Explain various challenges to disinvestment programme
Answers
Answer:
Explanation:
India needs to prepare its markets and prepare the companies for disinvestment first. For the latter to happen, it remains necessary to work on structural changes in how public sector companies are managed. Above all, public sector companies must be freed of the all-encompassing control of their nodal ministries. Over and over again, it is clear that politicians and bureaucrats in the ministry see their local public sector undertakings as a source of patronage and of perquisites. Unless this relationship is severed, the chances for good corporate governance in the public sector remain slim. The public sector's bloated workforce, too, must be trimmed - if necessary, by paying people to sit at home for a few years - so that the companies' balance sheets look more attractive.
There are other ways to discipline companies, too. One is to just open up the relevant sectors to private competition. Air India will not survive competition unless it cleans up its act. The big public telephone utilities are at a reform-or-perish stage, thanks to the presence of private competition. As for state-controlled banks, the problems there are even greater. After all, they have demonstrated that, unlike their private counterparts, they are unable to judge loan risk properly. Now, they need to be recapitalised twice over - once to satisfy Basel III norms, and once because they are struggling with bad loans. This will cost an enormous amount of money. Perhaps the banks must just shut down further lending; or some of them should be mashed together and sold.