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Monday, September 22, 2003

Kingshuk sent an interesting rejoinder on my post here on the disinvestment of HPCL. I thought those are quite interesting and valid arguments. So I have posted them below:

Firstly, the whole idea of privatization is to get government off industry

Thats one motivation but perhaps not the primary one. One major motivation highlighted by the government was to bring in enough money through privatisation to fund the some of the infrastructure projects that this government had undertaken, for example the National Highway project . Of course for a variety of reasons the disinvestment ministry is far from its original target and most of the funds thus raised is now largely used to fund the huge budget deficit.

I was talking more from my perspective. I believe that the government has no business running a business. And my comment reflected that. But it is good to know of the National Highway project.

The bureacrats must be feeling very pleased with themselves. They have hit two birds with one stone. It helps them towards meeting their disinvestment target for this year and also meets the Supreme Court directive.

I think you are attributing wrong motivation to the wrong group. The idea behind the proposed merger between HPCL and ONGC is

1. Not to meet disinvestment target
2. Privatise
and the author of this proposal are not the bureacrats.

The idea is to retain control over HPCL. The author is Petroleum minister Ram Naik .

If you had been following the disinvestment saga for the last few years you would notice the recurring scene of the ministers refusing to give up control of companies it used to have control over. Petroleum minister Ram Naik had been fighting disinvestment proposal of HPCL/BPCL tooth and nail for a long time and had proposed the option of ONGC bidding for HPCL/BPCL earlier -- only to be shot down by the PM when Arun Shourie threatened to resign over this. HPCL (and BPCL) due to its retail nature had always been an extremely potent political carrot to have for a minister. Giving out petrol pump licenses to favoured people had been a common practice. It came out recently when the PM cancelled ALL licenses doled out last year when the press realized and highlighted that almost all the licensees were relatives of local BJP strongmen

Overall I agree with what you say. Better not do it now. If they win they should do it in the next term..

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