THE THIRD WAY OUT OF THE THIRD WORLD:

Privatization is right back on track in India: Good news for local and foreign investors: divestment has made a comeback on the government's agenda, though in a different form. In its new avatar, public sector units will be privatized, but the government will retain control of the profit-making ones. (Indrajit Basu, 11/20/04, Asia Times)

Local and foreign institutional investors (FIIs) who thought divestment of India's state-owned units was dead and buried under the newly elected Congress-led United Progressive Alliance (UPA) government can take heart. The much-touted divestment plan is very much alive and kicking on the government's agenda.

Finance Minister P Chidambaram said on Wednesday that he plans to raise more than US$33 billion in the next five years from the sale of minority holdings in profit-making government-owned enterprises. He also announced setting up of a new body called the Empowered Group of Ministers (EGM) to identify the public-sector units (PSUs) that can be taken to the market, and to decide on the pricing of the shares and the quantum of the stake to be offloaded.

Succumbing to the pressure of its leftist-party allies, who insist that profitable state units remain under government control, the UPA government, soon after it assumed power in May, had shunted the previous government's "strategic sale" plans by which it had planned to raise more than $22 billion a year for the next five years. To appease the intensely privatization-averse leftist allies, Chidambaram, while assuming his new job, quipped that he wanted "to be an investment minister, not a disinvestment minister". In a loaded gesture, he also dismantled the previous government's divestment panel, called the Cabinet Committee on Disinvestment.

But encouraged by its recent victory in state elections in the western province of Maharashtra, and confronted with a funds crunch that threatens to stall its ambitious expenditure plans, the UPA is now crafting its own divestment plan that actually brings the old process back on track, but in a new mold.