Rob Peter To Pay Peter

PSUs were assiduously built from the blood and sweat of the taxpayers. Their sales were controversial and scandalous. Some were sold to other PSUs at high prices, they were purchased by private players at ridiculous prices, and the government used the proceeds largely to lower its looming fiscal deficits

- Alam Srinivas

FOR the past three decades, it proved to be the dreaded ‘D’ word. Disinvestment ensured that the cash-rich public sector undertakings (PSUs) remained the milking cows for the political elite, either directly or indirectly. Earlier, they were inefficient because their earnings were religiously siphoned off by politicians, civil servants, senior managers of the companies, and private contractors. Post-privatization, they were used to cook the government’s books, and to further crony capitalism. Thus, the PSUs remained the sacred placed where the powers-that-be offered prayers of corruption, and receive illegitimate blessings.

Critics said that the country’s ‘Crown Jewels’ and ‘Family Silver’ were sold either for pennies, or at high prices, depending on who they were sold to. The former was the case if the buyer was a private business person, and the latter when PSUs were sold to other PSUs. When the governments forced profitable state-owned entities to use their bulging cash reserves to buy the shares in other similar companies, it was a clear case ‘Rob Peter to Pay Peter’. That is, only the shares changed hands, and the money was transferred from one pocket, the buyer PSU, to the other one, government exchequer.

The proceeds were used to finance, or manage, the growing fiscal deficits, which were the result of governments’ profligacy. They were also used in meaningless acts of throwing money to ‘buy’ vote banks through welfare schemes, like subsidized housing, electricity, food, and fuel, and other freebies like loan waivers, which themselves became sources of corruption. Hence, disinvestment, whose ostensible aim was to make the PSUs more efficient, and whose underlying objective was to raise money to fund large infrastructure projects to fuel growth, became a source of colossal wastage.