PSU Privatization / Strategic Disinvestment

[Kakkaji]

In the US, one can buy t-bills and treasury bonds from your investment broker company. For example, say you have an account on Fidelity. You also get a schedule of when the bonds are getting sold at what maturity. But you would not know the coupon rate (AP yield). Fidelity bids for a large chunk at certain coupon rate (depending on the fed rate). Then individuals with a Fidelity account can request for however many bonds at that rate in units $1000/unit. You might get or you might not get depending on whether Fidelity was able to obtain the bonds. If fidelity gets only a part of what they asked for, then they will prioritize among their individuals depending on how much money they have in Fidelity funds, I suppose. It is all quite transparent and can be done online at Fidelity's website.

Can something equivalent be implemented for sale PSU shares?

VT ji

Thanks for your reply.

IMHO it is possible to do something like what you have suggested.

Perhaps the Govt can bundle all the shares it wants to sell in different PSUs this year and create a new security out of it, which it can offer for bidding by the institutional investors. I think there will be good demand for these by both domestic and foreign institutional investors like mutual funds.

I don't know feasible it is administratively by the Govt machinery. Suraj San will know better about that.

[Kakkaji]

...

Suraj San:

Thank you very much for your detailed reply.

Sir, I am not at all upset that I did not get a reply from the PMO to my message. I was not expecting any. I knew it was a one in a million chance of anyone in the PMO will respond to my message. Still, I sent it because I am frustrated with the situation about PSU disinvestments. We all know that India needs the Government to spend huge amounts on infrastructure, defence, and other areas for development. Mostly, these funds will have to be borrowed. On the other hand, there are lakhs of crores of public funds that are tied up in the PSUs. Sale of Government equity in the PSUs would provide the much-needed capital, without increasing Government borrowing. That is why I thought that if these shares can be sold gradually but steadily, in a transparent way, it would avoid controversies and get the job done.

As you have pointed out, there are political and bureaucratic/ administrative hurdles because of which my simplistic solution may not be practical. Yet my desire, that disinvestment in PSUs be speeded up, if fulfilled, will do a lot of good for the Indian economy.

My purpose for posting these thoughts on this moribund thread on BRF was to catch the attention of you and other BRF economics gurus so that we can discuss this issue and come up with some practical solutions that we can suggest in the appropriate way to the powers that be.

I am just an ordinary person and not a Guru. I also do not have much knowledge of how the Government works, nor do I have any contacts among the powers that be. But I can do the research if you guide me, since I am now retired and have time on my hands.

By the way, there are only 2 items on my wish list from the Government of India:
1. Speed up disinvestment in PSUs, and
2. Speed up arms procurement (from indigenous sources wherever possible)

Any गिलहरी प्रयास that I can do towards achieving the above 2 wishes, I am willing to do.

JMT

Thanks

[Vayutuvan]

@Kakkaji ji,

Thanks for your efforts. As @suraj ji said, it does take a lot of work to change anything or start a new project. Even with high level contacts, it is quite difficult to penetrate all the way to PMO and get your views heard. One thing to remember. The first question they will ask is whether your plan is going create jobs at a large scale or destroy jobs. Mostly they want jobs at lower levels, not high level R&D. By definition, R&D and hightech doesn't create the kind of jobs India needs.

On a different note, you are not participating in Math thread anymore. I hope you can spare some time for that thread. Pranam.

[Amber G.]

Paging Suraj San and other ECON Gurus on BRF:

I wish to share my thoughts and seek your opinion on an issue that has been bothering me very much lately, i.e., the glacial pace of disinvestment in public sector companies by the GoI...

Not a ECON guru but read your post..

From what I understand - Interesting idea — applying “rupee cost averaging” to PSU disinvestment is a creative way to deal with transparency concerns and market-timing pitfalls. The main challenges I see are liquidity (daily sales might depress prices in thinner PSUs), and the fact that big investors usually prefer block deals over small lots. Perhaps a pilot with a few large, liquid PSUs — at a weekly or monthly frequency instead of daily — could test the concept, while also recognizing that the bigger roadblock remains political will rather than market mechanics.

Anyway not much in subject of you post but a few comments which may be helpful:

Reaching the PM’s office directly is extremely difficult (unsurprisingly, given the volume they get), but there are some practical routes that have worked for people like me ( academics, ordinary citizens etc).

- Official Channels

** PMO Public Grievance Portal (PG Portal) (https://pgportal.gov.in)

This is the most direct online system to submit suggestions/complaints. Submissions get a tracking number and are routed to the concerned ministry.
(For disinvestment, it will likely go to Department of Investment & Public Asset Management (DIPAM))

** PMO Email (Email: [email protected] (often read by staffers).
-Letters are sorted by relevance; policy suggestions are usually marked to relevant ministries.

** MyGov Platform (https://www.mygov.in)

Sometimes the government runs structured “consultations” on reforms. Posting there increases the odds of visibility.

( Indirect but Higher-Impact Routes):

- Engage DIPAM directly

DIPAM is the nodal body for disinvestment. Reaching out to the Secretary (via official website or through LinkedIn/email) could be more effective than going straight to PMO.

Use Policy Forums

NITI Aayog, ICRIER, ORF, or CII/FICCI forums sometimes channel proposals into government pipelines. A paper or brief presented there gets more traction than an unsolicited letter. (Having contacts helps)

Media / Op-eds

- A well-argued op-ed in known paper will likely get picked up by policymakers. PMO staff do track such discussions.

- Parliamentary Standing Committees
(MPs on the finance/economy committees are often more accessible, and they feed inputs into government deliberations)

My Practical Advice -

If your goal is policy consideration, go via DIPAM + media/think tanks.

If your goal is visibility to the PMO, use PG Portal + MyGov, then amplify through LinkedIn/Twitter tagging relevant ministers (e.g., Nirmala Sitharaman, Piyush Goyal).

- A short policy note (2 pages max) framed as “Actionable Recommendations” .

( May be condense your disinvestment proposal into a crisp 1–2 page policy brief formatted the way ministries usually expect)

[Kakkaji]

Thanks for the comments above, and sorry for my late reply.

VT ji

My brains are now old and fossilized, so I can’t keep up any more with the with the high fundas in the Maths thread.

My suggestion for speeding up disinvestment in PSUs will free up a lot of funds for the Government which, if invested in pending infrastructure projects, will immediately create a large number of jobs at the lower levels.

Amber G. ji:

Thanks for your detailed message and the information you provided.

I get your point about selling in daily lots being too cumbersome. In that case, the Government may sell weekly or monthly lots, whatever is convenient. What is important is that the date of sale and the number of shares to be sold must be announced in advance, for the entire year, to ensure transparency.

I like your idea of starting with a pilot with a few large, liquid PSUs.

I will follow your suggestion about contacting the Government through various channels. In this regard, please note that I had earlier sent an email to Dr. Sanjeev Sanyal, but did not get a reply.

Also, Suraj San had earlier raised a point about the overhang of Government sales affecting the price of shares in the market. IMHO that will concern mainly the trader types. PSU shares should be more attractive for the long-term “buy and hold” types, for whom the short-term fluctuations do not matter. Most PSUs pay good dividends, which should make them attractive for Senior Citizens and Pension Funds. So, I think that market prices will settle down after a short period of fluctuations as the traders give these shares a pass, and long-term investors (including foreign investors) pick them up.

Thanks