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New Government Slows Privatization
Kumar Amitav Chaliha
(KWR) India’s new Congress Party-led government says
it is scrapping the country’s privatization ministry
and plans to retain control of the country’s leading
state-owned companies, including several large oil firms.
Announcing the government’s new economic policy program, Prime Minister
Manmohan Singh said that the Ministry of Disinvestment, which handled state
company sell-offs, was being abolished, with functions taken over by the
He added that the top nine state companies — including Indian Oil
Corp. (IOC), Oil and Natural Gas Corp. (ONGC), Hindustan Petroleum and
Bharat Petroleum — would remain in government hands. However, later
comments suggested that the sale of minority stakes has not been ruled
The planned privatization of Hindustan and Bharat was blocked by legal
challenges last year, but the former government proceeded with other sales
of stakes in energy companies in March. These included the $2.3 billion
sale of shares in upstream producer ONGC.The Congress-led alliance is relying
on leftist allies to form a government. India’s largest communist
party had described the disinvestment ministry as “unnecessary” and
said that it would oppose the sale of profit-making firms.
The common minimum program, the new government's roadmap to economic and
social policies in the next five years, emphasizes a review of the reformist
Electricity Act passed by the previous government and calls for delay in
the restructuring of state electricity boards. It does, however, offers
the private sector a role in power generation and distribution.
The ruling coalition also said that it plans to retain majority control
of state-run banks, continue with food and fertilizer subsidies, and promote
foreign investment to help create jobs.
The government has agreed to pursue reforms in a bid to place the economy
on a 7%-8% growth rate, according to the common minimum program document. “Generally,
profit-making companies will not be privatized,” the policy document
said. Singh, however, said there was no bar on even profitable state firms
selling minority stakes. “We have to distinguish between privatization
and disinvestment,” he told reporters after the policy announcement.
Initial market concerns about the change of government have eased since
it became clear that the new coalition, while slowing privatization, would
adhere to economic reforms.