07-07-2006, 12:13 AM
<!--emo&:argue--><img src='style_emoticons/<#EMO_DIR#>/argue.gif' border='0' style='vertical-align:middle' alt='argue.gif' /><!--endemo--> Govt calls off NLC disinvestment
- Rahul Srivastava/Sandeep Phukan/Sunil Prabhu/A Vaidynathan
Thursday, July 6, 2006 (New Delhi):
It's political blackmail of the darkest kind. Tamil Nadu CM M Karunanidhi warned the Prime Minister that if the government sold the 10 per cent stake in TN based Neyveli Lignite Corporation, then southern parties like the DMK will withdraw support from the UPA government.
"When the Union Government is not in a position to accept the demand of the NLC workers, the DMK is thinking whether to continue in the Union government and be a party to the decision of the Union Government.
"I have instructed our Union Ministers to inform this stand to the Prime Minister," said Karunanidhi.
The blackmail worked. By Thursday afternoon, the PM had announced that all disinvestment will be temporarily put on hold. But what does this mean for the government's revenues?
The government was hoping to rake in about Rs 2500 crore from the disinvestment of its 10 per cent stake in both Neyveli and Nalco.
It was hoping to make another Rs 7000 crore from selling its 10 per cent stake in Power Finance Corporation and 15 per cent in NMDC.
After today's developments the government stands to lose around Rs 9500 crore from disinvestments.
Revenue target unaffected
Sensing political opposition to disinvestment, the finance minister has cleverly not included revenue from disinvestment in the budget.
That means even if these disinvestments do not go through the government's revenue projections will not be affected.
But more than just the money that the government will lose out on, it sends out a wrong signal to the investing community that reforms are not on track.
"The reforms process will continue to be on the fox trot mode, going backward more than forward. I think the smallest of the pressures can really make the government succumb and even withdraw crumbs of the reform process. It's a very bad move," said K Ramachandran, Head-Advisory Desk, BNP Paribas.
Minister for communications and IT Dayanidhi Maran said while the DMK was happy with the decision to put the NLC divestment on hold, it wants the government to give up NLC divestment altogether.
"Of course we are part of UPA government but we want to ensure peace in Tamil Nadu," said Maran.
The DMK has six ministers in the UPA government and 16 members in Parliament's Lower House.
Left stand
While the Left supported the DMK's demands and was happy that NALCO's disinvestment plans had also been put on hold, it seemed to have seen through DMK's game.
"Of course these are arm twisting tactics, but it's good for the country," said CPM leader Sitaram Yechury.
The BJP, on the other hand, said the PM had given in to the DMK's threats. BJP leader Arun Jaitley criticised the PM for caving under pressure.
The Congress, of course, said it had no choice. "This is coalition dharma. But it does not mean we are against disinvestment," said Abhishek Singvi, Congress spokesperson.
This decision of the government to put on hold the disinvestment plans is a setback for the social sector, as the money from the disinvestment was supposed to be used for social programmes of the Centre.
It's also a huge setback for the ideology of disinvestment. This once again exposes the frailties of running a coalition formation.
From the finance ministry's perspective, it's perhaps time that it found out alternative areas of revenue generation which are less politically sensitive.
- Rahul Srivastava/Sandeep Phukan/Sunil Prabhu/A Vaidynathan
Thursday, July 6, 2006 (New Delhi):
It's political blackmail of the darkest kind. Tamil Nadu CM M Karunanidhi warned the Prime Minister that if the government sold the 10 per cent stake in TN based Neyveli Lignite Corporation, then southern parties like the DMK will withdraw support from the UPA government.
"When the Union Government is not in a position to accept the demand of the NLC workers, the DMK is thinking whether to continue in the Union government and be a party to the decision of the Union Government.
"I have instructed our Union Ministers to inform this stand to the Prime Minister," said Karunanidhi.
The blackmail worked. By Thursday afternoon, the PM had announced that all disinvestment will be temporarily put on hold. But what does this mean for the government's revenues?
The government was hoping to rake in about Rs 2500 crore from the disinvestment of its 10 per cent stake in both Neyveli and Nalco.
It was hoping to make another Rs 7000 crore from selling its 10 per cent stake in Power Finance Corporation and 15 per cent in NMDC.
After today's developments the government stands to lose around Rs 9500 crore from disinvestments.
Revenue target unaffected
Sensing political opposition to disinvestment, the finance minister has cleverly not included revenue from disinvestment in the budget.
That means even if these disinvestments do not go through the government's revenue projections will not be affected.
But more than just the money that the government will lose out on, it sends out a wrong signal to the investing community that reforms are not on track.
"The reforms process will continue to be on the fox trot mode, going backward more than forward. I think the smallest of the pressures can really make the government succumb and even withdraw crumbs of the reform process. It's a very bad move," said K Ramachandran, Head-Advisory Desk, BNP Paribas.
Minister for communications and IT Dayanidhi Maran said while the DMK was happy with the decision to put the NLC divestment on hold, it wants the government to give up NLC divestment altogether.
"Of course we are part of UPA government but we want to ensure peace in Tamil Nadu," said Maran.
The DMK has six ministers in the UPA government and 16 members in Parliament's Lower House.
Left stand
While the Left supported the DMK's demands and was happy that NALCO's disinvestment plans had also been put on hold, it seemed to have seen through DMK's game.
"Of course these are arm twisting tactics, but it's good for the country," said CPM leader Sitaram Yechury.
The BJP, on the other hand, said the PM had given in to the DMK's threats. BJP leader Arun Jaitley criticised the PM for caving under pressure.
The Congress, of course, said it had no choice. "This is coalition dharma. But it does not mean we are against disinvestment," said Abhishek Singvi, Congress spokesperson.
This decision of the government to put on hold the disinvestment plans is a setback for the social sector, as the money from the disinvestment was supposed to be used for social programmes of the Centre.
It's also a huge setback for the ideology of disinvestment. This once again exposes the frailties of running a coalition formation.
From the finance ministry's perspective, it's perhaps time that it found out alternative areas of revenue generation which are less politically sensitive.