Tuesday, October 31, 2006

Supreme Court clears hotel sell-off

The Indian Supreme Court has cleared the sale of Agra Ashoka hotel by the previous NDA Government as part of its dis-investment plans. The Govt had declared as part of its dis-investment policy that non-core holdings should be sold to strategic bidders to raise revenue. In addition, it was a policy decision that the Govt had no business to be in such sectors such as hotels, the running of which is best left to the private sector.

This was a welcome move. With the policy allowing sale to a strategic investor being cleared by the cabinet, the Govt earned large sums of money from the premium that the bidder was willing to pay and these companies were also able to recognize their true potential under private ownership. The Govt would also not be required anymore to sink public funds into these financial black holes to keep them up and working.

It was also a recognition of the fact that the Government is woefully inept in running businesses. There is too much of nepotism, waste and policies of patronage when the Govt gets into the running of businesses. The Govt had been steadily running the hotels into the ground with acute losses. Appointing a Govt official to run an industry for which he has no knowledge is seldom a wise policy. In addition, there are numerous other examples of why the Govt should not be in the nature of running non-core areas. Indian Airlines and Air India have been propped up in the past numerous times with massive loans. BSNL and MTNL were big uncaring monsters with extremely shoddy service levels until competition forced them to behave better. Who among us has not faced the uncaring face of some babu in some Govt office or some PSU. Why would you think that a person like this would do anything to make the PSU much better ?
But now this entire disinvestment policy has hit a dead end. On the one hand, a lot of politicians do not want further privatization since they fear that their ability to provide patronage to their own people will reduce, and then we have the fossil birds of the left parties continuing to drum beat their discredited policies, uncaring about the effects of their opposition. Their policies hit the worker class the most, the ones about whom they profess to care the most. With companies typically doing better in private hands, workers will also stand to do better in private companies, with better skills, and the ability to earn more if the company does well. In states where they actually have to face the people, they realize the benefits of privatization, and hence the West Bengal chief minister is a good example of a practical man doing what is good for his state, as opposed to the central communist leadership worshipping their false ideals.

The Govt is typically well-suited to act as a facilitator and a regulator, with active ownership in some core areas such as national security, law and order, social services, etc. But not in areas that can be done much better by the private sector, with the maximum benefit reaching the consumers.

If you like these writings, you can subscribe to this feed to get new postsSite Feed Site Feed

posted by Ashish Agarwal @ 9:33 PM