India Wants to Move With Caution on Privatization

By Narayanan Madhavan

NEW DELHI: Finance Minister P Chidambaram pledged that India would continue its program of partial privatization but cautioned that the pace could not be stepped up too quickly, March 7.

Chidambaram told an international business conference in the Indian capital that a Disinvestment Commission appointed by the government to recommend steps towards privatization had promised to record suggestions every month.

"The commission has promised one report every month," Chidambaram said. The panel set up last year submitted its first report in February.

Privatization efforts cannot be pushed recklessly, Chidambaram said, in an apparent reference to resistance from leftist groups and trade unions to India's efforts to sell off stakes in state-owned companies.

"Disinvestment is a very sensitive issue," Chidambaram said. "We don't want to hustle the process."

India began selling partial government stakes in state companies under an economic reform program launched in 1991. Chidambaram said the government had decided not to disinvest stakes at all in firms involved in strategic areas such as atomic energy and space research, and sell up to 49 percent of firms in core sector areas like infrastructure.

In other areas, the government had decided to consider selling up to 74 percent of its stakes, losing its majority control, but planned to hold the remaining 26 percent as a "golden share" to retain influence, Chidambaram said.

The government had last year referred 40 firms to the Disinvestment Commission which recommended in its first report steps to sell stakes in three of them, Modern Food Industries, the India Tourism Development Corporation (ITDC) and the Gas Authority of India Ltd (GAIL).

India's partial privatization program suffered in the current 1996/97 fiscal year due to poor market conditions. The government expects to raise only 5.00 billion rupees ($140 million) in the year, against a target of 50 billion rupees.

In 1997/98, the government has set for itself a target to raise 48 billion rupees from selling stakes in state firms. (Reuter)

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