Globally, the beneficial effect of privatisation on the economy has come to be widely appreciated now and the investors are eagerly looking forward to further privatisation in India. The recent Government announcement to sell strategic stakes in VSNL and CMC resulted in increase in the market capitalisation / value of the Government holdings in the listed PSEs by almost Rs. 4,000 cr. within a single day, which indicates that privatisation is not only being looked at favourably by the market but also that it is a very strong motivator for bringing in substantial resources to our country. Moreover, the removal of quantitative restrictions on imports, lowering of import tariffs and removal of restrictions of other kinds on global trade, services and capital, pursuant to our acceptance of the WTO regime and various economic reforms, have made it imperative that the public sector is privatised at the earliest, failing which it will soon fall sick and find it extremely difficult to survive in the new competitive environment.

Privatisation, in future, should be driven by the primary objectives of disinvestment, as mentioned earlier. To re-emphasise, the corner stone for privatisation should be the most efficient allocation of the scarce resources, both monetary and non-monetary, that meets the uppermost social objectives of the country. The highest concerns on the social priorities are basic health, family welfare, primary education, development of infrastructure and the retirement of public debt. The resources currently blocked in non-strategic PSEs, , should therefore, be released as soon as possible through sale of Government stake in such PSEs for redeployment in the above sectors. We should also ensure that there is no further flow of resources to these PSEs and no new PSEs are formed in non-strategic sectors. Our mission would, therefore, be to -

Obtain decision of Government on disinvestment / strategic sale in all non-strategic CPSEs in the next 3 - 4 years.

Complete such sales within the next five years, and wind up Department of Disinvestment.

All loss making non-strategic CPSEs to be financially restructured, if necessary, and privatised.

Even with financial restructuring package, if privatisation is not possible, such CPSEs, which are, prima-facie unviable and    should be closed, to prevent wastage of public funds in running / reviving such units.

It is often suggested that weak and sick PSEs should be privatised first, and the profit making PSEs need not be touched. However, the logic / rationale for privatising or not privatising a PSE is not based on whether it is making profit or loss but whether it is in a strategic sector or in a non-strategic sector, and whether the taxpayers' money can be saved from the commercial risks by transferring the risk to the private sector wherever the private sector is willing to step in and assume such risks.

The objective should be not to waste too much time over this but to privatise those PSEs first in the case of which this can be done with the least possible delay, since the opportunity cost of letting the resources remain locked up in PSEs is too high. However, broadly, the following criteria would be used for identifying the PSEs for disinvestment / privatisation:

PSEs in the sectors where adequate regulations and / or competition exist to take care of the monopoly and consumer interest     aspects;

The unviable PSEs whose continued existence is likely to cause a drain on exchequer;

The PSEs that are subject to intense competition or are likely to be exposed to competition because of the impending reforms.

PSEs providing services or goods, which, with the altered perceptions of the role of the State, are not the ones, that    Government need provide or manufacture.