Need to Maximise valuations just selling off loss making PSU s not the answer
In
pre-budget parleys with Centre, party offers suggestions on boosting valuation
Improved corporate governance, restraint in setting out targets
and monetization of assets are some of the suggestions from the BJF to the
government to improve valuation of the PSUs as part of a better divestment policy.
The ruling party also believes that disinvestment of the LIC is not advisable.
Talking to BusinessLine, the BJP's economic affairs spokesperson, Gopal Krishna Agarwal, said concerns and solutions about continued low valuation
of the PSUs have been conveyed to the government in the post-pandemic resource
crunch. the focus on middle class will not exactly result in direct tax
concessions. It believes tax incentives to boost consumption is a better idea.
"How does one generate resources when fiscal deficit is
already quite high and the borrowings have also gone up? The only alternative
for resource generation is divestment. The issue is, even when the capital
market is booming to almost record highs, the PSUs are still not getting proper
valuation. We believe large-scale tweaking is required. The Government has to
look into the reasons," Agarwal said
Lessons
learnt
Citing the instance of Hindustan Zinc Ltd (H21), where the
valuation went up post-divestment, Agarwal said corporate governance needs
to be factored into any future policy regarding divestment.
"One of the important suggestions from the capital market is
corporate gov ernance. Also, we believe that the idea of the Government
clearly setting out targets is also counter-productive. People know that
this is coming for sale ,and there is a supply overhang. Monetization of assets
is also critical," he said.
Policy
for strategic sale
According to Agarwal, an overarching policy is required for
strategic sale and maximising valuation. He said simply selling off loss-making
PSUs is not a good option. He also categorically said that the party is not in
favour of selling LIC.
"Five or six years
back, perhaps Air India was getting a good price and attracting buyers. Now
with a liability of 160,000 crore, who will buy it? We should not always think
of offloading a loss-making company. A strategy is required. We have to learn
from examples such as HZL, where the valuation went up because of corporate
governance. In case of LIC, we do not believe it should be disinvested. LIC Is
a holding company," he said. He said while focusing on giving incentives
to middle class, the suggestion is not to give any reduction in taxes.
"We have not suggested any reduction in taxes because already taxation limits for corporates and individuals has been brought down. Relaxation in saving limits is an option as is tax incentives to boost consumption,
Gopal
Krishna Agarwal, BJP's spokesperson Economic Affairs
