Be the first to like this
Government mulls 'creeping disinvestment'
The Union finance ministry is examining a proposal that seeks to dilute the government’s stake in all listed public sector undertakings to at least 90 per cent.
Our view is that ownership impacts the monitoring behavior of the firm. By its very nature public sector ownership is more widely distributed than a private firm’s. Since there is no way for any single owner to sell (alienate) his or her share of the public sector, public owners stand to gain or lose less from firm performance than do private owners, who can sell their shares. These two factors combine to produce sub-optimal levels of monitoring in the public sector. Thus, diluting just 10 percent will still leave ownership very diffused and will not have a positive impact on monitoring and hence performance. In the absence of a majority stake shake out this is just an exercise to raise revenues with little impact on efficiency.
Centre to set up regulatory body for the coal sector
The Centre has initiated work on setting up a regulatory body for the coal sector for the creation of a competitive coal market for user industries.
Our view is that proliferation of regulatory bodies is just a mechanism by the State to create sinecures for its retiring bureaucrats. In the absence of any serious debate on a coherent framework for regulation, regulatory authorities have mushroomed in an ad-hoc fashion without any clear mandate based on principles. For instance, with separate regulators for electricity, petrol and gas and now the proposed coal regulator indicates the either a lack of a clear understanding or cynicism regarding the role of these important institutions in a market economy. Going forward a consolidating legislation will be required to set up more efficient multi-sector regulators. This would eliminate proliferation of regulatory commissions, economise on scarce domain knowledge and most importantly reduce capture by parent ministries.
RIL fails to find enough takers for KG gas
RIL is running its production unit under its capacity as many consumers are not using allocated quota.
Our view as has been noted earlier is that the government should do away with national allocation priorities and quotas (as was indeed the original reforms mandate under NELP). It is ironical that India has plenty of this natural resource but myopic policy has made a mess of its utilization. The allocation mechanism has killed the market for gas even before it could take off. The gas allocation policy is predicated on a completely faulty price-fixation policy. An open bidding process, a cost-plus method or an indexation to oil prices would have been a better way for price discovery in this crucial sector. Is the policy protecting the producer?