The Unreliable Promoter

While the government is happy to sell shares of its companies in the public market to raise money when required, it has nothing but rank disrespect for the rights of other shareholders. For decades, it has run roughshod over them in listed PSUs

- UDAYAN MUKHERJEE

EVERY YEAR, the Finance Minister lays out an annual target for receipts from divestment of PSU shares, a number missed by a wide margin by the end of year, nearly every time. This is regardless of market conditions, buoyant or sluggish. Among many contributing factors, a paramount one is that most investors, and indeed businessmen, regard the Government of India (GoI) as an unreliable promoter, capable of utterly capricious behaviour to the detriment of minority shareholders. In this, the GoI has been remarkably consistent, regardless of which dispensation is in power. It is this tendency that has resulted in the sustained underperformance of PSU stocks over the decades and made global and local businessmen wary of buying state-owned assets.

The latest, and glaring, example of this is the ongoing saga of fuel prices and the proposed disinvestment of BPCL. Global crude prices have shot through the roof in response to the crisis in Ukraine, yet retail prices of fuel had not been raised since November 2021, till recently. State-owned oil companies have bled billions in this period and some private oil retailers were on the verge of shutting shop. When asked why prices had not been raised, the Finance Minister scoffs at the question saying she couldn’t possibly think only about the fate of BPCL or oil marketing companies while deciding on such matters, having loftier issues such as inflation to keep in mind. This churlish response was both surprising—as it was her predecessor Arun Jaitley who had announced the deregulation of diesel prices to rapturous applause from the business community in October 2014—and disingenuous, as the real reason is obviously the key state elections which held the government back from raising fuel prices.