Think.Nxt With Raghav: How Privatising Our PSUs Can Revolutionise Indian Economy
Raghav Bahl argues that if our PSUs are privatised, India will have more resources to invest on development.
advertisement
In this episode of Think.Nxt Shorts, The Quint’s Editor-in-Chief Raghav Bahl has argued that if India’s Public Sector Undertakings (PSUs) were to be privatised, the country’s balance sheet can be revolutionised. He explained this hypothesis by illustrating the recent privatisation of Air India, as well as that of Maruti in 1981.
“The total market value of all public sector companies today listed on the Indian stock exchanges is about Rs 35 lakh crore. If these PSUs are privatised and they increase in value 10 times over 10 years, then the total value of these companies will go up to Rs 350 lakh crore. And the bulk of this value will accrue to the government if it holds on to its equity.”
Bahl placed this value in context of India’s current debt – nearly Rs 170 lakh crore – and asserted that if the PSUs were to be privatised, the government will have more resource to invest in the development of this country instead of “wasting its energy in running private companies.”
The Air India Story
Air India was launched in 1932 by JRD Tata and at the time was a sought-after brand in global aviation. It was nationalised by the government of India in 1953. Over the last 70 years, under government ownership, the brand deteriorated.
“It ran up losses and debt of about Rs 60,000 crore. Last year, it was losing up to Rs 20 crore every day. More than the losses, Air India had become a symbol of inefficiency in India, a symbol of everything that is economically wrong in India,” reasoned Bahl.
In 2022, after Air India was privatised, however, the brand gained global recognition once again. It was touted as a global champion by world leaders such as US President Joe Biden, French President Emmanuel Macron, UK Prime Minister Rishi Sunak and Indian PM Narendra Modi.
The reason behind this, as Bahl explained, was that after infusion of funds, Air India placed an order of 470 aircraft – 250 from the UK-French consortium company Airbus and 220 from Boeing from the US.
“Global leaders were celebrating the fact that Air India would create about a million jobs in their country. All this happened due to privatisation,” added Bahl.
The Maruti Suzuki Story
In 1981, Maruti was at the brink of bankruptcy and was valued at just Rs 77 crore. Suzuki, a Japanese company then bought a 26 percent stake in Maruti for Rs 20 crore.
“At that time, the government of India did not sell its entire stake in Maruti in one go, and instead sold it in about four tranches. In addition, it handed over management control to Suzuki. That was very unusual. Consequently, they made Rs 2,000 crore on an initial value of Rs 50 crore,” said Bahl.
This meant a 50-times increase in valuation.
The BALCO, Hindustan Zinc Story
In the year 2000, 51 percent of Bharat Aluminium Company Limited (BALCO) was sold for Rs 550 crore, i.e. a valuation of about Rs 1,100 crore.
In 2023, however, the company is valued at over Rs 8,000 crore – eight times its value before privatisation.
“Similarly, look at the story of Hindustan Zinc Limited, which was sold to Sterlite Industries for Rs 770 crore in the early 2000s. The value of the company today is Rs 1.35 lakh crore. It is truly spectacular,” remarked Bahl.
Moreover, the 26 percent stake that the government still owns in it is worth Rs 35,000 crore – an increase of over 100 times.
Other Success Stories
Other than the disinvestment of Air India, Bahl also spoke about the privatisation of BSNL, which is now known as Tata Communications, and shared other similar examples as well.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)