We should not forget the equity dimension of PSU privatization

Context: The government must rework its privatization processes and take the interests of all stakeholders into account if its big plan is to succeed

Critical Challenges in Privatization of the Public Sector Units (PSUs):

• Process: Absence of administrative set up to carry out corporate mergers and acquisition's role.
  • • Good civil servants hesitate for fear of a career- or retirement-ruining scandal.
    • Outsourcing the job to private business opens up a conflict of interest issues
• Equity: deciding the distribution of the disinvestment proceeds requires intense stakeholders mapping, which is marred by a risk due to the absence of legislative safeguards.
  • Recall that the National Investment Fund (NIF), set up in 2005 with similar intent, saw a withdrawal in 2009.
  • Privatization may also lead to loss of employment and entitlement of reservations

Way Forward:

• Robust administration: Create a special purpose department, hybrid of government and private, to oversee government's role as an investment banker.
  • Having political sponsorship, administrative clout, professional talent, incentives for transparency, rewards for performance, and insulation from scandal.
• Stakeholder mapping:
  • Proceeds to go into long term physical and human infrastructure investments like in water and sanitation, education, healthcare, infrastructure up-gradation etc.
  • Job loss can be tackled through privatization agreement and reservations with political engagements. (e.g. promoting Dalit Entrepreneurship)
  • Putting part of the proceeds in the retirement accounts and pensions of our oldest taxpayers, as a way to compensate them for the sacrifices they made to finance the socialist state.
  • Bring in legislative safeguards to ensure these promises are not violated in future.