Even to those initiated in the intricacies of the ideology of privatisation, the proposal sounded peculiar. Clearly what was being privatised at the end of this process was not the NHPC but a segment of the NTPC. If that be the case, the government could have chosen to offload a part of its shareholding in the latter corporation to directly obtain the Rs. 4,500 crore, so that a truncated NTPC is not left burdened with NHPC's less profitable assets.
 
This suggests that the government is seeking to achieve two objectives at one go. The first, to use the words of Finance Minister Yashwant Sinha, is to treat the NTPC as a "big ticket item", which could immediately yield large revenues from equity sale to solve the problem of this year's burgeoning fiscal deficit. The second is to transfer that money to the government through the devious route of NHPC acquisition so that the returns on the assets remaining with the NTPC could cover the deficit in the NHPC's accounts and reduce the government's future budgetary burden.
 
Needless to say this amounts to a strategy of virtually killing one of the "Navratnas" in the public sector, to meet the immediate "revenue" needs of a cash-strapped government. It is virtually forcing one of the better performers in the public sector to resort to a strategic sale of some of its best assets in order buy up poorly performing public sector units. This would only render the public sector even more of a burden on the exchequer.
 
In fact, it has been reported that as a quid pro quo for the NHPC buy-out deal, the government has promised to cap dividend payments by the NTPC as well as leave the Navratna status of the corporation untouched even if it contracts debts that have to be guaranteed by the government, such as multilateral loans. That debt is seen as an important way of keeping the NTPC afloat is reflected in Kumaramangalam's statement that the buy-out of NHPC by increasing the asset base of the corporation would increase its leverage in the financial market. Put simply, the strategy appears to be one of reducing the fiscal deficit in the central budget by substituting government debt with public sector debt.
 
Secondly, given the cash-crunch the devious buy-back and equity cross-holding schemes are to continue. According to reports, the government is expecting to garner Rs. 500 crore from a buy-back of government equity by the Rural Electrification Corporation and the Power Finance Corporation. This would imply that in the long run, the returns which the government gets in the form of dividends from profitable public enterprises would fall, while its commitment to cover the losses of loss-making public enterprises would remain, worsening thereby the fiscal situation.
 
Finally, the distress sale of equity in leading PSUs like MTNL, VSNL and IPCL cannot be ruled out. If the divestment of large chunks of equity is to be persisted with, the prices of these otherwise valuable assets are bound to fall. And all indications are that the government is firmly set to move in this direction. The final loss may be borne not only by the citizens who ultimately finance the government's budget through their direct and indirect tax payments, but also by consumers who may have to deal with private monopolies in critical areas of domestic economic activity.