The Government of India’s one step forward-two steps backward approach on disinvestment might appear baffling to a keen observer of privatization in India, against the grim backdrop that more than half of the PSUs’ balance sheets are splashed in red. The latest CAG Report 2003-04 on PSUs’ health paints a gloomy picture. As per the report, out of 384 central government PSUs, as on March 2003-04, only 156 PSUs could earn profits. And of them, 42 PSUs accounted for over 80% of the total profits earned. That clearly reflects the ground reality about the financial health of the Public Sector Enterprises (PSEs) in the country.

So far, the government has divested 48 PSUs and has realized a sum of Rs. 45,066 cr against the targeted receipt of Rs. 91,500 cr. However, now the government appears to be taking a different approach. Budget 2005- 06 does not fix any target for realization from the stake sale. Also, the government is mooting equity infusion as well as the IPO route for PSUs to raise capital. This raises the question—why does the government want to go slow on privatization? What would it mean for the PSUs?

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