IN FEBRUARY Narendra Modi’s administration has trumpeted a vast plan to privatize the gems of Indian business. Previous governments have made such promises with little effect. Yet this time the ears of investors have perked up. Covid-19 had emptied public coffers by crushing the private economy while piling costly burdens on the public sector. In Indian business circles, hope has faltered for an economic reset that could complete the intermittent liberalization project that began 30 years ago in response to another economic crisis.
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After months of silence, on August 23, Finance Minister Nirmala Sitharaman finally spoke. The goal, she said, was to raise $ 81 billion, or 3% of GDP, over four years. But rather than doing it through outright sales, transactions will be more complex and, therefore, less transformative. The Indian state will liquidate small minority stakes in a few airports. Other large assets are expected to be leased to investors for up to 25 years. “Monetizing basic infrastructure assets,” Ms. Sitharaman intoned, “does not mean selling the assets”.
Unceded assets include 42,300 km of power lines, 26,700 km of motorways, 8,200 km of gas pipelines, 400 stations, 150 trains, 160 mining projects, 25 airports and interests in nine ports. In this half-hearted divestment strategy, Mr. Modi appears to emulate India’s largest private conglomerate, Reliance Industries, which has sold minority stakes in various pieces of its empire such as mobile telecommunications and refining while retaining ultimate control over them.
This approach has its advantages. Investors get a stable yield similar to bonds in already operating entities (which takes the headache out of India’s confusing authorization process). The public has a chance to benefit from better services, as new operators improve efficiency and increase investment. In the past, the transfer of assets to private management helped to beautify the airports of Delhi and Mumbai.
Ms. Sitharaman’s announcement lacked an update on the fate of big business. Three divestments are said to be underway, involving the Shipping Corporation of India, Pawan Hans (a helicopter service) and Neelachal Ispat Nigam, a steelmaker. But the progress seems icy.
Most disappointing of all has been the government’s reluctance to follow through on its promise to sell top prizes, such as the Life Insurance Corporation of India (LIC), Air India (the flag bearer, also 100% state-owned), Bharat Petroleum (a listed but state-run oil and gas giant) and even some state-owned banks. The sale of these assets, which were nationalized after India’s independence in 1947, would have symbolic, not just financial, weight.
Observers attribute the lost momentum to three causes. First, the government still has uses for some of the businesses; LIC served as a source of bailout for struggling businesses. Second, corporate employees are a powerful group that resists change. Third, like bureaucrats around the world, Indians fear that a successful sale will spark endless inquiries as to whether the price is too low. For everyone involved, it’s safer to do nothing. ■
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This article appeared in the Business section of the print edition under the headline “Gone today, here tomorrow”