to sell their stocks for fear of lower prices, which in turn lowers prices even further. Finally, lower stock prices limits a corporation's ability to sell a portion of their stocks in order to raise funds to expand the business.

[edit]References

  1. ^ The Pension Fund Attack On Iran, Niv Elis, 10.16.09, Forbes
  2. ^ a b The Lion in Winter - Boston Magazine

http://www.genocideintervention.net/

[edit]See also

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28 SEP, 2011, 10.07AM IST, HARSIMRAN JULKA,ET BUREAU

UID tender delay: IT companies like Accenture, HCL Infosystems, Wipro and Mahindra Satyam jittery over vendor selection for Rs 2,000-cr contract

Wipro Ltd.

BSE

340.70

-02.08%

-07.25

Vol:152656 shares traded

NSE

340.80

-01.95%

-06.80

Vol:1208078 shares traded

Prices|Financials|Company Info|Reports

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NEW DELHI: IT vendors are becoming jittery as the UIDAI has missed the 90-day deadline to select a vendor for the Rs 2,000-crore citizen database management contract amidst budget cuts from the finance ministry and a clash of a similar tender issued by the Department of IT for a National Population Register.


The delay is widening the gap between enrollments and issuance of Aadhaar numbers. The Unique Identification Authority of India has already enrolled about 40 million citizens but Aadhaar has been issued to only about 33 million people.


The selected vendor will manage IT and data of all Indian citizens, the largest citizen identity database in the world. US-VISIT program run by US department of Homeland Security is the only second such database in the world, which has about 10 million people enrolled in it.


UIDAI will complete its anniversary of issuing its first number on Thursday. At the current annual rate of enrollments, it will be able to issue only 160 million Aadhaar numbers by 2014, unless things are expedited. Accenture, TCS, HCL Infosystems, Wipro,Mahindra Satyam were selected to go in the final round, after IBM and HP opted out of bidding. But the selected vendors are also getting jittery.


"We've invested about $15 million in just preparing the bids. Uncertainty is causing a problem for us and the ecosystem. Ideally the government should sort out UID's clash with other departments," said an e-governance head of a large IT firm. The bids for the most crucial and largest IT tender of about Rs 2,000 crore were put in May, this year by IT companies.


So far, the authority had a record to select vendor in a timeframe of 45 days, from bids to selection. But amidst budget cuts from the centre, the delay is being prolonged. The Ministry of Finance has rejected UIDAI's demand of allocation to be upped from Rs 3,000 crore to Rs 15,000 crore. It has also rejected UIDAI's demand for allowing biometric enrollments over and above the 200 million mark.


The NPR will now take the reins from UIDAI, for enrolling citizens after it achieves 200 million enrollments. It has created a state of limbo for the UID ecosystem, which consists of over 200 empanelled agencies, who are already complaining of a delay in payment from states. An official of a US-based IT firm which pulled out from bids at the last moment said that though its good for their business that duplicate tenders of a similar size and quality are coming out, but it's not good for the taxpayer.


"Ideally the NPR and UID should work together to find a common ground," he added, on condition of anonymity. When ET spoke to UIDAI Director-General RS Sharma on a possible clash with the NPR tender, he said that UIDAI's job is to just implement the policy of the government.


"Our job is to just execute. It's the government which decides on the policies." Due to the government's delay in sanctioning of funds required for the project, the authority has been unable to select a vendor and is thus missing several deadlines in states such as Delhi, in issuing Aadhaar numbers. The Delhi government has extended the deadline to January for covering the whole city.

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More stories from this edition of UID Cards


http://economictimes.indiatimes.com/tech/ites/uid-tender-delay-it-companies-like-accenture-hcl-infosystems-wipro-and-mahindra-satyam-jittery-over-vendor-selection-for-rs-2000-cr-contract/articleshow/10148944.cms
1 OCT, 2011, 04.27AM IST, ET BUREAU

Fiscal deficit tops 66% of target in just 5 months

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NEW DELHI: India's fiscal deficit during the first five months reached 66.3% of the budgeted estimates, raising fears that the government may overshoot the 4.6% target set for the full year. The deficit for April to August was 2.73 trillion ($56 billion), the Controller General of Accounts said on Friday.

The fiscal deficit-the difference between expenditure and revenue-was substantially lower at 39.7% of the annual target in the same period last year.

The government, however, maintained that it was too early to conclude that the deficit would widen even as it asked all ministries to refrain from seeking money for new schemes other than those that were announced in the budget.

"The numbers are on the higher side but not alarming," said Madan Sabnavis, chief economist,Care Ratings.

The government on Thursday said it will borrow 53,000 crore more from the market. Finance ministerPranab Mukherjee on Friday said "it is too pre-mature to say that there would be adverse impact on fiscal deficit...we have to borrow 53,000 crore to ensure that there is an uninterrupted cash flow". He said as far as fiscal deficit is concerned we shall have to consider various other factors.

The finance ministry has asked all ministries and departments to refrain from seeking funds for non-budget schemes, unless unavoidable, while submitting proposals for the second batch of supplementary demands for grants that will be presented to Parliament in the winter session.

The government has pegged the 2011-12 fiscal deficit at 4.6% of the gross domestic product, lower than last fiscal's 5.1%.

Economists have said that it is too early to predict how the expenditure side would behave as spending tends to be lumpy. So far, there have been no major slippages. Latest figures show that total expenditure was 37.5% of the budgeted amount as compared to 40.4% a year earlier.

DK Joshi, chief economist Crisil, said: "There seems to be some fiscal pressure in the system and expenditure trends cannot be seen as a pointer to the future."

Historically, revenue and expenditure trends have shown that the government usually spends more in the first half while revenues pick up in the latter half.

The RBI had earlier said that fiscal consolidation was also needed to control inflation and that monetary measures alone would not be sufficient.

Experts say that achieving the fiscal target of 4.6% would be difficult as the slowdown would affect revenues. Revenue receipts have been much lower at 23.9% of the budgeted estimates compared to 42.6% last year.
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http://economictimes.indiatimes.com/news/economy/finance/fiscal-deficit-tops-66-of-target-in-just-5-months/articleshow/10190836.cms
30 SEP, 2011, 05.06AM IST, ET BUREAU

2-3% interest relief for exporters likely

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NEW DELHI: Acting early to shield exporters from an impending slump in global demand, the government has decided to announce a host of sops, including aninterest subsidy scheme for select sectors in a month.

"After the sectoral reviews, we will be announcing the incentives. You can definitely expect it by the end of October or first week of November," commerce and industry minister Anand Sharma told reporters after the meeting of an industry-government task force.

The minister said that the export target of $ 300 billion for the year was on track, but concerns over global slump were real and diversification into new markets was the only way forward for ensuring growth over the coming months.

S harma said the finance ministry has agreed to an interest subvention scheme for export credit and theReserve Bank of India is expected to notifiy it soon. While the minister did not reveal what the subsidy level would be, some officials said it could be between 2% and 3%. The RBI raised key interest rates by 25 basis points last week for the 12th time since March, 2010.

Exports in April-August 2011 posted a sharp growth of 54.21% to $134.5 billion, but Commerce Secretary Rahul Khullar had pointed out while announcing trade figures earlier this month that growth had started tapering. Khullar said growth would start declining in September-October as the weakness in the US and he Eurozone would shrink total demand.

We have to act before the slowdown kicks in, he said.

The government may carry out a re-jig in sops by offering it for products that need support and incentivising export to new markets.

On foreign direct investment, or FDI, in pharmaceutical industry, the minister informed the task force that the Prime Minister will convene an inter-ministerial meeting soon to deliberate on whether FDI in the sector should continue on the automatic route even for brown field investments or it should be placed under the government approval route.

"While we recognize that the pharmaceutical industry, like any other segment, undergoes the transformation and consolidation, yet the indigenous capacities of research and production of medicines need to be preserved and nurtured," he added.

"India needs more than a trillion dollar investment in infrastructure in the next 5 years. DMIC - a project entailing an investment of $90 billion- would be a major component of it", said Chandrajit Banerjee, Director General, CII, who also attended the meeting.

On the stalled National Manufacturing Policy, the minister said that minor issues remain and the group of ministers (GoM) headed by Sharad Pawar will soon attempt to resolve them.
http://economictimes.indiatimes.com/news/economy/foreign-trade/2-3-interest-relief-for-exporters-likely/articleshow/10177788.cms
Just see:
Full FDI freedom in drug research
OUR SPECIAL CORRESPONDENT
*

New Delhi, Sept. 30: The government today allowed 100 per cent FDI under the automatic route in industrial parks for bio-tech and pharmaceutical research.
This was one among a raft of proposals to ease foreign investment norms that were announced today.
Overseas investors can now enjoy greater freedom in segments ranging from external commercial borrowings and FM radio to apiculture (bee keeping), educational institutes and NRI accounts.
Every six months, the government updates the FDI policy document, a ready reckoner for foreigners.
A government circular said the 100 per cent FDI in bio-technology, pharmaceutical and life sciences was necessary "given the urgent need to augment research and development infrastructure in these areas as also expand the production facilities".
In ECBs, the government has allowed an issuer to pledge its shares, widening the options for raising resources.
The government also allowed 100 per cent FDI for apiculture (beekeeping) as it is an important agro-based industry and has potential to bring high returns.
"Liberalisation would not only provide the desired thrust to the sector but would also bring in international best practices to upgrade the product and the methods of production," the circular said.
FDI limit in FM radio is now up to 26 per cent, bringing it on a par with print.
There will also be an e-auction of 839 FM stations in 294 towns, in a manner similar to the auction of 3G telecom spectrum.
Analysts estimate the e-auctions can fetch Rs 17,000 crore, which is 10 times the revenues earned five years ago from the second round of FM auctions.
Restrictions in the FDI policy related to construction have been eased for educational institutions and old-age homes.
Investments in construction development sector have restrictions of minimum area and built-up area requirements, minimum capitalisation requirement and lock-in periods.
The policy provides for opening and maintaining, without RBI approval, non-interest bearing rupee escrow accounts by non-residents towards payment of share purchase.
FDI from April to July went up 92 per cent to $14.54 billion from $7.56 billion in the corresponding period in the preceding year.
For the first six months of 2011, FDI showed an increase of 57 per cent to $16.83 billion.

http://www.telegraphindia.com/1111001/jsp/business/story_14575832.jsp

Cabinet approves new mining bill calling for sharing profits, royalties with local communities

Cabinet has approved a bill calling for mining firms to share either profits or amounts equivalent to royalties, a move that could boost political support for the government and free up lucrative projects but also raise business costs.

The bill, which must now win parliamentary approval, calls on coal miners to share a maximum 26 percent of their profits with local communities and for other miners an amount equivalent to royalties, government ministers said on Friday.

The initial proposal suggested all miners give 26 percent of profits to local communities.

"All coal mining companies have to share 26 percent of their profits," Coal Minister Sriprakash Jaiswal told reporters after a cabinet meeting.

The draft law proposes the profit sharing formula in a bid to smooth land acquisition, a touchy issue in the country, where many oppose natural resources being carted away by outsiders.

A part of government moves to expand social programmes for the poor, the bill seeks to simultaneously please the core support base, block flows of new recruits to a Maoist insurgency and balance modern lifestyles against traditional ways.

While industry bodies are reconciled to sharing some profits, they have baulked at 26 percent, saying that will raise business costs too much and deter investors.

Shares of Coal India , the world's biggest coal miner, fell 3.4 percent after the cabinet approved the bill.

The mining ministry says that profit-sharing should make it easier for mining projects to win local approval and accelerate the pace of developments.

Years of protests, sometimes violent, have delayed many industrial projects, including South Korean steel maker POSCO's plant in Orissa state, the biggest foreign direct investment in India at $12 billion.

County's mining sector has only opened up fully to private investors in recent years and state-run companies have lacked the funds and expertise to probe deeper than the top 50 metres or so where its iron ore and coal reserves are found.

The bill is likely to be presented in the session of parliament in December and approved, though the opposition could seek changes.

Prabudh Nagar, Bhim Nagar and Panchsheel Nagar will be the three new districts of Uttar Pradesh. Chief minister Mayawati made an announcement about the formation of these districts on Wednesday. The step has been taken to provide better administration, she said after touring the three districts to start her election campaign. With this, UP now has 75 districts. In a swift move, the state government also posted the district magistrates and police chiefs in the new districts.

Announcing the formation of Hapur as a district, Mayawati said the new district - Panchsheel Nagar - will be carved out of the existing Ghaziabad. Consisting of the existing Hapur and Garhmukteshwar tehsils of Ghaziabad, the district will comprise a third tehsil, Dhaulana, which has been formed for inclusion in the new district. With a population of 14.22 lakh, the headquarters of Panchsheel Nagar will be at Hapur.

Dalit leader to give his own version of Lokpal to Parliament committee

Published: Tuesday, Sep 20, 2011, 19:24 IST
Place: New Delhi | Agency: PTI
Dalit leader Udit Raj, who is campaigning against Team Anna's version of Lokpal bill, Tuesday demanded that corporates, NGOs and media are brought under the anti-corruption ombudsman to make the law "more effective".
"If there is no representation of plurality, I don't think this law will be successful," the National Chairman of All India Confederation of SC/ST Organisations said.
He said he along with other activists will give their own version -- the'Bahujan Lokpal Bill'-- to the Standing Committee on September 24.
The Bahujan Lokpal Bill claims to have taken up issues that are not mentioned in the existing three drafts--government draft, Jan Lokpal bill and Aruna Roy's bill, he claimed.
Raj said their drafting group consists of 16 core members including representatives from Muslims, Christians, Dalits, other backward classes(OBC) and progressive Brahmans.
"Anna Team has given the impression that the backward, dalits and minorities are ignored and their civil society, indeed, does not represent them. These sections are apprehensive that if they are not given representation in the Lokpal committee, their victimisation is sure," he said.
The group alleged that corporate houses "are dens of corruption" and should also be brought under the ambit of Lokpal, if corruption is to be fought seriously.
NGOs and Media should also not be left out, Raj added.
Disagreeing with Arwind Kejriwal's view on excluding NGOs from Lokpal Bill because there are separate laws to govern them, Raj said that there are similar laws for politicians and judiciary too.
He said they would protest if corporates and NGOs are not brought into Lokpal's ambit.
http://www.dnaindia.com/india/report_dalit-leader-to-give-his-own-version-of-lokpal-to-parliament-committee_1589531

  1. Udit Raj - Wikipedia, the free encyclopedia

  2. en.wikipedia.org/wiki/Udit_Raj
  3. From Wikipedia, the free encyclopedia. Jump to: navigation, search. Udit Raj (born Ram Raj on 1 January 1958) was born in Ramnagar, Uttar Pradesh into a low ...
  4. Activism - Controversies - See also - References

  5. Dalit Freedom Network // About Us // Dr. Udit Raj

  6. www.dalitnetwork.org/go?/dfn/about/C189/
  7. Dr. Udit Raj (Ram Raj) is the National President of the Justice Party, the Confederation of Scheduled Caste/Scheduled Tribe Organizations, and the Lord ...

  8. Articles about Udit Raj - Times Of India

  9. articles.timesofindia.indiatimes.com › Collections
  10. Udit Raj News. Find breaking news, commentary, and archival information about Udit Raj From The Times Of India.

  11. Buddha Education - Dr. Udit Raj

  12. www.buddhaeducation.org/link_1.html
  13. Dr.Udit Raj was born into a Dalit Hindu family of Allahabad District in the state of Uttar Pradesh. He was originally Ram Raj and studied in an Uttar Pradesh ...

  14. Images for Udit Raj

  15. - Report images

  16. Dalit leader Udit Raj forms anti-Maya platform in UP - Hindustan Times

  17. www.hindustantimes.com/Dalit...Udit-Raj.../Article1-688128.aspx
  18. 21 Apr 2011 – With Uttar Pradesh (UP) elections approaching, there are distinct signs of an attempt from within Dalits to break Mayawati's vote bank.

  19. Udit Raj | Facebook

  20. www.facebook.com/udit.raj3
  21. Join Facebook to connect with Udit Raj and others you may know. Facebook gives people the power to share and makes the world more open and connected.

  22. Udit Raj: Latest News, Photos and Videos

  23. connect.in.com/udit-raj/profile-277021.html
  24. Explore Profile of Udit Raj at Connect.in.com, see Udit Raj web of connections, news, videos, photos and post your opinions.

  25. Dr. Udit Raj to Meet Prime Minister of India | All India Confederation ...

  26. scstconfederation.net/?p=135
  27. 2 Sep 2011 – Dr. Uditraj, Chairman of All India Confederation of SC/ST Organization along with the eminent leaders of Dalit/ST/SC/OBC/ Minorities and ...

  28. Reservation For Dalits In Private Sector By Dr. Udit Raj

  29. www.countercurrents.org/dalit-uditraj220604.htm
  30. Reservation For Dalits In Private Sector. By Dr. Udit Raj. 22 June, 2004. Countercurrents.org. The reservation in private sector is the talk of town. There are ...

  31. Pasmanda Muslim Forum: An Open Letter to Dr. Udit Raj

  32. www.pasmandamuslims.com/2011/06/open-letter-to-dr-udit-raj.html
  33. 6 Jun 2011 – This is a response to Dr. Udit Raj's (President, Indian Justice Party) note "Rather Upper Castes are nearer to Muslim than Dalits (untouchables)" ...



It was much more than the magical formula of Dalit-Muslim-Brahmin that earned BSP supremoMayawatithe landslide victory in the 2007 Uttar Pradesh assembly polls. Behind Behenji's winning social engineering concept was the might of over 132criminal warlordsfrom the UP ganglands, who were handpicked by the BSP to represent it before the people.
The ploy worked with the electorate sending 70 of them to the assembly and givingMayawatione of her best wins in the UP polls. Many of them were rewarded with cabinet berths and top posts at state bodies. But the honeymoon did not last long and soon the strongmen or Bahubalis - as they are called in the local dialect - started giving Mayawati headache.
The complete disregard for law and power proved to be a lethal combination, which was exemplified in severalMLAsindulging in brazen acts of violation of the law. Mayawati responded by cracking the whip.
On an operation whitewash before the assembly polls - scheduled early next year - the BSP supremo has weeded out more than a dozen of her ministers, MPs and MLAs in the last one year. The action was backed by a very politically correct logic - unlike her bete noire Mulayam Singh Yadav, Mayawati didn't tolerate criminals in her ranks.
She has removed five senior members of her party in the past couple of days. On Thursday, Bikapur (Faizabad) MLA Jitendra Singh Babloo joined the Peace Party, saying he deserted the BSP minutes before he was supposed to be suspended by the BSP supremo. Interestingly, state BSP chief Swami Prasad Maurya cited Babloo's criminal activities as the reason behind his suspension.
Babloo is the same legislator who was given a clean chit by Mayawati when UP Congress president Rita Bhuguna-Joshi had accused him for the incendiary attack on her Lucknow residence on July 15, 2009.
Four days ago, Maya suspended controversial Meerut MLA Haji Yaqub Qureishi for making derogatory remarks against the Sikh community. Qureishi has over a dozen cases of criminal assault and rioting against him. He had hit the international headlines in February 17, 2006, by announcing during a Friday prayer in Meerut a reward of Rs 51 crore on the head of the Danish cartoonist who made a caricature of Prophet Mohammad. He was the then minorities welfare minister in the Samajwadi Party (SP) government.
THISweek, she removed Yogendra Sagar - party MLA from Bilsi in Badaun. He was accused of abducting and raping a girl and then implicating her brother in a false case of kidnapping to mount pressure on her parents to withdraw the case against him. A local court had declared Sagar an absconder last year. But while juggling her cards wisely, Mayawati suspended him just before the assembly elections.

Click here to Enlarge

She also suspended Jaunpur MP of the party, Dhananjay Singh, on September 22 when he went to see ailing Rajya Sabha member Amar Singh in AIIMS. For the record, the MP is a mafiaturned- politician whose shooters in prison had allegedly eliminated deputy CMO of family welfare department Dr Y.S. Sachan in the Lucknow district jail in June this year.
But the "poll stunt" failed to impress Malti, Sachan's wife. "My husband was killed because he was about to reveal the involvement of Babu Singh Kushwaha and Anant Kumar Mishra in the multi-croreNRHM scam. God and the people are watching these things and the guilty will be punished," she said.
Contrary to Malti's impassioned plea, Maya's calculation has no emotion. BSP sources said she has asked senior members of her government to assess the benefits the BSP could reap if Kushwaha and Mishra were suspended from the party before assembly elections.
Dhananjay's suspension also reveals the politics of convenience that Mayawati has been pursuing. The BSP supremo had herself inducted a known Amar aide,Samajwadi PartyMLA Ashok Chandel, and later suspended him on September 21 for anti-party activities. Chandel, too, is a known name in the crime circles of Bundelkhand.
EARLYthis month, Mayawati had suspended animal husbandry and dairy development minister Awadh Pal Singh after UP Lokayukta justice N.K. Mehrotra found him guilty of a multicrore scam in the veterinary department in Etah.
Mayawati has recently suspended another rogue minister Rajesh Tripathi on the basis of a Lokayukta report that indicted him in a land grabbing case in Gorakhpur. While 13 leaders have been suspended in the past one year, the UP chief minister suspended Shekhar Tiwari, who was involved in the murder of PWD executive engineer Manoj Kumar Gupta, in 2009. He is in jail.
S.R. Darapuri, former UP IG, said: "People had dethroned Mulayam Singh Yadav because rogue SP members were openly defying law and order. It is strange that people were expecting Mayawati to get them rid of goons but they did not mind electing criminals again."


Read more at:http://indiatoday.intoday.in/story/up-polls-2012-mayawati-carcks-whip-on-criminal-politicians/1/153307.html



Read more at:http://indiatoday.intoday.in/story/up-polls-2012-mayawati-carcks-whip-on-criminal-politicians/1/153307.html


UP chief minister Mayawati shot off yet another letter, seventh in last 10 days, toprime minister Manmohan Singh on Saturday. This time she has demanded increase in the percentage of reservation provided to Scheduled Castes and Scheduled Tribes (SC/ST) in view of increase in their population and introduce quota system in the judiciary, private sector and other places where it has not been implemented as yet.Times of Indai reports.

Earlier, she had written to the prime minister for providing reservation to Jats under other backward class (OBC) category, upper caste poor on financial basis, quota within quota in OBC category to backward Muslims, inclusion of 25 most backward classes (MBC), dalit Muslims and dalit Christians in the SC/ST category, pathetic condition of national highways in UP and shortage of fertilisers. The letters are being seen as BSP chief's move to play caste card before 2012 assembly elections. Mayawati has sought to appease all sections of society -- backwards, dalits, upper castes and Muslims. She is also looking forward for an alliance of dalit-Brahmin-Muslim-MBC for 2012 elections. BSP had come to power with absolute majority in 2007 with the support of dalits and by successfully wooing a section of Brahims, Muslims and MBCs.

In her letter, Mayawati has stated that the population of dalits and tribals have increased considerably since Independence, hence it is important to increase the percentage of reservation to dalits and tribals in government jobs and educational institutions. She reiterated inclusion of MBCs in SC/ST list and providing them a fixed quota within quota. She had suggested that after including MBCs, dalit Christians and dalit Muslims in the SC/ST category, the percentage of quota should also be increased in accordance with the increase in number of communities. She had even recommended amendment in the constitution to increase quota and to include more castes and classes for reservation benefit. She had demanded that the reservation policy should be put in the ninth schedule of the constitution so that it cannot be challenged in any court of law.

Arguing that increase in quota will help marginalised sections to join national mainstream, Mayawati also patted her back for initiating number of schemes to benefit downtrodden in UP. The BSP government has introduced quota for dalits in allotment of government contracts upto Rs 25 lakh, reservation facility in promotions, filling of backlog reserved category vacancies, 10% quota in jobs in private sector units established with the help of state government and quota in jobs for dalits in the services outsourced to the private sector. Mayawati has also decided to introduce 23% quota to SC/ST and 27% for OBCs in the industrial units established under public-private-partnership. Besides, the government has also implemented several schemes - free housing for urban poor and dalits, scholarships for dalits, backwards and Muslims among other things.

Incidentally, Mayawati appointed 1977 batch IPS officer Brij Lal, a dalit, as the new director general of police (DGP) of UP on Saturday following superannuation of RK Tiwari, a Brahmin. Tiwari was made DGP last month after retirement of Karamveer Singh. Tiwari remained DGP for around a month. Political analysts say that Mayawati has tried to give a message to both Brahmins and Dalits with appointments of Tiwari and Lal. Significantly, Lal was already handling several important police departments. A judicial magistrate in Ghaziabad had recently directed police to lodge an FIR against Lal and some other senior IPS officers on the petition of a police constable Brijendra Singh Yadav who alleged that Rs 25 per month were illegally deducted from the salaries of 3.5 lakh constables in UP. Lal has challenged the order in the High Court.
http://timesofindia.indiatimes.com/india/Mayawati-wants-dalit-quota-in-judiciary-and-private-sector/articleshow/10197095.cms

Mayawati also requested the PM to incorporate the reservation policy in the Ninth Schedule of the Constitution to ensure it is not challenged legally. She said reservation was necessary to help those living below the poverty line, irrespective of their caste and class, and demanded that the backlog of vacancies in reserved category be filled urgently.


Reservation should be implemented in private sector and other government or semi-government services as well, Mayawati added.


Maya's Sunday letter is being seen as an effort to strike a balance in her 'Sarvjan vote bank' which comprises Dalits, Muslims, Brahmins and most backward classes. The CM reminded the prime minister that she had raised the issue of quota for upper castes on financial grounds in 2007 as well, soon after coming to power. She had also requested Singh to sanction financial packages for UP's backward regions.


Muslim are 20% of UP's population and upper castes comprise around 12%. While Muslims can tilt the balance in one-third of 403 assembly seats, upper castes are crucial in around 100 seats. Brahmins can make a difference in around 60 seats. Maya had successfully wooed a section of Brahmins in 2007 by demanding 10% quota for poor upper castes.


SP leader Ahmad Hasan accused Mayawati of not fulfilling any promise she had made in July 2007 in a meeting with Muslim ulema. Although the opposition criticised Mayawati, all political parties barring the BJP support Muslim quota as recommended by the Sachar Committee andRangnath Commission. Union law minister Salman Khurshid is said to be preparing a legislation for Muslim reservation.


The Samajwadi Party has already demanded quota for Muslims. Muslim organisations have welcomed Maya's demand saying reservation for socially and financially backward Muslims should be implemented at the earliest. "Some Muslim communities have been included in the other backward class (OBC) category list in UP for reservation benefit but we want a definite quota within 27% quota for OBCs," said All India Muslim Personal Law Board member Zafaryab Jilani.


http://timesofindia.indiatimes.com/india/Now-Mayawati-demands-quota-for-poor-in-upper-castes/articleshow/10033858.cms

While in the first letter she asked for constitutional amendment for Muslim quota in government jobs and educational institutions, the second one was for giving reservation to poor upper castes and putting reservation policy in ninth schedule of the constitution so that it cannot be challenged in any law court.

Maya has written that Jats earn their livelihood from agriculture and related activities. However, with time and increase of population, the per person land holding has dropped. As a result, Jats are now financially and educationally backward.

"The Jats in UP were included in OBC list in March 10, 2000. The Jats (leaving those living in Dhaulpur and Bharatpur districts) in Rajasthan were included in the Centre's OBC list in October 1999. The financial and educational condition of Jats in UP is similar to their counterparts in Rajasthan. Hence, the Jats of UP should be included in the government of India's list of OBC," she has written. Jats are the largest ethnic group having presence in Hindus, Muslims and Sikhs in India.

Their population is believed to be around 8.25 crore across nine states in India. In UP, their population is around 1.75 crore. Jats are only 5-6% of the total population of UP but they constitute 17% of the populace in the west UP and can affect elections in 55 assembly constituencies and 10 Lok Sabha constituencies. Besides UP and Rajasthan, Jats are already getting reservation under OBC category in Himachal Pradesh, Gujrat, Uttrakhand, Bihar and Delhi. However, Haryana, Punjab, Jammu & Kashmir and Maharashtra have not included Jats in OBC list. Yashpal Malik, president, All India Jat Arakshan Samiti, welcomed Mayawati's move.

"Central government had promised us in March 27, 2011, that Jats will be included in the Central OBC list within a month but we are still waiting for result," said Malik, who led the 21-day agitation in March blocking rail and road routes from Delhi to UP and beyond. The samiti will launch its agitation again if demand is not met by November after conducting a series of rallies in UP and other states from October 1 onwards, he added. On Saturday, Mayawati had written to prime minister for providing quota to Muslims by bringing them under the reservation policy. She had stated that her party will support the central government if quota for Muslims requires constitutional amendment. On Saturday, she wrote to Manmohan Singh for granting reservation to upper castes living under below poverty line.

With three letters Mayawati has tried to strike balance between minorities, OBCs and upper castes with 2012 assembly elections in mind. While muslims constitute around 18% of the electorate in UP, upper castes are around 20% (10% Brahmins 7.5% thakurs and 3% others, OBCs around 40% and dalits around 21.5%. Of total upper castes, 12% are said to be living under below poverty line. In UP's OBC list, there are total 79 classes/castes which include 34 muslim communities.? ?Reacting to Maya's letter, BJP spokesperson HN Dixit said that it was BJP government in 2000 under Rajnath Singh which granted Jats status of OBC in UP.

Singh, he said, had also introduced quota within quota for OBC for most backward classes which included 33 muslim communities. However, in 2002, Mayawati government scrapped the provision, thus reduced the benefits of muslim OBCs.
http://timesofindia.indiatimes.com/city/lucknow/Mayawati-now-wants-reservation-for-Jats/articleshow/10042093.cms

Maya mantra to win polls

TNN | Mar 5, 2011, 05.30AM IST
LUCKNOW: The month-long statewide inspection drive to assess the progress of developmental projects and implementation of various schemes by chief minister Mayawati was not only an administrative exercise. If sources are to be believed, the drive in fact is part of her five point strategy to romp home in the 2012 UP assembly polls.

During her visits, Mayawati also took feedback of the performance of sitting MLAs and the candidates short-listed for the 2012 assembly polls before making final announcement.

The Ambedkar villages selected for visit also had substantial Muslim population, sources said and added that she has already constituted bhaichara (brotherhood) committees at the booth level in districts to bring castes and communities other than dalits, close to the BSP. Party insiders also said that the BSP supremo is aiming to build an alliance of dalit, most backward classes and Muslims without upsetting the upper castes, particularly the Brahmins.According to sources, Maya has chalked out a five point programme for her mission 2012.

First: If in 2007 BSP's focus was on dalit-brahmin-muslim alliance, which brought it to power with absolute majority, for 2012, the party is aiming at the combination of dalit-muslims-most backward classes. At the same time, BSP will not say or do anything, which could antagonise any caste or community.

Secondly, Maya wants to declare party candidates one year in advance for polls due in April-May 2012, so that the latter get enough time to groom their constituencies.

Maya is of the view that a candidate should not be barred from contesting election on the basis of criminal record, but party sources said that she is taking extra care to verify credentials of the candidates selected for 2012 assembly elections before announcing their names. "Recent accusations of rape and murder against some BSP leaders has hit party image and Behenji does not want more controversies. We won 2007 election on law and order issue, hence extra care is being taken to improve the situation," said a senior BSP leader.

The third point in Maya's agenda is to find out a detailed caste configurations of every constituency, as delimitation has changed the demographic profile and old equations in comparison to 2007 assembly elections.

Maya wants all development work sanctioned for dalit dominated areas to be completed by July this year to counter Congress's attempt to poach on her dalit vote bank. Committed dalit leaders have been given important positions at district level in party organisation and have been told to convince dalits that the BSP is the only party they can trust on.

PWD minister Naseemuddin Siddiqui, has been asked to build an alliance of Muslim-dalit-backward classes to score in 89 reserved assembly seats in the state out of 403 assembly constituencies. Maya's close confidant and Brahmin face of the party, SC Mishra will continue to focus on the Brahmins. Swami Prasad Maurya and backward leader Babu Singh Kushwaha are working among non-Yadav backward classes and most backward classes (MBCs) close to the BSP.
http://timesofindia.indiatimes.com/city/lucknow/Maya-mantra-to-win-polls/articleshow/7631895.cms
Mayawati does a seasonal party clean-up
Cancels tickets of over two dozen MLAs, goes the extra mile to project herself as an able administrator, but many skeletons remain in the closet
Samarth Saran
New Delhi
*

Sources say the BSP chief is going over the candidates' list again and those with a criminal background might be denied tickets

*


With the Assembly poll drawing closer in Uttar Pradesh, Chief Minister Mayawati is on a cleaning spree. She has in recent times either suspended or expelled more than a dozen sitting Members of the Legislative Assembly who were facing criminal charges against them, from her party. Interestingly, some of the MLAs and party leaders are those ones against whom the Mayawati-government had once requested that criminal cases be withdrawn against them.
Political observers describe this move by Mayawati as shrewd move to portray herself as a clean administrator. "What is done during the last six to eight months of the government have more of an impact on the voters. This move by Mayawati will certainly help in boosting her image," says Sanjay Kumar of Centre for the Study of Developing Studies (CSDS).
Mayawati's tenure has been rocked by the murder of chief medical officer Dr BP Singh in and the Banda Rape case. Even though tough measure have been taken by her in the case, Uttar Pradesh Congress Committee president Rita Joshi says that the these step are too late and too little. "Her image has taken a beating and Mayawati has emerged as one of the worst administrators in maintaining law and order in the state" says Joshi.
A case in point is Dhananjay Singh, the party MP from Jaunpur, who was suspended recently for indiscipline, was once the party favourite. Two cases against him under the Uttar Pradesh Gangster Act were withdrawn by the Government in 2008. In fact Singh's father Rajdev Singh a sitting MLA, has also been denied the ticket from Rari in Jaunpur.
Then there is Jitendra Singh Babloo, an MLA from Bikapur, who has a dozen criminal cases against him including one of setting Rita Joshi's residence on fire. A case of extortion and criminal intimidation against him was withdrawn in 2008 after a request from the Mayawati government. He too he has now been suspended from the party and denied a ticket. Former Medical Health Minister Anant Kumar Mishra who resigned after the murder of CMO Dr BP Singh, has also been denied a ticket. Other ministers who have been denied tickets are Avadh Pal Singh Yadav, Badshah Singh and Subash Pandey.
Yadav, who was the former animal husbandry and dairy development minister had resigned after being indicted by the Lokayukta, and was suspended on disciplinary grounds. Sitting BSP legislators who have been denied tickets include Jitendra Singh Babloo, Sonu Singh, Sushil Singh and Anand Sen Yadav.
Sources say the BSP chief is going over the candidates' list again and those with a criminal background might be denied tickets even if their names have already been declared. The CM might walk the extra mile to project herself as an able administrator, but a cursory glance over the list of sitting MLAs or MPs depicts a different picture. Shahnawaz Rana for example, an MLA from Bijnore, he was suspended from the party after his aide tried to rape two tourists at gunpoint in Muzaffarnagar. However, Mayawati had ordered the withdrawal of criminal cases against him and his uncle Kadir Rana who is an MP from Muzaffarnagar.
These cases were lodged against them for indulging in e arson and violence during the 2004 Lok Sabha elections. The government had requested that cases be withdrawn in public interest. The court had rejected the application. Apparently, the government has also moved applications for criminal cases to be withdrawn against a dozen MLAs.
Samarth Saran is a Correspondent with Tehelka.com.
samarth@tehelka.com

http://www.tehelka.com/story_main50.asp?filename=Ws011011Utttar_Pradesh.asp

Name game and its after-effects

Swati Mathur, TNN | Oct 1, 2011, 12.03PM IST
LUCKNOW: Districthood may mean smaller administrative units, but it hasn't translated into an easier life for most. Take Sant Ravidas Nagar, erstwhile Bhadohi, for instance. Created on June 1994 as the 65th district of the state, the district has still not shed its Bhadohi tag, even after 17 years of being renamed by chief ninister Mayawati, during her first stint at the top.
A hub for manufacturing and exporting 75% of India's total carpets, the region is still recognised as Bhadohi, rather than Sant Ravidas Nagar. What is interesting is that the state government, despite its decision in this regard, continues to play along. "For ease of use, our passports bear the name of Sant Ravi Das Nagar Bhadohi. The passport office in Lucknow, from where our applications are processed, accepts this format. With Bhadohi as part of the name, it is not difficult to travel,'' said ON Mishra, a carpet manufacturer and exporter from the region.
Sant Ravidas Nagar, in fact, is not the only district to suffer this fate. Of all the districts Mayawati has created or renamed, Mahamaya Nagar, erstwhile Hathras, has the most curious history. Till 1997, Hathras was but an ordinary town famous for its culture and literature. The district had its first brush with an identity crisis when Mayawati took over as UP chief minister renamed Hathras after Gautam Buddha's mother Mahamaya. Once a sub-divison of Aligarh, Mahamaya Nagar was also declared a new district. However, in 1998 when the BJP-led government came to power, the town was rechristened as Hathras. In 2002, though, when Mayawati returned to the CM's chair, Hathras again became Mahamaya Nagar.
This was not the end of Hathras' change in identity. In 2003, when Samajwadi Party came to power, chief Minister Mulayam Singh Yadav renamed Mahamaya Nagar to Hathras. Not to be defeated easily, Mayawati, after she regained power in 2007, changed the name of the town for the fifth time in a decade. Former Advocate General, Uttar Pradesh SMA Kazmi, said: In instances where a new administrative unit has been formed or an existing one had been renamed, the old name goes along with a now named as'' tag, for easy identification. Within the country or region, this may not pose problems; travelling abroad, however, could be troublesome. It is advisable, however, for people to have their documents, like ration cards or passports, updated under such circumstances.''
The process to update'' such legal documents, though simply on paper, is not easily accomplished. Businessman by profession and a resident of Mahamaya Nagar, Sanjay Yadav, said: "My learner's licenxe was issued in late 1997 when the state was called Mahamaya Nagar. In the address space, the district was called Mahamaya Nagar Hathras. The next year Mulayam Singh changed the name of the district. When I went to get my permanent licence, the officer there made me run around to get proof that the district was now only Hathras, without Mahamaya Nagar. I had to pay him an additional amount to get the licence.''
Constitutional experts, however, say there's a process in place when it comes to the formation of a new or renaming of an existing district. Legal documents issued before carving out a district, or before rechristening an existing one, are typically acceptable when accompanied by a note that clarifies the new status of the administrative unit. Travelling to a country like the USA, however, could pose a problem, though, because they are extremely particular about the paper work,'' Kazmi added.
Also, merely announcing the formation of a district is not enough. A new administrative unit becomes a legal entity only after a formal gazette notification is published. It is true that the state government exercises the right to form or disband an administrative unit. However, it should follow a proper process, which includes a feasibility survey that explains the need for the unit. In UP, however, most districts have been formed for political reasons and without the due diligence.''
http://timesofindia.indiatimes.com/city/lucknow/Name-game-and-its-after-effects/articleshow/10193945.cms
1 OCT, 2011, 04.30AM IST, ET BUREAU

Instruments with sell-back options won't count as FDI

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NEW DELHI: The government on Friday amendedforeign direct investment rules keeping all instruments with in-built options, such as right to sell back shares, out of FDI ambit.

This will hit the private equity industry the most and also affect capital inflows in general by making it difficult for investors to exit.

The new policy issued by the Department of Industrial Policy and Promotion (DIPP) on Friday imposes an additional condition on FDI in single-brand retail, saying that the investor must also own the brand.

"Only equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares, with no in-built options of any type, would qualify as eligible instruments for FDI," the policy says.

The DIPP updates its master policy every six months (April 1 and October 1).

H Jayesh, Founder Partner at law firm Juris Corp, said the government has given in to the RBI without realising that there is a 50-year old circular that permits options pursuant to JV agreements, including financial collaborations.

For years, offshore financial and strategic investors have struck deals with their Indian partners to put in place an easy exit arrangement. It gave the overseas investor the right to sell back equity shares to the promoter of the Indian company. The understanding between the two partners helped closely-held Indian firms attract overseas financial and strategic investors who, in turn, derived comfort from the arrangement

The FDI policy now says that such instruments, even if they have in-built options provided by third parties, will be considered debt instruments that will have to comply with the external commercial borrowing guidelines.

The restrictions on 'options' come after the Reserve Bank of India questioned many deals saying these inflows were more like debt than equity.


But policymakers think that with in-built options FDI investments lose their equity character, and the basic aim of the FDI policy to attract long-term equity funds is defeated as options are usually designed to provide exit.

The RBI had even questioned the legality of sellback right, or a put option, to foreign investors saying these were akin to one-on-one equity derivative deals, which are not permitted.

Under current rules, equity derivatives can be traded only on stock exchanges and such over-the-counters products structured between two parties are not permitted.

The new rules could end up hurting the private equity industry that frequently resorts to such exit options if a public offer is not possible.

"This is largely negative for the private equity industry and should not have been done," PwC executive director Akash Gupt said.

Officials said the inclusion of another condition on FDI in single-brand retail will remove any policy ambiguity.

The government is yet to permit multi-brand retailing under FDI.

The new rules come at a time when the government desperately needs to attract more long-term funds to meet its rising current account deficit. FDI inflow rose 92% to $14.54 billion in April-July from a year ago, reversing the drop in 2010-11 to $19.4 billion from $25.9 billion in 2009-10.

The updated policy has exempted construction for the education sector and old-age homes from the various conditions imposed on FDI in the construction development sector, such as minimum area and built-up area requirement, minimum capitalisation requirement, and lock-in period.
http://economictimes.indiatimes.com/news/economy/policy/instruments-with-sell-back-options-wont-count-as-fdi/articleshow/10190843.cms

7 SEP, 2011, 11.15PM IST, PTI

Coal India operating 239 mines without environment clearance: CAG

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NEW DELHI: State-run Coal India (CIL) is running 239 mines in its seven coal producing subsidiaries without environment clearances, the country's accounting watchdog CAG said today.

"In all, 239 mines in seven coal producing subsidiaries, which existed prior to 1994 ... were working without environmental clearance ... mining activities without prior environmental clearance were in total violation of the instructions of the MoEF," CAG said.

These include 48 open-cast, 170 underground and 21 combined mines.

The Maharatna firm, which is the biggest producer of the dry fossil fuel across the world, has drawn flak from the Comptroller and Auditor General (CAG) at a time when Ministry of Forest and Environment(MoEF), and the Coal Ministry have locked horns over delays in environment clearance to projects.

MoEF in 2009 had categorised 203 coal blocks with potential annual production capacity of 660 MT, as 'no go' mining zone, which is being contested by Coal Ministry. The matter is pending before a Group of Ministers (GoM), formed to find a solution to address issues hurting production.

In its report, the CAG also pointed out that of the 18 sample open-cast and eight underground mines, ten mines had undertaken capacity expansion without environmental clearances.

The increased output from there was to the tune of 45.70 million tonnes (MT) during April 2002 to March 2010.

The CAG did not buy the CIL management's contention that the production was increased to meet the energy needs of the country, including supply crisis in power plants, and to make up for the shortfall in production in some collieries.

When contacted, CIL Chairman N C Jha said that the applications for clearances to the projects have already been submitted to the Ministry of Environment and Forests.

The public sector firm's coal producing subsidiaries are -- Eastern Coalfields Limited (ECL), West Bengal,Bharat Coking Coal (BCCL), Jharkhand, Central Coalfields (CCL), Jharkhand, South Eastern Coalfields (SECL), Chhattisgarh, Western Coalfields (WCL), Maharashtra, Northern Coalfields (NCL), Madhya Pradesh and Mahanadi Coalfields (MCL), Orissa.

Besides, it has one more wholly-owned subsidiary - Coal Mines Planning and Design Institute (CMPDIL), Jharkhand.

The company which accounts for over 85 per cent of domestic production, recorded an output of 431 million tonnes (MT) last fiscal.

The performance audit of the CIL and its subsidiaries was conducted by CAG with a view to assess whether the companies were able to fulfil their CSR activities in an efficient manner towards environmental protection, safety requirement, occupational health of workers.

CIL operates 470 mines, including 164 open cast, 275 underground and 31 mixed mines.
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http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/metals-mining/coal-india-operating-239-mines-without-environment-clearance-cag/articleshow/9902061.cms
Govt legitimising Bangladeshi encroachment of Indian land: BJP

BJP today expressed concern over the India-Bangladesh land boundary agreement during Prime Minister Manmohan Singh's visit to Dhaka last month alleging it amounted to legitimising transfer of land "illegally occupied" by Bangaldesh and sought a discussion on it in Parliament.

The BJP national executive discussed the issue and passed a resolution against the agreement saying the Centre has "legitimised Bangladeshi encroachment of Indian territory".

"There should be no transfer of Indian territory to Bangladesh without all facts being placed on the table of Parliament and a proper discussion and ratification of this agreement be got done by it," said senior BJP leader Chandan Mitra.

He said BJP had opposed the agreement with Bangladesh and has demanded in its resolution that the 1,500-odd survey maps that were exchanged between Bangladesh and India be made public.

"The party has also demanded that all (strip) maps be placed in public domain and a discussion be held in the next session of Parliament and take the advice of Parliament before deciding on the issue," he added.

The BJP leader charged that "in the name of rationalising the borders, local interests have been severely compromised with. The local population has been kept in the dark and people of the area are very disturbed."

Mamata Banerjee urges industrialists not to pay bribe for setting units
KOLKATA: West Bengal Chief Minister Mamata Banerjee today asked industrialists not to pay bribe to any one while setting up units in the state and asked the police to take proper steps in this regard.

In a message to the industrialists keen to set up units in the state, the chief minister said, "Please do inform us if there is any claim for bribe and convey the same to the minister concerned and your identity will be kept a secret for the police to take appropriate action."

Launching a website of the West Bengal Industrial Development Corporation (WBIDC), the nodal agency for industrial development, the Chief Minister called for improving infrastructure prerequisite for industrial development in the state.

The Chief Minister said that festive season would begin from tomorrow and called for ensuring that peace was maintained at all costs.

"Our state has a rich heritage of having communal amity which has to be maintained at all costs," she said.

Banerjee warned of stern steps against any bid to create communal passion and said "don't try to mix politics with religion and force the government to take legal action".

She said the police were always on the alert to maintain law and order and the force would burden a huge task during the Durga puja festivities.

"Some persons will try to create communal disturbances, but people will not allow it. We will sternly deal with these enemies of people," the chief minister said, appealing to all to peacefully celebrate the festival.

23 SEP, 2011, 05.01PM IST, IANS

West Bengal woos start-ups with simpler procedures

KOLKATA: Start-up companies will now find it easier to set shop in West Bengal as the state government plans to almost halve the number of forms required to be filled, state Commerce and Industry MinisterPartha Chatterjee said Friday.

The state government plans to reduce the number of forms to seven from the present 15.

"All the formalities for reducing the number of forms for the start-ups are complete. The companies will have to complete only nine forms. We plan to bring it down further to seven," said Chatterjee on the sidelines of the 157th annual general meeting of the Bengal Chamber of Commerce.

During the erstwhile Left Front regime, the requisite number of forms was 99 and it took 315 days for the formalities to be completed. But the new government under Chief Minister Mamata Banerjee reduced the number to 35 which was subsequently brought down to 15.

Chatterjee, however, did not specify the number of days that would be needed for the formalities to be completed. He only said it would be less than the 315 days required earlier.

Chatterjee reiterated that the government was also mulling a holistic single window clearance process for different companies and start-ups.

Urging the industry not to keep any acquired land idle, Chatterjee said: "Please make use of the land to generate employment. If even after our requests they do not pay heed, then legal recourse might be an option."

Chatterjee said there was a lack of accurate study on the number of sick and closed units in the state. "For an accurate figure of the sick and closed units, we have asked a private institution to do a study and submit the report within three months. Work has already started."

The West Bengal Industrial Development Corporation (WBIDC) will now be asked to focus on promoting skill development in the state, Chatterjee added.

According to the minister, since the WBIDC will not be involved in acquisition of land - as per the policies of the government - it will be looking into issues of human resource and skill development.
26 JUL, 2011, 07.02PM IST, PTI

Nasscom positive on West Bengal's cluster approach

KOLKATA: IT body Nasscom on Tuesday applauded West Bengal government's cluster approach to boost start-ups and small companies in the information technology sector.

"If the clsuter approach can work in manufacturing, why can't in happen in IT ? We will look at the architecture on how companies can work together for larger projects," Nasscom Chairman R S Pawar said here today.

Nasscom has decided to focus on start-ups and small IT companies during the year.

Pawar said small IT companies would have enourmous opportunities after the Unique Identification Number project is rolled out.

"Now, the infrastructure is been rolled out. Soon the small players in the IT sector can develop utility applications to play around this infrastructure," he said.

Interacting with Nasscom members, West Bengal Industry Minister Partha Chatterjee said the government was mulling steps to boost the small IT companies by creating a cluster among them.

The state is also planning to have IT hubs in every district to help create more jobs.

The land for the IT hubs, which would require less land, would be located in tier II towns of Durgapur, Asansol, Siliguri, Bankura, Barjora, Kalyani and North and South 24 Parganas. Common facilities would be created for the start ups.

"We are also looking to increase the corpus of the venture capital fund and offer it public utility status," he added.
30 SEP, 2011, 10.23PM IST, PTI

Global recession will not have big impact on Indian IT: Nasscom

Global recession will not have big impact on Indian IT: Nasscom

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THIRUVANANTHAPURAM: The Indian IT sector will not be impacted much by recessionary trends in Europeand the US as the industry is poised to grow on increasing domestic demand and by tapping new markets outside the West, Nassocm said today.

"Yes, slowdown happens. We are mindful. But we are sure about the potential of the IT sector in India," software and services industry body Nasscom's Chairman Rajendra Pawar told reporters here today.

The domestic market has been growing fast in the last two years. In addition, Indian software and service providers can tap emerging markets like Russia and Brazil, Nasscom said.

The last decade had been generally considered a troubled time the world over. But the Indian IT market has kept its phenomenal growth during that period, Pawar said.

Nasscom's executive council met here today and said Kerala has the potential to become a major IT-BPO destination.

The success that Kerala has achieved in the tourism sector can be repeated in the IT sector as well, by harnessing its inherent strength like literacy and connectivity, Nasscom said.
http://economictimes.indiatimes.com/tech/ites/global-recession-will-not-have-big-impact-on-indian-it-nasscom/articleshow/10186679.cms
1 OCT, 2011, 05.12AM IST, ET BUREAU

NSDL appeals to SAT against Sebi directive in 6-yr-old IPO scam case

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MUMBAI: The National Securities Depository, or NSDL, has appealed to the Securities Appellate Tribunal ( SAT) against Sebi's order to comply with the directions of a two-member bench against the depository, relating to an IPO scam over six years ago, in which scores of retail investors were cheated after thousands of demat accounts were opened under fictitious names by a few stock market operators.

The Sebi board, following the directions of the Supreme Court, decided recently to release the orders passed by two of its former board members which was earlier declared by the regulator as null and void.

The board had specially constituted an independent panel comprising its non-wholetime members to ring fence Sebi's proceedings against NSDL from any involvement by its former chairman CB Bhave (previous head of NSDL) and whole-time members.

The order passed by the twomember panel had held that NSDL did not discharge its responsibilities cast on it. As the depository is a statutory entity, it cannot allow any laxity of the system, the two-member board committee, comprising Mohan Gopal and V Leeladhar, said.

Both are no longer on the board of Sebi now. On Friday, the appellate tribunal headed by presiding officer Justice NK Sodhi after admitting the plea, adjourned the case to November 8. Law firms K Ashar & Co and J Sagar Associate are representing Sebi and NSDL.
http://economictimes.indiatimes.com/markets/ipos/fpos/rights-issues/nsdl-appeals-to-sat-against-sebi-directive-in-6-yr-old-ipo-scam-case/articleshow/10191095.cms
1 OCT, 2011, 05.08AM IST, ET BUREAU

Sebi to take fresh look at MCX-SX plea for trading platform

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MUMBAI: Sebi told the Bombay High Court on Friday that it will take a fresh look at the proposal of MCX-SX to offer a platform for trading in equities and otherexchange-traded products if it complies with market regulations.

MCX-SX and Sebi are locked in a dispute over the regulator's decision to deny it approval to offer trading in equities and equity derivatives.

Three years ago, MCX-SX commenced currency futures trading after the Sebi approval. Subsequently, it sought approval for starting an equity trading segment.

Sebi directed the exchange's promoters Financial Technologies and commodity exchange MCX to fulfil shareholding norms relating to ownership of an exchange, which restricts a single investor's holding in a bourse to 5%, before granting approval for the equity segment.

To meet the regulatory norm, MCX-SX followed a capital restructuring scheme, whereby its promoters cut their stakes to 10% from a combined 70%.

In lieu of capital reduction, the promoters issued themselves warrants, which could be converted into equity shares six months after they were sold to investors. However, Sebi rejected the scheme in September last year, following which MCX-SX appealed against the order.

At Friday's hearing, additional Solicitor General Darius Khambatta, who represented Sebi, said a show-cause notice issued by the regulator to MCX- SX would be kept in abeyance while Sebi considers the application by the exchange afresh.

"If Sebi is not satisfied with the undertakings given by the entity, the regulator would have the liberty to re-issue the show-cause notice and pass an order," he said.

A division of bench comprising Justice DY Chandrachud and Justice Anoop Mohta said the court wants to preserve the regulatory powers of Sebi and also provide justice to the aggrieved party. The case has been adjourned to October 14.
http://economictimes.indiatimes.com/markets/regulation/sebi-to-take-fresh-look-at-mcx-sx-plea-for-trading-platform/articleshow/10191065.cms

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Divestment

From Wikipedia, the free encyclopedia
This article is about the business concept. For other uses, see Disinvestment and Divestment campaign.
Finance
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In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.

Contents

 [hide]

[edit]Motives

Firms may have several motives for divestitures.

First, a firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. For example,Eastman Kodak, Ford Motor Company, and many other firms have sold various businesses that were not closely related to their core businesses.

A second motive for divestitures is to obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash. For example, CSX Corporation made divestitures to focus on its core railroad business and also to obtain funds so that it could pay off some of its existing debt.

A third motive for divesting is that a firm's "break-up" value is sometimes believed to be greater than the value of the firm as a whole. In other words, the sum of a firm's individual asset liquidation values exceeds the market value of the firm's combined assets. This encourages firms to sell off what would be worth more when liquidated than when retained.

A fourth motive to divest a part of a firm may be to create stability. Philips, for example, divested its chip division called NXP because the chip market was so volatile and unpredictable that NXP was responsible for the majority of Philips's stock fluctuations while it represented only a very small part of Philips NV.

A fifth motive for firms to divest a part of the company is that a division is under-performing or even failing.

A sixth reason to divest could be forced on to the firm by the regulatory authorities, for example in order to create competition.

[edit]Divestment for financial goals

Often the term is used as a means to grow financially in which a company sells off a business unit in order to focus their resources on a market it judges to be more profitable, or promising. Sometimes, such an action can be a spin-off. (For the United States); Divestment of certain parts of a company can occur when required by the Federal Trade Commission before a merger with another firm is approved. A company can divest assets to wholly owned subsidiaries.

The largest, and likely most famous, corporate divestiture in history was the 1984 U.S. Department of Justice-mandated breakup of the Bell System into AT&T and the seven Baby Bells.

[edit]Method of divestment

Some firms are using technology to facilitate the process of divesting some divisions. They post the information about any division that they wish to sell on their website so that it is available to any firm that may be interested in buying the division. For example, Alcoa has established an online showroom of the divisions that are for sale. By communicating the information online, Alcoa has reduced its hotel, travel, and meeting expenses.

With Economic liberalization of the Indian economy, Ministry of Finance of India had set up a separate Department of Disinvestments.

[edit]References

  • Jeff Madura (2007). Introduction to Business, Fourth Edition. USA: Thomson South-Western. ISBN 0-324-36079-7.

[edit]External links

[edit]See also

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1 OCT, 2011, 01.41PM IST, TK ARUN,ET BUREAU

2G scam: Prime Minister alone can clear the mess

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The 2G spectrum controversy is now becoming a global concern, given its enervating impact on governance and growth and the Indian economy's role in propelling global growth. For the sake of the world, India's growth, the prospects of his political party and government and his own personal reputation, Dr Manmohan Singh must clear the air on the subject.

Clear answers are required for three questions: what is the precise nature of the scam? Who lost and who gained? Who is responsible for this?

The commonplace understanding is that telecom minister Raja decided to give away valuable spectrum to new licensees for arbitrary rates, other ministers including the Prime Minister failed to check him, and the exchequer lost up to 1,76,000 crore.

The facts are otherwise.

The Prime Minister wrote to Raja on November 2, 2007, asking him to examine a number of issues in telecom including introduction of transparent methodology of auctions "wherever legally and technically feasible", and revision of the entry fee.

Mr Raja wrote back that "the issue of auction of spectrum was considered by the Trai and the Telecom Commission and was not recommended as the existing licence holders, who are already having spectrum up to 10 MHz per circle, have got it without any spectrum charge. It will be unfair, discriminatory, arbitrary and capricious to auction the spectrum to new applicants as it will not give them level playing field."

Raja went on to add that "an increase in the number of operators will certainly bring real competition that will lead to better services and increased teledensity at lower tariff." After Raja issued his new licences, operators did drop charges and the industry added some 500 million customers till now, to increase the total number of connections to over 800 million.

Was Raja wrong? The minister followed the advice of the telecom regulator, rather than the wishes of the finance ministry. The regulator, in turn, followed the mandate of the New Telecom Policy, 1999, which identifies as its goal the spread of telecom so as to increase the pace of social and economic development, rather than direct revenue accumulation. The policy has been a runaway success ever since the NDA government regularised, in 2003, Reliance's backdoor entry into mobile telephony, removing an arbitrary restriction on full deployment of licensed technology.
http://economictimes.indiatimes.com/policy/2g-scam-prime-minister-alone-can-clear-the-mess/articleshow/10190749.cms

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Nationalization

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Not to be confused with Naturalization.
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A decree of the French Revolution, assigning a convent to the army

Nationalization, also spelled nationalisation, is the process of taking an industry or assets into government ownership by a national government or state.[1] Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such asmunicipalities, being transferred to the public sector to be operated by or owned by the state. The opposite of nationalization is usually privatization or de-nationalization, but may also bemunicipalization.
A renationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power. A renationalization process may also be called reverse privatization. Nationalization has been used to refer to either direct state-ownership and management of an enterprise or to a government acquiring a large controlling share of a nominally private, publicly listed corporation.[citation needed]
The motives for nationalization are political as well as economic. It is a central theme of certainfascist and/or 'state socialist' policies that the means of production, distribution and exchange, should be owned by the state on behalf of the citizenry to allow for centrally planned allocation of output, consolidation of resources, and central planning or control of the economy. Manysocialists believe that public ownership enables people to exercise full democratic control over the means whereby they earn their living and provides an effective means of distributing output to benefit the public at large, and a means for providing public finance.
Nationalized industries, charged with operating in the public interest, may be under strong political and social pressures to give much more attention to externalities. They may be obliged to operate some loss making activities where social benefits are clearly greater than social costs — for example, rural postal and transport services. As an instance, the United States Postal Service is guaranteed its nationalised status by the Constitution. The government has recognized these social obligations and, in some cases, provides subsidies for such non-commercial operations.
Since the nationalised industries are state owned, the government is responsible for meeting anydebts incurred by these industries. The nationalized industries do not normally borrow from the domestic market other than for short-term borrowing. However, if they are profitable, the profit is often used as a means to finance other state services, such as social programs and government research — which can help lower the tax burden.
Nationalization may occur with or without compensation to the former owners. If it takes place without compensation it is a case of expropriation. Nationalization is distinguished from property redistribution in that the government retains control of nationalized property. Some nationalizations take place when a government seizes property acquired illegally. For example, the French government seized the car-makers Renault because its owners had collaborated with the Nazi occupiers of France.

[edit]Compensation

A key issue in nationalization is payment of compensation to the former owner. The most controversial nationalizations, known asexpropriations, are those where no compensation, or an amount far below the likely market value of the nationalized assets, is paid. Many nationalizations through expropriation have come after revolutions, in particular marxist revolutions.
The traditional Western stance on compensation was expressed by United States Secretary of State Cordell Hull, during the 1938 Mexican nationalization of the petroleum industry, that compensation should be "prompt, effective and adequate." According to this view, the nationalizing state is obligated under international law to pay the deprived party the full value of the property taken. The opposing position has been taken mainly by developing countries, claiming that the question of compensation should be left entirely up to the sovereign state, in line with the Calvo Doctrine. Communist states have held that no compensation is due, based on socialist disregard for the notion of property rights.
In 1962, the United Nations General Assembly adopted Resolution 1803, "Permanent Sovereignty over National Resources", which states that in the event of nationalization, the owner "shall be paid appropriate compensation in accordance with international law." In doing so, the UN rejected both the traditional Calvo-doctrinist view and the Communist view. The term "appropriate compensation" represents a compromise between the traditional views, taking into account the need of developing countries to pursue reform even without the ability to pay full compensation, and the Western concern for protection of private property.
When nationalizing a large business, the cost of compensation is so great that many legal nationalizations have happened when firms of national importance run close to bankruptcy and can be acquired by the government for little or no money. A classic example is the UK nationalization of the British Leyland Motor Corporation. At other times, governments have considered it important to gain control of institutions of strategic economic importance, such as banks or railways, or of important industries struggling economically. The case ofRolls-Royce plc, nationalized in 1971, is an interesting blend of these two arguments. This policy was sometimes known as ensuring government control of the "commanding heights" of the economy, to enable it to manage the economy better in terms of long-term development and medium-term stability. The extent of this policy declined in the 1980s and 1990s as governments increasingly privatized industries that had been nationalized, replacing their strategic economic influence with use of the tax system and of interest rates.
Nonetheless, national and local governments have seen the advantage of keeping key strategic assets in institutions that are not strongly profit-driven and can raise funds outside the public-sector constraints, but still retain some public accountability. Examples from the last five years in the United Kingdom include the vesting of the British railway infrastructure firm Railtrack in the not-for-profit company Network Rail, and the divestment of much council housing stock to "arms-length management companies", often with mutual status.

[edit]Notable nationalizations by country

[edit]Argentina


[edit]Australia


[edit]Bolivia

  • 2006 On May 1, 2006, newly elected Bolivian president Evo Morales announces plans to nationalize the country's natural gas industry; foreign-based companies are given six months to renegotiate their existing contracts.

[edit]Canada


[edit]Channel Islands

  • 2003 Aurigny Air Services was bought by the States of Guernsey to keep precious routes from the island to London.

[edit]Chile


[edit]Croatia

The HDZ government, on the break-up of Yugoslavia, nationalized private agricultural, non communist nationalized, property and rezoned it under the guise of forest statesmanship when their publicly professed agenda was to only complete the nationalization of the communists. Much of this land is in the process of being restituted and the model rethought.

[edit]Cuba

The Castro government gradually expropriated all foreign-owned private companies after the Cuban Revolution of 1959. Most of these companies were owned by U.S. corporations and individuals. Bonds at 4.5% interest over twenty years were offered to U.S. companies, but the offer was rejected by U.S. ambassador Philip Bonsal, who requested the compensation up front.[3] Only a minor amount, $1.3 million, was paid to U.S. interests before deteriorating relations ended all cooperation between the two governments.[3] The United States established a registry of claims against the Cuban government, ultimately developing files on 5,911 specific companies. The Cuban government has refused to discuss the effective and adequate compensation of U.S. claims. The United States government continues to insist on compensation for U.S. companies. In 1966-68, the Castro government nationalized all remaining privately owned business entities in Cuba, down to the level of street vendors.

[edit]Czechoslovakia

  • 1945 Large manufacturing enterprises.
  • 1948 All manufacturing enterprises.

[edit]Egypt


[edit]France

Nationalization in France dates back to the 'regies' or state monopolies first organized under the Ancien Régime, for example, the monopoly on tobacco sales. Communications companies France Telecom and La Poste are relics of the state postal and telecommunications monopolies.
There was a major expansion of the nationalised sector following World War II.[4] A second wave followed in 1982.
  • 1938 Societe Nationale des Chemins de Fer Francais (SNCF) (originally a 51% State holding, increased to 100% in 1982)[4]
  • 1945 Several nationalizations in France, including most important banks and Renault.[4] The firm was seized for Louis Renault's alleged collaboration with Nazi Germany, although this condemnation was without judgement and after his death, making this case remarkable and rare. A later judgement (1949) admitted that Renault's plant never collaborated. Renault was successful but unprofitable whilst nationalised and remains successful today, after having been privatized in 1996.
  • 1946 Charbonnages de France, Electricite de France (EdF), Gaz de France (GdF)
  • 1982 A large part of the banking sector and industries of strategic importance to the state, especially in electronics and communications, were nationalized under the new president François Mitterrand and the PS-led government. Many of those companies were privatized again after 1986.

The Paris regional transport operator, Regie Autonome des Transports Parisiens (RATP), can also be counted as a nationalised industry.

[edit]Germany

The German railways were nationalised after World War I. Partial privatisation of Deutsche Bahn is currently underway, as of 2008.
Most enterprises in East Germany were nationalised following World War II. After reunification, an agency, Treuhand, was established to return them to private ownership. However, due to structural and economic problems inherent in the previous regime, many of these had to be liquidated.
  • 2008 Renationalization of the "Bundesdruckerei" (Federal Print Office), which had been privatized in 2001.

[edit]Greece


[edit]Iceland


[edit]India

The nationalised banks were credited by some, including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009.[5][6]

[edit]Iran


[edit]Ireland

Railways in the Republic of Ireland were nationalised in the 1940s as Coras Iompair Eireann.
  • 2007 On August 3, 2007, the Irish government were offered a stake in Eircom's copper network infrastructure.[7] Ireland's telephone networks were privatised in 1999.
  • 2009 On January 16, 2009, the Irish Government nationalised Anglo Irish Bank to secure the bank's viability.[8]
  • 2010 Irish state owned bank Anglo Irish Bank is to take majority control of one of Ireland's largest companies QUINN group bringing it under Public ownership.[9]

[edit]Israel


[edit]Italy


The regime of Benito Mussolini extended nationalisation, creating the Istituto per la Ricostruzione Industriale (IRI) as a State holding company for struggling firms, including the car maker Alfa Romeo. A parallel body, Ente Nazionale Idrocarburi (Eni) was set up to manage State oil and gas interests.

[edit]Japan


[edit]Latvia

In 2008 Parex Bank was nationalized by Latvian governmant.

[edit]Malta


[edit]Mexico

  • 1938 The Expropriation of the Petroleum Industry of Mexico: President Lázaro Cárdenas issued a decree that the petroleum companies were in rebellion against the government of Mexico and under the powers granted him under the Expropriation Act passed by the Congress of Mexico in late 1936 expropriated them. March 19, 1938, union personnel took control of the properties.[10]
  • 1982 The nationalization of the Mexican banking system made by President José López Portillo, later in the Carlos Salinas de Gortaripresidency (1988–1994) a large number of banks were privatized.

[edit]The Netherlands

  • 2008 The Dutch State nationalizes the Dutch activities of Belgian-Dutch banking and insurance company Fortis, which had come in solvability problems due to the international financial crisis.

[edit]New Zealand

  • 2001 Central government purchased the Auckland railway network from Tranz Rail.
  • 2003 The Labour Government of New Zealand took an 80% stake in near-bankrupt national air carrier Air New Zealand in exchange for a large financial infusion.
  • 2004 The rest of the country's rail network is purchased from Toll New Zealand, formerly known as Tranz Rail. A new state owned enterprise, ONTRACK, was established to maintain the rail infrastructure.
  • 2008 The rolling stock of Toll New Zealand was purchased by central government, bringing the rail system under total state ownership and renamed KiwiRail.

[edit]Pakistan

  • 1972 On January 2, 1972, Zulfiqar Ali Bhutto, after the fall of East Pakistan, announced the nationalisation of all major industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities.[11]

[edit]Philippines

During the administration of Ferdinand Marcos, important companies such as PLDT, Philippine Airlines, Meralco and the Manila Hotel were nationalized. Other companies were sometimes absorbed into these government-owned corporations, as well as other companies, such asNapocor and the Philippine National Railways, which in their own right are monopolies (exceptions are Meralco and the Manila Hotel). Today, these companies have been reprivatized and some, such as PLDT and Philippine Airlines, have been de-monopolized. Others, like government-formed and owned Napocor, are in the process of privatization.
The Philippine Revolution (1896–1898), called the "Tagalog War" by the Spanish, was an armed military conflict between the people of the Philippines and the Spanish colonial authorities which resulted in the secession of the Philippine Islands from the Spanish Empire.
The Philippine Revolution began in August 1896, upon the discovery of the anti-colonial secret organization Katipunan by the Spanish authorities. The Katipunan, led by Andrés Bonifacio, was a secessionist movement and shadow government spread throughout much of the islands whose goal was independence from Spain through armed revolt. In a mass gathering in Caloocan, the Katipunan leaders organized themselves into a revolutionary government and openly declared a nationwide armed revolution. Bonifacio called for a simultaneous coordinated attack on the capital Manila. This attack failed, but the surrounding provinces also rose up in revolt. In particular, rebels in Cavite led by Emilio Aguinaldo won early victories. A power struggle among the revolutionaries led to Bonifacio's execution in 1897, with command shifting to Aguinaldo who led his own revolutionary government. That year, a truce was officially reached with the Pact of Biak-na-Bato and Aguinaldo was exiled to Hong Kong, though hostilities between rebels and the Spanish government never actually ceased.[1][2]
In 1898, with the outbreak of the Spanish-American War, Aguinaldo unofficially allied with the United States, returned to the Philippines and resumed hostilities against the Spaniards. By June, the rebels had conquered nearly all Spanish-held ground within the Philippines with the exception of Manila. Aguinaldo thus declared independence from Spain and the First Philippine Republic was established. However, neither Spain nor the United States recognized Philippine independence. Spanish rule in the islands only officially ended with the 1898 Treaty of Paris, wherein Spain ceded the Philippines and other territories to the United States.[2] After eruption of the 1899 Battle of Manila on February 4 between Filipino and U.S. forces, Aguinaldo immediately ordered, "[t]hat peace and friendly relations with the Americans be broken and that the latter be treated as enemies".[3] In June 1899, the nascent First Philippine Republic formally declared war against the United States.[4][5] The Philippine-American War then ensued.

[edit]Poland


[edit]Portugal

  • 1974 In the years following the Carnation Revolution, the Junta de Salvação Nacional and Provisional Governments nationalized all the banking, insurance, petrol and industrial companies. Among those companies were Companhia União Fabril (CUF), the assets of theChampalimaud family and SONAE. Along with the telecommunications companies, which were state-owned even before the Revolution, many of the nationalized companies were reprivatized in the 1980s and 1990s. In the agricultural sector, according to government estimates, about 900,000 hectares (2,200,000 acres) of agricultural land were occupied between April 1974 and December 1975 in the name of land reform; about 32% of the occupations were ruled illegal. In January 1976, the government pledged to restore the illegally occupied land to its owners, and in 1977, it promulgated the Land Reform Review Law. Restoration of illegally occupied land began in 1978.[12][13]

[edit]Romania

  • 1948 With the Decree 119 June 1948 the new Romanian communist regime nationalised all the existing private companies and their assets in Romania leading to the transformation of the Romanian economy from a market economy to a planned economy.

[edit]Russia

  • 1998 The Yeltsin government began seizing Gazprom assets, claiming that the company owed back taxes. Privatization of Gazprom from the mid 1990s had been reduced to 38.37% with the intention of achieving full privatization. However, the stake of the Russian Government in Gazprom has since been increased to 50% with Vladimir Putin's plan to increase the stake to a controlling position. Gazprom is also buying up both Russian and other international utility companies.

[edit]South Korea

  • 1946 USAMGIK nationalized all South Korean private railroad companies and made Department of Transportation. This now becomesKorail.

[edit]Soviet Union

  • 1918 All manufacturing enterprises, many retailing enterprises, any private enterprises, the whole bank system, agrarian sector, others. Basically everything was nationalized in the name of the Revolution (a justification phrased used upon the nationalization process), no private ownership was allowed. Later the government of Lenin introduced the New Economic Policy that slightly reverted process, however upon the death of the Soviet vozhd (Lenin) Stalin renewed the process again.

[edit]Spain

  • 1941 Spain's railways were nationalised, as RENFE, in the aftermath of the Spanish Civil War.
  • 1983 Nationalization without compensation of the Spanish Rumasa. Separate business were later privatized.

[edit]Sri Lanka

  • 1958 The Government nationalised Bus transport (creating the Ceylon Transport Board). The Colombo Port was also nationalised the same year.
  • 1961 The local subsidiaries of the foreign owned petroleum companies, Caltex, Esso and Shell had formed a cartel, to break which they were nationalised. The Insurance companies and the Bank of Ceylon were also nationalised in the same year.
  • 1971 Graphite mines nationalised.
  • 1972 Locally owned Tea and Rubber plantations were nationalised under the Land Reform law.
  • 1975 Sterling plantation companies (owned by British plantation companies) were nationalised.
  • 2009 Seylan Bank nationalised to prevent its collapse.

[edit]Sweden

  • 1939-1948 Nationalisation of most of the private Railway companies.
  • 1957 The mining company LKAB is nationalized. The state had owned 50% of the corporation's shares, with options to buy the remainder, since 1907.[14]
  • 1992 A large part of Sweden's banking sector is nationalized.[15]

[edit]United Kingdom

The following companies/industries were the subject of nationalisation in the given year:

[edit]British assets nationalised by other countries


[edit]United States


[edit]Venezuela

  • 2007 On May 1, 2007, Venezuela stripped the world's biggest oil companies of operational control over massive Orinoco Belt crude projects, a controversial component in President Hugo Chavez's nationalization drive.
  • 2008 On April 3, 2008, President Hugo Chavez ordered the nationalization of the cement industry.[31]
  • 2008 On April 9, 2008, Hugo Chavez ordered the nationalization of Venezuelan steel mill Sidor, in which Luxembourg-based Terniumcurrently holds a 60% stake. Sidor employees and the Government hold a 20% stake respectively.[32]
  • 2008 On August 19, 2008, Hugo Chavez ordered the take-over of a cement plant owned and operated by Cemex, an international cement producer. While shares of Cemex fell on the New York Stock Exchange, the cement plant comprises only about 5% of the company's business, and is not expected to adversely affect the company's ability to produce in other markets. Chavez has been looking to nationalize the concrete and steel industries of his country to meet home building and infrastructure goals.[33]
  • 2009 On February 28, 2009, Hugo Chavez ordered the army to take over all rice processing and packaging plants.[34]
  • 2010 On January 20, 2010, Hugo Chavez signed an ordinance to nationalize six supermarkets in Venezuela under the system of retail stores of a French company because of increasing price and speculation hoarding illicit.[35]
  • 2010 On June 24, 2010, Venezuela announced the intention to nationalize oil drilling rigs belonging to the U.S. company Helmerich & Payne.[36]
  • 2010 On October 25, 2010, Chavez announced that the government was nationalizing two U.S.-owned Owens-Illinois glass-manufacturing plants.[37]
  • 2010 On October 31, 2010, Venezuelan President Hugo Chavez said his government will take over the Sidetur steel manufacturing plant. Sidetur is owned by Vivencia, which had two mineral plants appropriated by the government in 2008.[37]

[edit]Zimbabwe

  • Zimbabwe has nationalized its food distribution infrastructure.
  • Zimbabwe Cricket formerly the Zimbabwe Cricket Union was nationalised in 2004

[edit]Other countries


[edit]See also


[edit]References

  1. ^ http://www.merriam-webster.com/dictionary/nationalization
  2. ^ The Constitutional Centre of Western Australia | The Role of The High Court
  3. ^ a b Thomas, Hugh (March 1971). Cuba; the Pursuit of Freedom. New York: Harper & Row. pp. 224, p252. ISBN 0060142596.
  4. ^ a b c Myers (1949)
  5. ^ PSU banks' policies saved India from financial blushes: Chidambaram
  6. ^ The importance of public banking
  7. ^ Eircom and State in broadband swap?
  8. ^ Government nationalises 'fragile' Anglo Irish Bank
  9. ^ Anglo Irish Bank's €700m Quinn plan
  10. ^ The Expropriation of the Petroleum Industry of Mexico in 1938
  11. ^ US Country Studies. "Zulfikar Ali Bhutto" (PHP). Retrieved 2006-11-07.
  12. ^ "Portugal", Country Studies (U.S. Library of Congress), "In the mid-1980s, agricultural productivity was half that of the levels in Greece and Spain and a quarter of the EC average. The land tenure system was polarized between two extremes: small and fragmented family farms in the north and large collective farms in the south that proved incapable of modernizing. The decollectivization of agriculture, which began in modest form in the late 1970s and accelerated in the late 1980s, promised to increase the efficiency of human and land resources in the south during the 1990s."
  13. ^ "Portugal Agriculture", The Encyclopedia of the Nations
  14. ^ A Historic Journey Luossavaara-Kiirunavaara Aktiebolag, April 2006
  15. ^ Stopping a Financial Crisis, the Swedish Way
  16. ^ Schifferes, Steve (February 18, 2008). "The lessons of nationalisation". BBC News. Retrieved May 20, 2010.
  17. ^ http://www.historytoday.com/dt_main_allatonce.asp?gid=9859&g9859=x&g9857=x&g30026=x&g20991=x&g21010=x&g19965=x&g19963=x&amid=9859
  18. ^ SN 1825 -Nationalisation of the UK Coal Royalties, 1938 : Compensation Payments
  19. ^ http://www.uksteel.org.uk/history.htm
  20. ^ a b "What was the last nationalisation?", BBC News, 18 February 2008
  21. ^ House of Commons Hansard Written Answers for 12 Feb 2002 (pt 16)
  22. ^ "Northern Rock to be nationalised". BBC News. February 17, 2008. Retrieved May 20, 2010.
  23. ^ "HIGHLIGHTS-Britain nationalises Bradford & Bingley". Reuters. September 29, 2008.
  24. ^ US rescue of Fannie, Freddie poses taxpayer risks
  25. ^ Diamond and Kashyap on the Recent Financial Upheavals
  26. ^ a b Baxter, Lawrence; Brown, Bill; Cox, Jim (February 27, 2009). "Finally, A Bridge to Somewhere". Huffington Post.
  27. ^ Nature of Citi stake debatable
  28. ^ Am I the Last Capitalist? Obama Falters on Rick Wagoner, GM, and the Auto Industry - Mary Kate Cary (usnews.com)
  29. ^ "If, in fact, Wagoner resigned because somebody in government said, 'You have to resign,' then I think we have nationalized the auto industry, at least GM, and I think that's bad to have the government have a socialized car industry," -Sen. Chuck Grassley (R-Iowa)
  30. ^ The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2009/06/01/AR2009060101480.html.[dead link]
  31. ^ Al Jazeera English - Americas - Chavez nationalises cement industry
  32. ^ "Venezuela to nationalize steelmaker Sidor: union". Reuters. April 9, 2008.
  33. ^ "Venezuela Seizes Cemex - Forbes.com".[dead link]
  34. ^ "Chavez sends army to rice plants". BBC News. March 1, 2009. Retrieved May 20, 2010.
  35. ^ Venezuela quốc hữu hóa 6 siêu thị ngoại quốc (Vietnamese)
  36. ^ Frank Jack Daniel (June 24, 2010). "Venezuela to nationalize U.S. firm's oil rigs". Reuters.
  37. ^ a b the CNN Wire Staff (November 2, 2010). "Venezuela nationalizes private steel plant". CNN.com.

[edit]Bibliography

[edit]On banks nationalization


[edit]External links

*

Look up nationalization in Wiktionary, the free dictionary.


[edit]Origin

Edwards states that The Economist coined the term in the 1930s in covering Nazi German economic policy.[4][5]
The Oxford English Dictionary notes usage dating from 1942 in Econ. Jrnl, 52, 398.

[edit]History

*

This section requires expansion.


A long history of privatization dates from Ancient Greece, when governments contracted out almost everything to the private sector.[6] In theRoman Republic private individuals and companies performed the majority of services including tax collection (tax farming), army supplies (military contractors), religious sacrifices and construction. However, the Roman Empire also created state-owned enterprises—for example, much of the grain was eventually produced on estates owned by the Emperor. Some scholars suggest that the cost of bureaucracy was one of the reasons for the fall of the Roman Empire.[6]
Perhaps one of the first ideological movements towards privatization came during China's golden age of the Han dynasty. Taoism came into prominence for the first time at a state level, and it advocated the laissez-faire principle of Wu wei (無為), literally meaning "do nothing".[7] The rulers were counseled by the Taoist clergy that a strong ruler was virtually invisible.
During the Renaissance, most of Europe was still by and large following the feudal economic model. By contrast, the Ming dynasty in Chinabegan once more to practice privatization, especially with regards to their manufacturing industries. This was a reversal of the earlier Song dynasty policies, which had themselves overturned earlier policies in favor of more rigorous state control.[8]
In Britain, the privatization of common lands is referred to as enclosure (in Scotland as the Lowland Clearances and the Highland Clearances). Significant privatizations of this nature occurred from 1760 to 1820, coincident with the industrial revolution in that country.
In more recent times, Winston Churchill's government privatized the British steel industry in the 1950s, and West Germany's government embarked on large-scale privatization, including selling its majority stake in Volkswagen to small investors in a public share offering in 1961.[6] In the 1970s General Pinochet implemented a significant privatization program in Chile. However, it was in the 1980s under the leaderships of Margaret Thatcher in the UK and Ronald Reagan in the USA, that privatization gained worldwide momentum. In the UK this culminated in the 1993 privatization of British Rail under Thatcher's successor, John Major; British Rail having been formed by prior nationalization of private rail companies.
Significant privatization of state owned enterprises in Eastern and Central Europe and the former Soviet Union was undertaken in the 1990s with assistance from the World Bank, the U.S. Agency for International Development, the German Treuhand, and other governmental and nongovernmental organizations.
A major ongoing privatization, that of Japan Post, involves the Japanese post service and the largest bank in the world. This privatization, spearheaded by Junichiro Koizumi, started in 2007 following generations of debate. The privatization process is expected[by whom?] to last until 2017.

[edit]Types

There are four main methods[citation needed] of privatization:
  1. Share issue privatization (SIP) - selling shares on the stock market
  2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhandmodel
  3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price.
  4. Privatization from below - Start-up of new private businesses in formerly socialist countries.

Choice of sale method is influenced by the capital market, political and firm-specific factors. SIPs are more likely to be used when capital markets are less developed and there is lower income inequality. Share issues can broaden and deepen domestic capital markets, boostingliquidity and (potentially) economic growth, but if the capital markets are insufficiently developed it may be difficult to find enough buyers, and transaction costs (e.g. underpricing required) may be higher. For this reason, many governments elect for listings in the more developed and liquid markets, for example Euronext, and the London, New York and Hong Kong stock exchanges.
As a result of higher political and currency risk deterring foreign investors, asset sales occur more commonly in developing countries.
Voucher privatization has mainly occurred in the transition economies of Central and Eastern Europe, such as Russia, Poland, the Czech Republic, and Slovakia. Additionally, Privatization from below is/has been an important type of economic growth in transition economies.
A substantial benefit of share or asset-sale privatizations is that bidders compete to offer the highest price, creating income for the state in addition to tax revenues. Voucher privatizations, on the other hand, could be a genuine transfer of assets to the general population, creating a real sense of participation and inclusion. If the transfer of vouchers is permitted, a market in vouchers could be created, with companies offering to pay money for them.

[edit]Results

Literature reviews[9][10] find that in competitive industries with well-informed consumers, privatization consistently improves efficiency. The more competitive the industry, the greater the improvement in output, profitability, and efficiency.[3] Such efficiency gains mean a one-off increase in GDP, but through improved incentives to innovate and reduce costs also tend to raise the rate of economic growth. The type of industries to which this generally applies include manufacturing and retailing. Although typically there are social costs associated with these efficiency gains,[citation needed][11] many economists argue that these can be dealt with by appropriate government support throughredistribution and perhaps retraining.
In sectors that are natural monopolies or public services (such as, say, passenger rail in the United States), the results of privatization are much more mixed, as a private monopoly behaves much the same as a public one in liberal economic theory. The government is actually seen as a more natural provider of public goods and services. However, the efficiency of an existing public sector operation can be put into question requiring changes to be made. Changes may include, inter alia, the imposition of related reforms such as greater transparency and accountability of management, an improved cost-benefit analysis, improved internal controls, regulatory systems, and better financing, rather than privatization itself.
Regarding political corruption, it is a controversial issue whether the size of the public sector per se results in corruption. The Nordic countries have low corruption but large public sectors. However, these countries score high on the Ease of Doing Business Index, due to good and often simple regulations, and for political rights and civil liberties, showing high government accountability and transparency. One should also notice the successful, corruption-free privatizations and restructuring of government enterprises in the Nordic countries. For example, dismantling telecommunications monopolies has resulted in several new players entering the market and intense competition with price and service.
Also regarding corruption, the sales themselves give a large opportunity for grand corruption. Privatizations in Russia and Latin America were accompanied by large-scale corruption during the sale of the state-owned companies. Those with political connections unfairly gained large wealth, which has discredited privatization in these regions. While media have reported widely the grand corruption that accompanied the sales, studies have argued that in addition to increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption is more prevalent in non-privatized sectors. Furthermore, there is evidence to suggest that extralegal and unofficial activities are more prevalent in countries that privatized less.[12]

[edit]Differing views

[edit]Supporting

Studies show that private market factors can more efficiently deliver many goods or service than governments due to free marketcompetition.[3][9][10] Over time this tends to lead to lower prices, improved quality, more choices, less corruption, less red tape, and/or quicker delivery. Many proponents do not argue that everything should be privatized. According to them, market failures and natural monopolies could be problematic. However, some Austrian school economists[who?] and anarcho-capitalists[who?] would prefer that every function of the state be privatized, including defense and dispute resolution.
The basic economic argument given for privatization states that governments have few incentives to ensure that the enterprises they own are well run. One problem is the lack of comparison in state monopolies. It is difficult to know if an enterprise is efficient or not without competitors to compare against. Another is that the central government administration, and the voters who elect them, have difficulty evaluating the efficiency of numerous and very different enterprises. A private owner, often specializing and gaining great knowledge about a certain industrial sector, can evaluate and then reward or punish the management in much fewer enterprises much more efficiently. Also, governments can raise money by taxation or simply printing money should revenues be insufficient, unlike a private owner.
If private and state-owned enterprises compete against each other, then the state owned may borrow money more cheaply from the debt markets than private enterprises, since the state owned enterprises are ultimately backed by the taxation and printing press power of the state, gaining an unfair advantage.
Privatizing a non-profitable state-owned company may force the company to raise prices in order to become profitable. However, this would remove the need for the state to provide tax money in order to cover the losses.
Proponents of privatization[who?] make the following arguments:
  • Performance. State-run industries tend to be bureaucratic. A political government may only be motivated to improve a function when its poor performance becomes politically sensitive, and such an improvement can be reversed easily by another regime.[citation needed]
  • Increased efficiency. Private companies and firms have a greater incentive to produce more goods and services for the sake of reaching acustomer base and hence increasing profits. A public organization would not be as productive due to the lack of financing allocated by the entire government's budget that must consider other areas of the economy.
  • Specialization. A private business has the ability to focus all relevant human and financial resources onto specific functions. A state-owned firm does not have the necessary resources to specialize its goods and services as a result of the general products provided to the greatest number of people in the population.
  • Improvements. Conversely, the government may put off improvements due to political sensitivity and special interests—even in cases of companies that are run well and better serve their customers' needs.
  • Corruption. A state-monopolized function is prone to corruption; decisions are made primarily for political reasons, personal gain of the decision-maker (i.e. "graft"), rather than economic ones. Corruption (or principal-agent issues) in a state-run corporation affects the ongoing asset stream and company performance, whereas any corruption that may occur during the privatization process is a one-time event and does not affect ongoing cash flow or performance of the company.
  • Accountability. Managers of privately owned companies are accountable to their owners/shareholders and to the consumer, and can only exist and thrive where needs are met. Managers of publicly owned companies are required to be more accountable to the broader community and to political "stakeholders". This can reduce their ability to directly and specifically serve the needs of their customers, and can bias investment decisions away from otherwise profitable areas.
  • Civil-liberty concerns. A company controlled by the state may have access to information or assets which may be used against dissidents or any individuals who disagree with their policies.
  • Goals. A political government tends to run an industry or company for political goals rather than economic ones.
  • Capital. Privately held companies can sometimes more easily raise investment capital in the financial markets when such local markets exist and are suitably liquid. While interest rates for private companies are often higher than for government debt, this can serve as a useful constraint to promote efficient investments by private companies, instead of cross-subsidizing them with the overall credit-risk of the country. Investment decisions are then governed by market interest rates. State-owned industries have to compete with demands from other government departments and special interests. In either case, for smaller markets, political risk may add substantially to the cost of capital.
  • Security. Governments have had the tendency to "bail out" poorly run businesses, often due to the sensitivity of job losses, when economically, it may be better to let the business fold.
  • Lack of market discipline. Poorly managed state companies are insulated from the same discipline as private companies, which could go bankrupt, have their management removed, or be taken over by competitors. Private companies are also able to take greater risks and then seek bankruptcy protection against creditors if those risks turn sour.
  • Natural monopolies. The existence of natural monopolies does not mean that these sectors must be state owned. Governments can enact or are armed with anti-trust legislation and bodies to deal with anti-competitive behavior of all companies public or private.
  • Concentration of wealth. Ownership of and profits from successful enterprises tend to be dispersed and diversified -particularly in voucher privatization. The availability of more investment vehicles stimulates capital markets and promotes liquidity and job creation.
  • Political influence. Nationalized industries are prone to interference from politicians for political or populist reasons. Examples include making an industry buy supplies from local producers (when that may be more expensive than buying from abroad), forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies.
  • Profits. Corporations exist to generate profits for their shareholders. Private companies make a profit by enticing consumers to buy their products in preference to their competitors' (or by increasing primary demand for their products, or by reducing costs). Private corporations typically profit more if they serve the needs of their clients well. Corporations of different sizes may target different market niches in order to focus on marginal groups and satisfy their demand. A company with good corporate governance will therefore be incentivized to meet the needs of its customers efficiently.
  • Job gains. As the economy becomes more efficient, more profits are obtained and no government subsidies and less taxes are needed, there will be more private money available for investments and consumption and more profitable and better-paid jobs will be created than in the case of a more regulated economy.[13][unreliable source?]

[edit]Opposing

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Opponents of certain privatizations believe that certain public goods and services should remain primarily in the hands of government in order to ensure that everyone in society has access to them (such as law enforcement, basic health care, and basic education). Likewise, private goods and services should remain in the hands of the private sector. There is a positive externality when the government provides public goods and services to society at large, such as defense and disease control. As for natural monopolies, opponents of privatisation claim that they are subject to fair competition, and better administrated by the state.
Many privatization opponents[who?] also warn against the practice's inherent tendency toward corruption. As many areas which the government could provide are essentially profitless, the only way private companies could, to any degree, operate them would be through contracts or block payments. In these cases, the private firm's performance in a particular project would be removed from their performance, and embezzlement and dangerous cost-cutting measures might be taken to maximize profits.
Some[who?] would also point out that privatizing certain functions of government might hamper coordination, and charge firms with specialized and limited capabilities to perform functions which they are not suited for. In rebuilding a war torn nation's infrastructure, for example, a private firm would, in order to provide security, either have to hire security, which would be both necessarily limited and complicate their functions, or coordinate with government, which, due to a lack of command structure shared between firm and government, might be difficult. A government agency, on the other hand, would have the entire military of a nation to draw upon for security, whose chain of command is clearly defined. Opponents would say that this is a false assertion: numerous books refer to poor organization between government departments (for example the Hurricane Katrina incident).
Although private companies will provide a similar good or service alongside the government, opponents of privatization are careful about completely transferring the provision of public goods, services and assets into private hands for the following reasons:
  • Performance. A democratically elected government is accountable to the people through a legislature, Congress or Parliament, and is motivated to safeguarding the assets of the nation. The profit motive may be subordinated to social objectives.
  • Improvements. the government is motivated to performance improvements as well run businesses contribute to the State's revenues.
  • Corruption. Government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are guaranteed through codes of conduct and declarations of interest. However, the selling process could lack transparency, allowing the purchaser and civil servants controlling the sale to gain personally.
  • Accountability. The public does not have any control or oversight of private companies.
  • Civil-liberty concerns. A democratically elected government is accountable to the people through a parliament, and can intervene when civil liberties are threatened.
  • Goals. The government may seek to use state companies as instruments to further social goals for the benefit of the nation as a whole.
  • Capital. Governments can raise money in the financial markets most cheaply to re-lend to state-owned enterprises.
  • Strategic and Sensitive areas. Governments have chosen to keep certain companies/industries under public control because of their strategic importance or sensitive nature.
  • Cuts in essential services. If a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable.
  • Natural monopolies. Privatization will not result in true competition if a natural monopoly exists.
  • Concentration of wealth. Profits from successful enterprises end up in private, often foreign, hands instead of being available for the common good.
  • Political influence. Governments may more easily exert pressure on state-owned firms to help implementing government policy.
  • Downsizing. Private companies often face a conflict between profitability and service levels, and could over-react to short-term events. A state-owned company might have a longer-term view, and thus be less likely to cut back on maintenance or staff costs, training etc., to stem short term losses. Many private companies have downsized while making record profits.
  • Profit. Private companies do not have any goal other than to maximize profits. A private company will serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority, and are thus anti-democratic. The more necessary a good is, the lower the price elasticity of demand, as people will attempt to buy it no matter the price. In the case of price elasticity of demand is zero (perfectly inelastic good), demand part of supply and demand theories does not work.
  • Privatization and Poverty. It is acknowledged by many studies that there are winners and losers with privatization. The number of losers —which may add up to the size and severity of poverty—can be unexpectedly large if the method and process of privatization and how it is implemented are seriously flawed (e.g. lack of transparency leading to state-owned assets being appropriated at minuscule amounts by those with political connections, absence of regulatory institutions leading to transfer of monopoly rents from public to private sector, improper design and inadequate control of the privatization process leading to asset stripping.[14]
  • Job Loss. Due to the additional financial burden placed on privatized companies to succeed without any government help, unlike the public companies, jobs could be lost to keep more money in the company.

[edit]Equivalence to secured borrowing

Setting aside questions of efficiency and public versus private control of resources, some privatization transactions can be interpreted as a form of a secured loan,[15][16] and are criticized as a "particularly noxious form of governmental debt".[15] In this interpretation, the upfront payment from the privatization sale corresponds to the principal amount of the loan, while the proceeds from the underlying asset correspond to secured interest payments – the transaction can be considered substantively the same as a secured loan, though it is structured as a sale.[15] This interpretation is particularly argued to apply to recent municipal transactions in the United States, particularly for fixed term, such as the 2008 sale of the proceeds from Chicago parking meters for 75 years. It is argued that this is motivated by "politicians' desires to borrow money surreptitiously",[15] due to legal restrictions on and political resistance to alternative sources of revenue, viz, raising taxes or issuing debt.

[edit]Intermediate views

Others don't dispute that well-run for-profit entities with sound corporate governance may be considerably more efficient than an inefficient governmental bureaucracy or NGO, however many implementations of privatization can - in practice - lead to the fire sale of public assets, and/or to inefficient or corrupt - for profit management.

[edit]Developed or minimally corrupt economies

A top executive can readily reduce the perceived value of an asset – due to information asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily poorer, or simply promote and report severely conservative (e.g. pessimistic) estimates of future earnings. Such seemingly adverse earnings news will be likely to (at least temporarily) reduce sale price. (This is again due to information asymmetries since it is more common for top executives to do everything they can to window dress their earnings forecasts). There are typically very few legal risks to being 'too conservative' in one's accounting and earnings estimates.
When the entity gets taken private - at a dramatically lower price - the new private owner gains a windfall from the former top executive's actions to (surreptitiously) reduce the sales price. This can represent tens of billions of dollars (questionably) transferred from previous owners (the public) to the takeover artist. The former top executive is then rewarded with a golden handshake for presiding over the fire sale that can sometimes be in the tens or hundreds of millions of dollars for one or two years of work. (This is nevertheless an excellent bargain for the takeover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives).
When a publicly held asset, mutual or non-profit organization undergoes privatization, top executives often reap tremendous monetary benefits. The executives can facilitate the process by making the entity appear to be in financial crisis - this reduces the sale price (to the profit of the purchaser), and makes non-profits and governments more likely to sell.
Ironically, it can also contribute to a public perception that private entities are more efficiently run reinforcing the political will to sell of public assets. Again, due to asymmetric information, policy makers and the general public see a government owned firm that was a financial 'disaster' - miraculously turned around by the private sector (and typically resold) within a few years.

[edit]Underdeveloped or highly corrupt economies

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In a society with substantial corruption, privatization allows the government currently in power and its backers to siphon a large portion of the entire net present value of state assets away from the public and into the accounts of their favored power brokers. Without privatization, corrupt officials would have to slowly harvest their corrupt earnings over time. As such, efficient privatization depends on their being a very low of current corruption among the current government officials since it allows for far more 'efficient' extraction of corrupt rents.
Of course, corrupt governments can also extract corrupt rents quite efficiently in other ways - particularly by borrowing extensively to engage in spending on overly favorable contracts with their backers (or on tax shelters, subsidies or other giveaways). Generations of subsequent taxpayers are then left with paying back the debt incurred for corrupt transfers made decades previously. Naturally, this may lead to the sale of public assets....
In the end, the public is left with a government that taxes them heavily, and gives them nothing in return. Debt repayment is enforced by international agreements and agencies such as the IMF. Infrastructure and upkeep is sacrificed - leading to a further decay in the economic efficiency of the country over time.

[edit]Alternatives

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[edit]Public utility

The enterprise can remain as a public utility.

[edit]Non-profit

A private non-profit organization could manage the enterprise.

[edit]Municipalization

Transferring control to municipal government

[edit]Outsourcing or sub-contracting

National services may sub-contract or out-source functions to private enterprises. A notable example of this is in the United Kingdom, where many municipalities have contracted out their garbage collection or administration of parking fines to private companies. In addition, the British government has involved the private sector more in the workings of the National Health Service principally through outsourcing the construction and operation of new hospitals to private companies. There are also moves to refer patients to private surgeries to ease the load on existing NHS human resources, and covering the cost of this.
See also: private finance initiative

[edit]Partial ownership

An enterprise may be privatized, but with the state retaining a number of shares in the resultant company. This is a particularly notable phenomenon in France, where the state often retains a "blocking stake" in private industries. In Germany, the state privatized Deutsche Telekom in small tranches, and still retains about a third of the company. As of 2005, the state of North Rhine-Westphalia is also planning to buy shares in the energy company E.ON in what is claimed to be an attempt to control spiraling costs.
Whilst partial privatization could be an alternative, it is more often a stepping stone to full privatization. It can offer the business a smoother transition period during which it can gradually adjust to market competition. Some state-owned companies are so large that there is the risk of sucking liquidity from the rest of the market, even in the most liquid marketplaces: this may favor gradual privatization. The first tranche of a multi-step privatization would also in the first instance establish a valuation for the enterprise to mitigate complaints of under-pricing.
In some instances of partial privatization of contracted services, some portion(s) of the state-owned service are provided by private-sector contractors, but the government retains the capacity to self-operate at contract intervals, if it so chooses. An example of partial privatization would be some forms of school bus service contracting, such as arrangements where equipment and other resources purchased with government capital funds and/o those already owned by a governmental entity are used by the contractor for a period of time in providing services, but ownership is retained by the governmental unit. This form of partial privatization eases concerns that once an operation is contracted, the government may be unable to obtain sufficient competitive bids, and be subjected to terms less desirable than the prior operation under state-ownership. Under that scenario, a reverse privatization would be more feasible for the government. (see section below)

[edit]Public–private partnership

Main article: Public-private partnership

[edit]Notable examples

See also: List of privatizations
The largest privatization in history involved Japan Post. It was the nation's largest employer and one third of all Japanese government employees worked for Japan Post. Japan Post was often said to be the largest holder of personal savings in the world.
The Prime Minister Junichiro Koizumi wanted to privatize it because it was thought[by whom?] to be an inefficient and a source for corruption. In September 2003, Koizumi's cabinet proposed splitting Japan Post into four separate companies: a bank, an insurance company, a postal service company, and a fourth company to handle the post offices as retail storefronts of the other three.
After the Upper House rejected privatization, Koizumi scheduled nationwide elections for September 11, 2005. He declared the election to be a referendum on postal privatization. Koizumi subsequently won this election, gaining the necessary supermajority and a mandate for reform, and in October 2005, the bill was passed to privatize Japan Post in 2007.[17]
Nippon Telegraph and Telephone's privatization in 1987 involved the largest share-offering in financial history at the time.[18] 15 of the world's 20 largest public share offerings have been privatizations of telecoms.[18]
The United Kingdom's largest public-share offerings were privatizations of British Telecom and British Gas during the 1980s under theConservative government of Margaret Thatcher, when many state-run firms were sold off to the private sector. This attracted very mixed views from the public and parliament, and even a former Conservative prime minister, Harold Macmillan, was critical of the policy; likening it to "selling the family silver".[19]
The largest public-share offering in France was France Telecom.
Egypt undertook widespread privatization under President Hosni Mubarak. After his overthrow in the 2011 revolution, the association of the newly private businesses with the crony capitalism of the old regime along with the new look at long-festering labor and police-state issues have led to calls for re-nationalization.[20]

[edit]Negative responses

Privatization proposals in key public service sectors such as water and electricity in many cases meet with strong resistance from opposition political parties and from civil society groups, many of which regard them as natural monopolies. Campaigns typically involve demonstrations and democratic political activities; sometimes the authorities attempt to suppress opposition using violence (e.g. Cochabamba protests of 2000 in Bolivia and protests in Arequipa, Peru, in June 2002). Opposition is often strongly supported by trade unions. Opposition is usually strongest to water privatization—as well as Cochabamba, recent examples include Haiti, Ghana and Uruguay (2004). In the latter case a civil-society-initiated referendum banning water privatization was passed in October 2004.

[edit]Reversion

A reversion from contracted ownership of an enterprise or services to governmental ownership and/or provision is called reverse privatizationor nationalization. Such a situation most often occurs when a privatization contractor fails financially and/or the governmental unit has failed to purchase satisfactory service at prices it regards as less than with state-ownership or self-operation of services. Another circumstance may occur when greater control than viable under privatization is determined to be in the governmental unit's best interest.
National-security concerns may be the source of reverse privatization actions when the most likely providers are non-domestic or international corporations or entities. For example, in 2001, in response to the September 11th attacks, the then-private airport security industry in the United States was nationalized[citation needed] and put under the authority of the Transportation Security Administration.

[edit]See also


Case studies:
Development strategies:

[edit]Notes

  1. ^ Chowdhury, F. L. ''Corrupt Bureaucracy and Privatisation of Tax Enforcement'', 2006: Pathak Samabesh, Dhaka.
  2. ^ "Musselburgh Co-op in crisis as privatization bid fails.". Co-operative News. 2005-11-01. Retrieved 2008-05-21.
  3. ^ a b c "Privatising State-owned Enterprises". 2010-02-22. p. 9. Retrieved 2011-07-11.
  4. ^ Edwards, Ruth Dudley (1995). The Pursuit of Reason: The Economist 1843-1993. Harvard Business School Press. p. 946.ISBN 0-87584-608-4.
  5. ^ Compare Bel, Germà (2006). "Retrospectives: The Coining of 'Privatisation' and Germany's National Socialist Party". Journal of Economic Perspectives 20 (3): 187–194.doi:10.1257/jep.20.3.187.
  6. ^ a b c International Handbook on Privatization by David Parker, David S. Saal
  7. ^ Li & Zheng 2001, p. 241
  8. ^ Bouye, Thomas M., Manslaughter, markets, and moral economy
  9. ^ a b "Privatisation in Competitive Sectors: The Record to Date, World Bank Policy Research Working Paper No. 2860". John Nellis and Sunita Kikeri (World Bank). June 2002. SSRN 636224.
  10. ^ a b "From State To Market: A Survey Of Empirical Studies On Privatisation" (PDF). William L. Megginson and Jeffry M. Netter(Journal of Economic Literature). June 2001.
  11. ^ "Winners and Losers: Assessing the Distributional Impact of Privatisation, CGD Working Paper No 6" (PDF). Nancy Birdsall & John Nellis (Center for Global Development). March 9, 2006.
  12. ^ Privatisation in Competitive Sectors: The Record to Date. Sunita Kikeri and John Nellis. World Bank Policy Research Working Paper 2860, June 2002. Privatisation and Corruption. David Martimort and Stéphane Straub. One career city manager in America, Roger L. Kemp, wrote a library reference volume titled Privatization: The Provision of Public Services by the Private Sector," which was originally published in 1991 and republished in 2007. In this volume, based on a national literature search of best practices among municipal governments in this field, Dr. Kemp recommended that administrators owe it to their taxpayers and citizens to seek private alternatives to selected public services. He felt that city managers should go to the marketplace to determine the cost of contracting for selected public services, while keeping quality consistent with the same service provided by the municipality. Sometimes, Kemp noted, it's more cost effective to have certain public services provided by contract by the private sector. In some cases it can be less expensive for the private sector to provide public services, but the benefit to society may actually turn out to be less as well.
  13. ^ Central Europe's Mass-Production Privatization, Heritage Lecture #352
  14. ^ Dagdeviren (2006) "Revisiting privatisation in the context of poverty alleviation" Journal of International Development, Vol. 18, 469–488
  15. ^ a b c d Roin, Julie. "Privatization and the Sale of Tax Revenues".SSRN eLibrary. Retrieved 2011-07-27, also published as "Privatization and the Sale of Tax Revenues" in Minnesota Law Review, Vol. 85, p. 1965, 2011, and U of Chicago Law & Economics, Olin Working Paper No. 560
  16. ^ U. of C. professor argues privatization of public assets just like borrowing money, July 22, 2011, Chicago Tribune, Ameet Sachdev's Chicago Law, Ameet Sachdev
  17. ^ Takahara, "All eyes on Japan Post"Faiola, Anthony (2005-10-15)."Japan Approves Postal Privatization". Washington Post (The Washington Post Company): p. A10. Retrieved 2007-02-09.
  18. ^ a b The Financial Economics of Privatisation By William L. Megginson, p. 205 - 206
  19. ^ [1]
  20. ^ Amos, Deborah, "In Egypt, Revolution Moves Into The Factories", NPR, April 20, 2011. Retrieved 2011-04-20.

[edit]References


Unindexed
Journal of Economic Literature 39(2), June 2001, 321-89.
  • Juliet D'Souza, William L. Megginson (1999), "The Financial and Operating Performance of Privatised Firms during the 1990s", Journal of Finance August 1999
  • von Hayek, Friedrich, (1960) The Constitution of Liberty
  • Smith, Adam (1994) The Wealth of Nations
  • Stiglitz, Joseph Globalization and its Discontents
  • David T. Beito, Peter Gordon, and Alexander Tabarrok (editors); foreword by Paul Johnson (2002). The voluntary city: choice, community, and civil society. Ann Arbor: University of Michigan Press/The Independent Institute. ISBN 0-472-08837-8.
  • von Weizsäcker, Ernst, Oran Young, and Matthias Finger (editors): Limits to Privatisation. Earthscan, London 2005 ISBN 1-84407-177-4
  • Jeb Sprague, 2007. Haiti: Workers Protest Privatisation Layoffs. Inter Press Service.
  • Roger L. Kemp, PhD, "Privatization: The Provision of Public Services by the Private Sector," McFarland & Co., Jefferson, NC, USA; and London, UK., 2007.

[edit]External links

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Look up privatization in Wiktionary, the free dictionary.


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Categories: Public economics | Privatisation | Monopoly (economics) | Market structure and pricing | Economics of regulation


Prime Minister's Council on TRADE & INDUSTRY


How to get Disinvestment Going
Building India's Future

Report of the Special Subject Group


Members :

Shri GP Goenka
Shri Rajeev Chandrasekhar
Shri Nusli  Wadia 

 

 

How to Get Disinvestment Going

"Building India's Future"

 

1.  Why disinvest?

Since reforms began in 1991, this is the first time after 1993-94 that one feels that reforms are going to go forward. Except industrial delicensing and some changes in the financial sector, almost nothing has so far happened on domestic economic reforms. The second generation of reforms is about domestic economic reforms. And domestic economic reforms have to begin with public sector reform and privatization. Without this as a prerequisite, nothing else is possible. Nothing else can happen. Modern Foods is a good beginning. This report will express some skepticism about what is proposed for Indian Airlines. But more than these two, what has been reported in the media about the government's intentions is the really positive signal. Why is disinvestment necessary?

THE CITIZENS' CHARTER

v     Who are shareholders of public sector undertakings (PSUs)?  Indian citizens are, the government only acts on their behalf.

v     As percentage of GDP (gross domestic product), does the government need to spend so much?  The government in India spends 32.6% of GDP.  Indonesia spends 16.2%, South Korea 17.8%, Malaysia 23.2% and Thailand 18.6%.

v     Only 3.5% of GDP is spent on education.

v     If government expenditure is reformed, 5.1% of GDP can be saved – 1.5% from privatization and repurchase of public debt, 0.6% from fertilizer subsidies, 0.2% from PDS, 0.3% on public administration and 2.5% from smaller transfers to States.  This is an additional expenditure that can be made on primary education and rural health care.

v     The government subsidizes losses of almost Rs 80 billion per year made by around 120 Central PSUs.

v     Each individual citizen pays Rs 80 a year, each household pays Rs 400 a year.  Are 6 million jobs in PSUs worth it?

v     The government has no right to decide, shareholders must decide.

  • The future of India is at stake.

  • India's balance sheet is in a mess. It is obvious that over the last 50 years huge amounts of Public money have been invested into the public sector. Hundreds and thousands of Crores of Public money has been invested into various Public Sector Units. However, these investments have not resulted in creation of value on the balance sheet. All in all investments have yielded very little or no return on investments, but creating a huge hole in the balance sheet. This huge hole in the balance sheet is being further exasperated through the excessive borrowings every year and the resultant interest burden

  • India's revenue – Profit & Loss statement is also in a mess If one adds up four items of current revenue expenditure – interest payments, defence expenditure, wages and salaries of government employees and subsidies – and compares this figure with total current revenues (tax plus non-tax), there already is a deficit. That means that even if the government stops functioning and ceases to do anything else, there will be a deficit.

  • This is not tenable. The government should have a surplus on the revenue account to finance a deficit on the capital account. Capital expenditure is what the government should be doing. But there is no money for this. The government should be spending on infrastructure – social and physical. The government should be spending on primary education and rural health care. But there is no money for this.

  • The situation is worse. A deficit can only be financed through borrowing, which pushes up interest rates and crowds out necessary private sector investments, or through monetisation of the deficit and resultant inflation. Inflation is the most regressive form of taxation that there is. It hurts the poor more than the rich, the poor don't have inflation-indexed incomes. The government doesn't have a treasure chest. The poor will pay through higher interest rates or higher inflation.

  • Inefficient PSUs are largely responsible for the macroeconomic crisis India faced in the 1980s, a phenomenon that spilled over into a balance of payments (bop) crisis in 1990-91.

  • Some of these PSUs shouldn't have existed in the first place. That is, they are sick private sector units that should have been closed down. Instead, to protect a few existing jobs, they were absorbed into the public sector.

  • It is necessary of course to point out that the public sector can mean various things. The government itself (Centre or State) sometimes runs undertakings, these are PSUs proper. Then there are departmental enterprises like railways, post offices or telecommunications, which are not separately incorporated, but are run as government departments. Finally, there are those that are separately incorporated and are run as independent companies. Since such distinctions are not important for this report, when the expression public sector is used, it means all three types.

    EMPLOYMENT

    v     A 7.5% growth rate means 11 million new jobs a year.

    v     A 6% growth rate means 9 million new jobs a year. 

    v     Lack of PSU reform implies a loss in growth rate from 7.5% to 6% - a loss of 2 million jobs a year.

    v     In three years, the country can recover the entire present employment in PSUs.

  • A large chunk of revenue expenditure is interest payments on past government borrowing. If the interest payment problem can be solved, there will no longer be a fiscal deficit problem and the government will have money to spend on capital expenditure or infrastructure. In a country like India, there cannot be a moratorium on interest payments. While borrowing at market-determined interest rates and curbing present government expenditure disciplines future borrowing, the only solution to the debt overhang of earlier borrowing is disinvestments that can be used to retire public debt. That is what the ordinary citizen stands to gain from successful disinvestment.

  • This argument can be reinforced. PSUs (public sector undertakings) were not created only for the purpose of providing employment.1  They were meant to generate surpluses that flow into the government's non-tax revenue.2   This hasn't happened. Disinvestment will improve PSU performance, it will improve PSU competitiveness. Those who have jobs in PSUs will enhance their job and economic security. Disinvestment accomplishes more.

    RETURNS

    v    Who will be satisfied with a return on capital of between 2 to 5%?

    v    That's the figure for PSUs.

    v     If one excludes the ones that are monopolies, the rate of return is      lower still.

    v    The government borrows at 12% for this rate of return and citizens pay for this stupidity.

  • Inefficient PSUs also constrain the efficient performance of the private sector, since the private sector requires inputs and infrastructure services provided by monopoly suppliers in the public sector. Not everyone can have a job in a PSU. Disinvestment improves efficiency and pushes up growth rates. Growth provides jobs and employment. If the Indian economy can grow at around 7.5%, the backlog of unemployment will begin to disappear.

  • These points were made with the Central government in mind and the Central government has equity in around 240 PSUs, 27 banks and 2 insurance companies. But at the level of the States, where there are around 1000 PSUs3, the situation is even more serious. Most States are bankrupt. They don't have money to pay wages and salaries of government employees, forget education and health care, or infrastructure.

  • India is bound to have a current account deficit in the foreseeable future. This current account deficit has to be financed through capital account inflows. Such inflows can be borrowing or non-debt creating inflows like foreign direct investments (FDI). As the East Asian experience also demonstrates, non-debt creating capital inflows like FDI are preferable. Disinvestment helps to attract global capital. In fact, it helps to attract domestic capital as well.

1  Coal India employs 700,000 people, of whom, one-third are redundant.  In the entire governm ent, 2 million people are believed to be redundant.  This is out of a total employment of 20 million, of which, 6 million is in PSUs, 3 million in the Central government, 7 million in State governments and 2 million in local bodies.

2   The cash value of most PSUs is more than the present value of profit flows, even if the cash value is evaluated on book value of assets.  The conclusion is stronger if valuation is done at current value.  Perhaps it is necessary to mention that some loss-making PSUs also have positive market value.

3   Roughly half of these make losses.  Of the ones that make losses, roughly half have eroded their net worth and these figures are only for the Centre.

BUILDING INDIA'S FUTURE
SECOND GENERATION REFORMS

bif1.jpg (60606 bytes)

PSUs have never earned profits that have exceeded 6 per cent of capital employed (Table 1)4. Their return on capital has been between 5 and 7 percentage points below the rate of interest on long term government bonds. That is just one measure of the lost opportunity cost of return.

Table 1: Profitability of Indian PSUs

 

91-92

92-93

93-94

94-95

95-96

96-97

No of PSUs

237

239

240

241

239

236

PAT as % of CE

2

2

3

4

6

5

PAT as % of GS

2

2

3

4

4

4

No of profitable PSUs

133

131

121

130

132

129

No of non-profitable PSUs

104

108

116

109

102

104

 

 

These poor returns have occurred despite huge rents that accrue from government monopolies like petroleum and power. Once these are netted out, PSUs show negative return (Table 2)5.

 

 

 

 

 

4  Public Enterprises Survey. PAT = Profits after tax; GS = Gross sales; CE = Capital employed.

5  L. Bhandari and O. Goswami, The Wasted Years: The Public Sector in India, National Council of Applied Economic Research, forthcoming, 2000.

 

Table 2: Differential PSU profitability (%)

PAT/Net Sales

91-92

92-93

93-94

94-95

95-96

96-97

All non-service PSUs

2

2.2

3

4.4

4.9

4.4

Less petroleum

0.1

- 0.1

- 1.2

1.6

3.4

2.7

Less petroleum & power

- 2.4

- 2.3

- 3.4

- 0.2

1.3

0.1

Less petroleum, power, coal & lignite (pure manufacturing PSUs)

- 5.3

- 5.4

- 6.9

- 2.3

- 2.4

- 4.3

  • The controlling shareholder of PSUs has distinctly different objectives. Commercial viability, profitability, cost minimization, optimal investment decisions rarely figure among the concerns of a typical Member of Parliament or a Minister. Next in the hierarchy of shareholders' representatives comes the civil servants. Bureaucrats specialize in proper procedures. This creates an inconsistency between the organizational forms of governments and those of modern financial and industrial entities: governments and their agents are process oriented, whereas firms have to be result oriented. The mismatch gets exacerbated by a civil servant's aversion to risk taking.

  • Given such non-commercial objectives of the representatives of shareholders, most chief executives of PSUs quickly adopt the line of least resistance, develop the 'don't rock the boat' syndrome. Thus, organizational changes are not made, erring staff remain undisciplined, loss-making plants are neither down-sized nor closed, wages are not linked to productivity, and redundant workers are not retrenched.

  • Above all this, there is Article 12 of the Constitution of India, which defines 'the State' as "the Government and Parliament of India and the Government and Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India". Since most PSUs have more than 50% government ownership, they fall under the ambit of 'the State'. This has affected PSUs in several adverse ways.

  • All PSUs are expected to achieve a wide variety of non-commercial objectives which are imposed by the Ministries and the Parliament.

  • There is an annual audit by the Comptroller and Accountant General (CAG) in addition to the audit by the statutory auditor. The area where CAG audits inflict the greatest ex antedamage is in purchases and tenders. PSU managers invariably veer towards selecting the lowest bid, even when they know that the quality is poorer. Innumerable CAG allegations of financial impropriety only on the basis of rejecting the lowest bid have taught PSU managers that propriety dominates profitability.

  • There are constraints on appointment of senior management personnel, which can only be done through the Public Enterprise Selection Board (PESB) and, thereafter, clearance from the Department of Personnel, the Home Ministry, and, in many instances, by the Office of the Prime Minister. This has led to delays, non-appointment of CEOs and executive directors, and excessive emphasis on seniority — which means that very few CEOs can enjoy their full term.

  • Since PSUs are interpreted as 'the State', they are subject to writ petitions to the Supreme Court under Articles 32, and High Courts under Article 226 of the Constitution.

  • Again by virtue of being considered as servants of 'the State', managers of PSUs are often subjected to criminal investigation by the Chief Vigilance Commissioner and the Central Bureau of Investigation.

  • State status limits managers from down-sizing plants, retrenching or re-deploying employees.

  • Finally, the directors of PSUs have little autonomy in finalizing investment decisions.

For a while, governments tried the system of having target-setting memoranda of understanding (MOUs) between PSUs and their administrative ministry. The idea was to make a PSU achieve greater efficiency without diluting the government's majority ownership and control. Despite the Department of Public Enterprises showing high 'success' rates, the MOUs failed.6   First, there is a sample selection bias: virtually no loss-making PSU signs a MoU. Thus, over 55% of the PSUs remain outside the MOU ambit. Second, the targets are set low enough to ensure achievement. The post-MOU performance of the so-called 'excellent' and 'very good' achievers is no better — and often worse — than before.

                               6  Bhandari and Goswami (2000).

2. Tactics and strategy

There is a difference between tactics and a strategy. So far, disinvestment has been driven by the tactical compulsion of financing the fiscal deficit. This is perhaps the reason why the word privatization has not been used until recently, the word disinvestment tending to imply a soft choice. This is in contrast to a country like Britain, where privatization and disinvestment were driven by a conscious recognition that this improves efficiency.7  However, there are no soft choices. As countries like Peru, Brazil, Chile, France, Morocco, Poland, Indonesia, Malaysia, the former German Democratic Republic, the Philippines, Pakistan, Sri Lanka, Taiwan, Indonesia and New Zealand have recognized, the fiscal deficit or releasing resources for social or infrastructure sectors cannot be the only reasons for disinvestment. Other reasons are improved efficiency and competition and broadening and deepening the capital market.

PSU reform attempts go back to the 1980s, where there was some attempt to increase functional autonomy of PSUs, without privatization and disinvestment. Post-1991, there were ad hoc equity sales in around 50 PSUs, with equity sales ranging from 5% to 49%. There was a hang-up about letting go of more than 51% equity.8   This led to some improvement in efficiency and pre-tax profit as a percent of capital employed in PSUs more than doubled from the base figure of 3.4% in 1990-91.9 This illustrates what is possible with full-fledged reforms.

7   However, the Rangarajan Committee Report (Report of the Committee on Restructuring Public Enterprises), 1992, did mention improved efficiency as an objective.

8   As a parallel move, fresh issues of equity in global markets for expansion also diluted government equity.

9   See detailed figures in M.S. Ahluwalia, "India's Economic Reforms: An Appraisal" in Jeffrey D. Sachs, Ashutosh Varshney and Nirupam Bajpai edited, India in the Era of Economic Reforms, Oxford University Press, 1999.

 

SECURING THE FUTURE OF INDIA'S PSUs

bif2.jpg (52505 bytes)

 

 

The hang-up about giving up more than 51% equity was possibly given up with the setting up of the Disinvestment Commission in 1996, a commission that has now been wound up. The Disinvestment Commission examined 50 PSUs, ostensibly non-strategic and non-core, where government equity could be brought down to zero and management handed over. In most cases, it is now accepted that government equity can be brought down to 26%. The 51% figure is important. Any firm where the government has more than 50% equity is legally interpreted as part of Article 12 of the Constitution and is accountable to administrative ministries, government audits and Parliament. There will also be the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI). Moreover, with a 51% hang-up, new private shareholders will always be a minority on the boards. Naturally, bids would have been higher had the government agreed to dilute equity to 26% in a time-bound fashion.

However, driven by tactical considerations, the entire disinvestment process so far has been left to bureaucrats who do not necessarily have a perfect understanding of how capital markets operate or how international investor decisions are taken. Therefore, issuance is piecemeal, there are long delays in appointment of lead managers and finalization of IPOs (initial public offerings) and flawed criterion used in selection of lead managers. There has been lack of transparency, a fact that reports of the Comptroller and Auditor General (CAG) of India have also commented on. It should not be surprising that foreign investments in the disinvestment process in India are a trickle compared to global investments that flow into disinvestment processes world-wide. It is remarkable that not a single PSU is yet under autonomous private management and the cross-holdings by oil companies is a particularly perverse illustration of this phenomenon.

It is only recently that the government has become a bit more serious about disinvestment. As the following will make clear, this report favours what has been done for Modern Foods, but not what has been done for Indian Airlines, unless that is a temporary step.

Unlike what happened historically, a strategy will have a proper vision and plan of action.

 

 

First, the management and responsibility of the entire disinvestment process should exclusively be with the Disinvestment Ministry (DM). Setting up such a DM ensures transparency and fairness and also contributes to a comprehensive approach to disinvestment, as opposed to ad hoc decisions. This is one reason why most developing countries have opted for formal structures. Other ministries can be co-opted only if it is absolutely necessary. The Secretary of DM must have sufficient capital market experience. For each proposal, the DM will be responsible for taking the proposal to a Cabinet Committee on Disinvestment that will consist of the Prime Minister, the Finance Minister, the Disinvestment Minister and any other economic ministry that may be necessary from the point of view of the specific proposal. The DM will be a specific pre-determined target of capital that will be raised over a fixed time horizon, say the next two years. Thus, for the next two years, the DM will develop a plan and course of action that addresses individual companies and sectors and draws up a strategy for each. The strategy need not be the same across all companies or across all sectors. To ensure a realistic and successful course of action, the DM will have an Advisory Board. The Advisory Board will have as members, individuals who have sufficient capital market and international investor experience. Examples are representatives from financial institutions, management consultants, merger and acquisition (M&A) experts and private companies. It is important to ensure that the DM and politicians and bureaucrats involved in the disinvestment process are granted immunity from prosecution and investigation by the Central Bureau of Investigation (CBI) or Central Vigilance Commission (CVC). If the process is transparent, as is argued in this report, the need for these will not arise. In this framework, there is no need to revive the Disinvestment Commission. It has no further role to play.

HOW MANY OF THESE JUSTIFICATIONS FOR PSUs ARE VALID NOW?

v     Infant industry

v     Heavy industry based development strategy

v     Right distribution of ownership of capital

v     Lack of resource

v     No technical competence in private sector

v     Under-developed capital market

v     Balanced regional development

v     Employment promotion

v     Protection

Second, the candidates for disinvestment must be chosen carefully. Stronger PSUs are the ones that must enter the market first, in the immediate short run (the first four years). This will whet the appetite of investors and make India a success story, a phenomenon that tends to snowball. Creation of markets is in fact an indirect positive fallout of successful disinvestments. In the medium term however, all government companies that are non-strategic should be candidates for disinvestment. Strategic or core must be carefully defined. Other than arms, ammunition and defence equipment, atomic energy, radioactive minerals and railway transport, there is nothing else that can appropriately be defined as strategic or core. Therefore, in every other case, there is no reason why government equity should not be brought down to 26% and this includes banking, insurance, aviation, the petroleum sector and tourism. 26% equity is enough to ensure that the government has some influence over corporate decision making. The only caveat to 26% can be if prior privatization of management enhances valuation. The disinvestment process is best managed if there are a defined number of large transactions per year, as opposed to a large number of small transactions. Perhaps some overall restructuring of PSUs through mergers and acquisitions (or even winding up) is therefore necessary prior to disinvestment.

Stated differently, one of the first decisions the DM has to take is on the extent of disinvestment. Will there be total disinvestment? Will there be partial disinvestment with managerial control retained by the State? Will managerial control be handed over to a strategic investor, with only minority share holding granted to such an investor? As the statements above indicate, this report argues for total disinvestment. The selling of bundles of portfolios of shares will not work. Moreover, selling lots of 5 or 10% is counterproductive because buyers know that further shares will be offered. The mindset that a PSU, even if does not make losses, is a going concern must change. Instead, the block of assets must be sold. Whether the enterprise will continue to be a going concern or not, is for the new management to decide.

There is some urgency in doing this. Before liberalization, many PSUs were monopolies. They are now being exposed to competition. This process will intensify as further liberalization of trade (cuts in tariffs and elimination of quantitative restrictions) and investments (foreign direct investments) take place. To get a good value for these PSUs, the time to disinvest is now. Not later.

Third, the present system of selecting lead managers on the basis of bidding for fees is entirely unsatisfactory. Second-best lead managers are chosen and are often not interested, or do not deliver their best resources, to issuances. Globally, there are only 5 or 6 top lead managers. All these should be empanelled and additions to this panel can be through co-managers from smaller investment banks. The norms for fees can be fixed and such norms can be suggested by a team of financial institutions that have requisite expertise. These empanelled lead managers can be allotted initial issuances in random fashion and further issuance mandates can be based on performance (over-subscription, market-making, pricing). All this will eliminate delays in the process of selecting lead managers.

Fourth, the process of disinvestment need not be completely capital market driven, as it is today. The capital market focus, the small percentage of equity disinvested and an overall lack of clarity result in a less than optimum value being derived from the disinvestment process. There are nine, not mutually exclusive, options possible for the disinvestment process and PSU reform and all nine can be used to ensure flexibility and maximum value from disinvestments. Often, the choice may be dictated by whether the eventual shareholding is meant to be narrow or wide. These nine options are the following. First, there can be strategic majority sales to a partner and global trends show that there is more realizable value (about 20 to 30% more) through strategic sales to companies in the same sector. 51% or even 100% equity can be sold to such strategic buyers. Second, there can be open public auctions for units to bidders, with or without pre-qualifications. However, sales should not be only to public sector financial institutions and their subsidiary mutual funds. Third, there can be public sales through stock exchanges in the domestic capital market. One can continue with capital market disinvestments, except that larger shares of equity must be off-loaded through initial IPOs. It is necessary to privatize management before IPOs for value to be maximized. Global trends are that 20 to 30% more value is obtained through disinvestments after privatization of management than before privatization of management. Fourth, it is possible for PSUs to enter into joint ventures (JVs) with the private sector and transfer their business for stock in the new enterprise. However, in such cases, shareholder agreements between the private company and the PSU must over-ride government decision making or policy. Once the JV route has been followed, capital market transactions are possible. Fifth, GDRs/depository receipts can be issued in international capital markets.10   Sixth, as an imperfect framework of disinvestments, there can be management contracts for limited periods of time with private operators. Seventh, there can be sales in blocks. Eighth, despite all attempts at reform, there will be some clear cases of winding up. Ninth, there can be mergers and restructuring. For Central PSUs, this report later gives suggestions about what modality can be attempted for which PSU.

Since employees and Indian citizens in general have to be part of the disinvestment process, employees must first be given up to 10% of stock at par or at discounts on market values. This can be spliced with deferred payment for employees and loyalty bonus of shares if shares are held for a minimum period. In addition, a small additional IPO or up to 10% of capital can be offered to Indian citizens in individual capacity. There can be a caveat that a single individual cannot have more than 1000 shares. This will eliminate some resistance to disinvestment and employees or others will become part of the process that creates more value for their company. PSUs will move from being employment creators for those who are employed with the company to enterprises that create wealth for their share-holders, the citizens of India. This is what should have happened with PSUs in the first place. In addition, it may be necessary to ensure that willing employees are provided attractive severance packages. Without the possibility of surplus manpower being shed, bids will be marked down. The role of a media campaign in generating consensus also needs to be emphasized.

What is the need to privatize profit making PSUs?

v    Because it fetches better prices.

v    Unless an enterprise is in the strategic sector and        unless          the market structure is a monopoly,   profit    making    is    an          argument for disinvestment – not an     argument against it.

There will continue to be a problem with loss-making PSUs, many of which historically are loss-making private sector enterprises that should have been closed down, but were nationalized in the 1970s. The Board for Industrial and Financial Reconstruction (BIFR) is supposed to examine these and recommend ones that cannot be revived. Not a single one has been closed down, primarily because of court intervention on labour grounds. While loss-making PSUs that have positive market value can be sold, this is also true of loss-making PSUs that have eroded their net worth,11   provided that the assets are sold as a block. There may be a few cases where actual closing down is necessary. Properly used, the National Renewal Fund (NRF) can be used to retrain and re-deploy people who are retrenched because of closing down. However, the NRF cannot be equated with a Voluntary Retirement Scheme (VRS). As originally stated, the NRF was supposed to be used for VRS, retraining and unemployment insurance. Only the first has come about. The proceeds of disinvestment should not go into the Consolidated Fund of India. They have to be used to retire the public debt or for a genuine NRF (from which Rs 1000 crore can be earmarked for VRS). In fact, the present value of future wage and pension flows of workers is easy to compute. From funds obtained through sales, this amount can be set aside, so that a worker who loses a job does not lose the income security.

There has to be fresh legislation to ensure fast transfer or leasing of government land and user rights. This can even provide for special tribunals, without violating Article 14 of the Constitution. Otherwise, the entire process can get stuck in the court system.

10 In passing, there should be greater resort to the American Depository Receipt (ADR) route, which has greater depth and can therefore offer higher valuation.

11   A rough figure will be 60 at the Central level and at least 60 at the State level.

3.  Sequence and transition

For the entire mechanism and process to be credible, two units must be sold by 31 March 2000. Thereafter, there should be a clear target for the next two years. 12 billion US dollars over the next two-year time span is a reasonable target, that is, Rs 52,000 crores.

It is not possible for this report to be specific about the time sequencing of disinvestment. However, some principles can be mentioned. First, there is urgency about sectors where monopoly is being threatened because of liberalization. Second, the government is generally bad in areas where there is a service orientation. Therefore, services, manufacturing and trading are sectors where the initial flush of disinvestments can take place. This emphasis on service orientation also explains why banks have to go first.

Barring the strategic sectors, no more than 26% government equity need be retained. But in the interim period, the government might wish to continue as the single largest shareholder. Retaining government shareholding directly will constrain PSUs because of interference from government ministries, Parliament and government audits. Once government equity is below 50%, decisions on appointing management must be left to Boards and not to Joint Secretaries in administrative ministries. Another advantage of bringing equity down to 26% is avoidance of the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI) and the Prevention of Corruption Act (PCA). Section 13 of the Prevention of Corruption Act defines that a public servant is guilty of criminal misconduct (corruption) if a decision taken by the public servant benefits a third party, unless it can be proved that this benefit to the third party is in the public interest. Any decision taken benefits a third party and it is impossible to prove that this benefit to the third party is in the public interest. Therefore, public servants become risk averse and don't take decisions. There is no point asking PSUs to function along commercial principles as long as such a section continues.

Ideally, until the government shareholding is brought down to below 51%, there should be a National Shareholding Trust as a non-profit trust under the Societies Registration Act or the Companies Act. The entire government shareholding can be transferred to this Trust. On the advice of the DM, the Trust will sell equity in block sales to banks, financial institutions or mutual funds or directly to retail investors. In the interim, there can be a stipulation that shares held by the Trust will not drop below the 26% threshold. The Trust will be preferable to a Special Purpose Vehicle as it will take the enterprise out of the purview of the CVC, CBI, PCA, government ministries, Parliament and government audits. However, if this is not done and government shareholding is more than 50%, the enterprise must still explicitly be taken outside the CVC, CBI, PCA, government ministries, Parliament and government audits. The salaries paid to management must also be delinked from government salary structures. Management salaries have to be decided by boards and by no one else.

There has to be a proper competition policy to cover unfair and restrictive trade practices and issues like transfer pricing. The competition policy must also cover mergers and acquisitions. At present, no prior approval is required for mergers and acquisitions, although that is the practice in many developed countries also. Subsequent de-monopolization through breaking up involves significant transaction costs. It is a better idea to require prior approval.

One must also be careful in some service sectors. With many individual countries, service sector liberalization depends on reciprocity clauses – banking and aviation are examples. These may have to be renegotiated if government equity drops below 50%.

Incidentally, there is no reason to exclude banking from disinvestments, although changes in the Banking Regulation Act will be necessary. Banks, when privatized, can have certain guidelines on lending for priority sectors. But these guidelines must be set out by the Reserve Bank in the offer letter itself, and not introduced subsequently.

In line with these points, this report suggests the following modalities for Central PSUs. In the annexure table, "X" indicates that the route is appropriate for a PSU, the absence of "X" indicates that for that PSU, that route is not appropriate.

4.  The road map

  • Explain to citizens the benefits of disinvestment – more expenditure on education, health care and infrastructure, higher growth, more employment, lower interest rates, lower inflation and costs of the present status quo. Use media campaigns.

  • Disinvestment should be driven by efficiency, rather than fiscal deficit compulsions.

  • There should not be ad hoc sales, nor any hang-ups about clinging on to 51% equity. With a 51% threshold level, new private shareholders will be in the minority on boards and realizations will be higher without this limit.

  • If government equity is brought down to 26%, the enterprise will no longer be "State" as defined by Article 12 of the Constitution. It will thus be outside the ambit of the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI), administrative ministries, government audits and accountability to Parliament.

  • Disinvestment cannot be left to bureaucrats who have no experience of capital markets or international investor sentiments. They will delay appointment of lead managers, finalization of IPOs (initial public offerings) and develop non-transparent processes. As a result of this, not a single PSU has changed hands since 1991.

  • There must be Disinvestment Ministry (DM), other ministries can be co-opted only if absolutely necessary. The Secretary of DM must preferably have capital market experience. DM will be responsible for taking the proposal to a Cabinet Committee on Disinvestment consisting of the Prime Minister, the Finance Minister, the Disinvestment Minister and any other economic ministry considered necessary. There is no need for a Disinvestment Commission. The DM will have an Advisory Board consisting of members who have sufficient capital market and international investor experience and there will be a transparent and strategic approach.

  • The DM will have a specific pre-determined target of capital that will be raised over a fixed time horizon, such as, 12 billion US dollars over the next two years.

  • The DM and politicians and bureaucrats involved in the disinvestment process must be granted immunity from prosecution and investigation by the Central Bureau of Investigation (CBI) or Central Vigilance Commission (CVC). If the process is transparent, the need for these will not arise.

    POSSIBLE STRATEGY FOR DM

    v      Monopoly market, efficient PSUs and high social obligation sectors – retain 51% initially

    v      Monopoly market, efficient PSUs and low social obligations – down to 26%

    v      Competitive market, efficient PSUs and high social obligations -– retain 26%

    v      Competitive market, efficient PSUs and low social obligations – down to 0%

    v      Monopoly market, inefficient PSUs and high social obligations – management contracts

    v      Monopoly market, inefficient PSUs and low social obligations – joint ventures

    v      Competitive market, inefficient PSUs and high social obligations – down to 0%, sales as block

    v      Competitive market, inefficient PSUs and low social obligations – down to 0%, sales as block or close down

  • Candidates for disinvestment must be chosen carefully by the DM. The stronger PSUs must enter the market first, so as to create an appetite for investors. Before this, there may be a need for mergers and acquisitions and winding up among existing PSUs.

  • All non-strategic government companies should eventually be brought down to 26% government equity, unless prior privatization of management ensures better valuation. 26% is enough to ensure influence on managerial decision making. There must be a defined number of large transactions per year, not a large number of small transactions.

  • Arms, ammunition, defence equipment, atomic energy, radioactive minerals and railway transport are the only strategic sectors. Everything else can eventually be divested, including banks.

  • The present system of selecting lead managers on the basis of bidding for fees is unsatisfactory. Globally, there are only 5 or 6 top lead managers and they can constitute the panel.

  • Empanelled lead managers can be allotted initial issuances in random fashion and further issuance mandates can be based on performance (over-subscription, market-making, pricing).

  • The disinvestment process should not be capital market driven and all nine forms of disinvestment and PSU reform can be judiciously used by the DM – first, strategic majority sales; second, open public auctions for units to bidders, with or without pre-qualifications; third, domestic public sales through stock exchanges; fourth, joint ventures, where shareholder agreements must override government decisions; fifth, GDRs/depository receipts; sixth, management contracts; seventh, block sales; eighth, winding up; and ninth, mergers/restructuring.

  • Until government shareholding is brought down to below 51%, there should be a National Shareholding Trust as a non-profit trust under the Societies Registration Act or the Companies Act. The entire government shareholding can be transferred to this Trust. On the advice of the DM, the Trust will sell equity in block sales to banks, financial institutions or mutual funds or directly to retail investors. The Trust will be preferable to a Special Purpose Vehicle as it will take the enterprise out of the purview of the CVC, CBI, Prevention of Corruption Act, government ministries, Parliament and government audits.

  • However, if this is not done and government shareholding is more than 50%, the enterprise must still explicitly be taken outside the CVC, CBI, Prevention of Corruption Act, government ministries, Parliament and government audits. Managerial salaries should be delinked from government salaries.

  • To address the political economy of the disinvestment process, employees can be given 10% of stock at par or at a discount on the market value. There can also be an additional IPO of up to 10% to citizens in individual capacity, with a stipulation that no individual can hold more than 1000 shares.

  • PSUs that have eroded their net worth must be closed.

  • Disinvestment proceeds should not flow into the Consolidated Fund of India and be used to finance revenue expenditure. A stipulated percentage can be earmarked for capital expenditure and building physical and social infrastructure. Another percentage can be used for retiring public debt. The remainder, which should be a smaller percentage, can be used for a National Renewal Fund, which should not be equated with a Voluntary Retirement Scheme only.

  • There must be fresh legislation for the transfer of government land and assets. Special tribunals to dispense with time-consuming court procedures need to be set up.

  • Enact a competition policy and renegotiate reciprocal service sector agreements where necessary.

 

PSU

Strategic sales

Open public auctions to select bidders

Domestic capital market sales to public

Joint ventures

GDRs, ADRs

Management contracts

Block sales

Winding up

Mergers, restructuring

Air India, Pawan Hans

X

  

X

      

Indian Airlines

  

X

  

X

     

Airports Authority

X

  

X

 

X

   

Bank of Baroda, Bank of India, Canara Bank, Corporation Bank, SBI, Syndicate Bank, PNB

  

X

 

X

    

X

All other banks

       

X

X

X

BCCL, CCL, NCL, SECL, WCL, Coal India

     

X

   

Bharat Earth Movers

X

        

X

BHEL

X

          

IOC, ONGC, GAIL

 

X

  

X

     

BPCL, HPCL, IPCL, IBP, Bongaigaon Refinery, Cochin Refineries

X

        

X

Cement Corporation

       

X

   

Central Inland Water Transport

Corporation

X

    

X

   

Central Warehousing Corporation

X

 

X

 

X

     

Cochin Shipyards, Goa Shipyards, Hindustan Shipyard

     

X

   

Container Corporation

X

         

CMC

X

         

Cement Corporation

       

X

  

DTC

      

X

   

Dredging Corporation

          

EIL/EPIL

X

   

X

      

ECGC

  

X

 

X

    

Fertilizer Corporation, FACT, GSFC, Madras Fertilizers, National Fertilizers, Southern Pesticides

X

     

X

 

X

Paradeep Phosphates

       

X

 

X

FCI

      

X

    

Handicrafts & Handloom Exports Corporation

      

X

   

Hindustan Antibiotics

X

  

X

     

HAL (spinning off airframes, engine maintenance)

   

X

 

X

   

Hindustan Cables, Hindustan Copper, HEC, Hindustan Fertilizers, Hindustan Fluorocarbons, Hindustan Latex, Hindustan Insecticides

X

      

X

  

HMT

   

X

    

X

Hindustan Newsprint, HindustanPaper

X

         

HOCL

X

      

X

 

X

HTL

X

  

X

      

Hindustan Zinc

X

         

Hotel Corporation

X

      

X

   

HUDCO

  

X

 

X

     

Indian Additives

X

         

IDPL

X

  

X

     

IFCI, IDBI, LIC, GIC

  

X

 

X

    

X

ITI

X

         

IISCO, Sponge Iron

       

X

X

X

ITDC

X

 

X

  

X

    

KRIBHCO

   

X

 

X

    

Kudremukh Iron Ore

X

  

X

      

Konkan Railway, IRCON, RITES

   

X

 

X

    

Lubrizol India

X

         

MTNL

 

X

X

 

X

     

MMTC, STC

  

X

X

  

X

     

BALCO, NALCO

X

X

X

X

X

    

X

NBCC

  

X

  

X

     

NHPC, NTPC

         

X

NFDC

      

X

    

National Seeds

X

         

NTC

       

X

X

 

Neyveli Lignite

X

      

X

 

X

PFC

          

X

Power Grid Corporation

  

X

 

X

X

    

Semiconductor

Complex

X

      

X

  

SCI

X

 

X

 

X

X

   

SAIL

X

         

VSNL

 

X

X

 

X

     

Vizag Steel

X

      

X

  

 

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--
Palash Biswas
Pl Read:
http://nandigramunited-banga.blogspot.com/
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