Jasleen Kaur | March 23, 2015
Finance minister Arun Jaitley has set a disinvestment target of '69,500 crore for 2015-16. Disinvestment secretary Aradhana Johri, the 1980-batch IAS officer from the Uttar Pradesh cadre, calls it an ambitious target. The disinvestment revenue in 2014-15 has been the highest so far, but Johri is confident of meeting the even higher target for the coming fiscal. In an interview with Jasleen Kaur, she says the department is changing its rules of doing business and working systematically to fast-track the disinvestment process. Excerpts:
2014-15 has not been good for disinvestment. How do you see the target for 2015-16?
It is certainly very ambitious and challenging. But we are gearing up for it. Between 2000 and 2014, the average was '9,500 crore. In 2014-15, it was '24,200 crore, the highest in any year. Like previous years, last year also we started late. But we are changing the way we do business. And we will not wait for the end of the year.
The past performances of various governments raise questions about the actual realisation of the target. How do you plan to achieve this?
Earlier, there used to be annual action plans, under which selective stocks were identified and approvals were sought one by one. A lot of time was used [wasted] in getting approvals, and there was the problem of flexibility. Also, every time a stock came up for sale, the market got to know about it and ended up hammering down the stock prices.
So, I have initiated a plan B for such a scenario. Using that, I was able to protect Coal India prices from being beaten down. Nobody knew we are going to divest. We were also able to protect the value of the stock. CIL was huge and the most challenging issue. This was equal to 22 issues.
In future, we will draw up a robust plan, which will give us a lot of scope to start early and spread the entire process across the [next] financial year.
There has been a lot of dependence on the LIC...
If the disinvestment is open to public and private players, then why should they not come in? If we can talk to investors abroad then why cannot we talk to the LIC? This criticism is totally unwarranted.
The LIC’s presence has never crowded out the private sector. Also, where is the depth in the market to do so much in a day? The LIC releases its stocks in the market slowly. It has a huge amount of money and can afford to invest for a long time.
We go all the way to the US, UK and Singapore to talk to investors. Then what is wrong in the public sector, which has the largest money bank, coming forward to invest?
PSU stocks are not considered as attractive as private stocks. How do you plan to resolve that?
There could be improvement in the efficiency of these companies and also how they market themselves. Public sector companies market themselves much less than the private sector. Why should PSUs talk to the market and investors only when stocks have to be sold? If they continuously talk about the good work they are doing then I would not have to do road shows and have stock prices beaten up. They should often talk to critical investors and show them the good work they are doing.
The government has also been criticised for offering minuscule discounts to retail participants for their lack of enthusiasm about the disinvestment process.
Before Coal India, I talked to several actors in the market and based on their suggestions we gave 4.5 percent discount. And I got my price right. People pulled out money from everywhere to put in CIL. The issue was subscribed 1.06 times – it was not an over-subscription which would have meant that the price was too low. The issue wasn’t under-subscribed either, which, if it had happened, would have meant that the price was too high. CIL has been a total trendsetter.
The secrecy maintained during CIL proved to be beneficial. Would you continue that with other stocks as well?
Nobody in the government – neither the minister nor the minister of state nor me – discusses with anyone which are the stocks to be sold. It is market-sensitive information. If the market gets to know beforehand [which company is to be divested], it will shoot down the price [of the stock]. And that is why we pulled out a whole lot of stocks. Nobody knows exactly which stock we are going to sell. The positives of this are that we have got a robust pipeline of about '30,000 crore. These issues are at various stages of approval, and there is certainly seamless transition.
Are there any constraints?
The constraints are three-fold. One big constraint is that we have no big stock like Coal India [as of now]. Managing a big stock has its own challenges but it also means that to reach Coal India we have to have 22 stocks. We have a lot of stocks in the pipeline, but the problem is, how fast is fast enough? Second constraint is the nature of stocks. Most of the stocks are metal stocks and globally they are down. Another 20-30 percent are oil stocks. With oil there is an issue of subsidy and this has to be addressed, because long-term investors want a roadmap. The government has to do that very quickly. So, before bringing ONGC, the government has to address the issue of subsidy and this cannot happen immediately. There is erosion of '160 in its value.
Even after that [the subsidy issue] is resolved, we will have to wait for the right time to divest. The third constraint is the depth of the market. [To resolve that] one of the segments that can be focused upon is the retail market. We definitely need big stocks and through SUUTI (Specified Undertaking of UTI) we expect at least '20,000 crore to come from this year onwards. There is no reason why the government should stay invested in these companies.
How do you plan to further involve retail investors?
People have money to invest in equities. But for that they need to have market knowledge and active demat accounts. We will have to equip them.
We can have some sort of scheme to train them, make them understand the market and to minimise risks. Merchant bankers say that there are around two crore Demat accounts, of which half are inactive.
Like we have a drive to open Jan Dhan accounts, we should open demat accounts in a similar manner. Also, Jan Dhan is a platform through which all transactions are being done, like insurance, subsidies, cash transfer, etc. A demat account can also be used as a platform for delivery to target segments. It will prove to be an incentive and people will actively use it.
Isn’t it a long-term plan? Do you really think people will buy this and invest?
We have to start somewhere. You have to create more knowledge and skills. If we can equip a person with skills to do carpentry or to operate a computer, why not equip them with a skill to understand the market and create wealth for them? As a result, their propensity and capacity to invest in the market will also increase.
(The interview appears in the March 16-31, 2015, issue)
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