If you can privatise the public sector,why cant you ‘privatise’ the private sector?At debates eve,the proposed disinvestment of equity in the public sector gather momentum,financial experts have come with another idea:sell all excess equity of private companies held by the institutions. An FI manager believes that the proposal makes sense even if the government seeks privatization on ideological grounds.”If the idea is to roll back the frontiers of government,what better way to start than by asking FIs to reduce their stranglehold over the private sector?”he asks.
ATTRACTIVE SHARES:Whatever be the present market price,the prices obtained by the FIs will be lower,once the disinvestment starts.However,many more analysis feel that shares of profit making private sector companies are so attractive that investors and NRIs would be willing to pay a very high price for them.Thus,even if the nine Tata Groups shares are offloaded at half the present market rates,the government can still raise upwards of Rs. 1000 crore,no small change by any yard-stick.And there are many more private sector companies-more than 250 infact where excess equity could be offloaded gradually.
The other problem with this proposal is that FIs will lose that part of their portfolio quoting the maximum premium and take a severe beating on the net asset value of their holdings. Another problem with the FIs disinvesting private equity is how the proceeds will find their way into the goverment’s books as receipts in order to reduce the budgetary deficit-Private placements with FIs by public sector companies offering attractive returns?This is suspiciously close to the original idea itself issuing public sector shares to FIs.