Tuesday, June 08, 2004

A Loss-Making Venture : OutLookIndia.com

I can't help but agree on the point that the current government seems to be making with regard to the dis-investment of profit making PSU's. It somehow puzzles me that stock markets and other watchers of the Indian economy react as though the entire house has come falling down when an announcement on dis-investment has been made.

I am no economist and perhaps I am naive about the subject. But common sense tells me that the need for profit making companies to be sold in order to "reduce the burden to the central exchequer" is complete nonsense.

Rather than selling these organizations and pro-liberal folks will be quick to jump on the fact that although these companies make profits, they suffer from so many problems ranging from internal power struggles, bloated work forces etc.

Strategies could be easily be put in place in order to trim down the work force (VRS schemes are surely a way out for such companies that have pretty strong cash reserves) and induce new efficiencies (adotping newer technology etc). I agree that there is a need for dis-investment in most PSU's.

Dis-investement alone isnt going to reduce the fiscal deficit or bring about more fiscal disciple. It is going to take something more than that in order to get out of the current state of mess as far as government finances are concerned. A more efficient tax policy (on the lines of the Kelkar committee recommendations - But hey dont tax NRI's- cos I happen to be one..grin) that allows the government to significantly boraden the tax payer base (both corporate and individuals), coupled with a comprehensive VAT based tax structure (as Mr. PC put it) could be a step in the right direction.

( Although totally unrelated to this topic...I cant help but laugh at the concept of free power to farmers. Here we are struggling to met our ever growing power needs, and how does the Congress get power in AP? By giving free power to farmers of course! (Do some of the ministers or babus in our governments know how power is even generated? Or how much power a normal water pump consumes?). Bottom line: Help the needy but dont make them over dependent on subsidies. More rants and raves on this sometime later)

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