The fear of being seen as favouring the private sector is one of the biggest impediments to disinvestment in India, the Economic Survey has said. Citing retrospective taxation cases such as those of Vodafone and Monsanto, it noted that despite the government’s commitment not to act retroactively on tax and other issues, they continue to remain unresolved.“Evidently, it seems politically difficult to uphold a widely shared—and judicially endorsed— principle against expropriation and retroactivity because of the fear of being seen as favouring the private sector, especially the foreign private sector,” the Survey said. The issues pointed out by the Survey may continue to trouble the Narendra Modi-led government, which is all set to embark on the biggest strategic sale in public sector companies next fiscal with cabinet approvals for stake sale in around six companies that include BEML Ltd and Pawan Hans.Short of naming loss-making national carrier Air India, the Survey pointed out the commitment to make the perennially unprofitable public sector airline “world class”. “But the understandable distrust of discretion means that methods other than auctions could be perceived as favouring particular parties,” it noted. “Discussion of disinvesting the government’s majority stake in public sector banks is often difficult in part because of the view that they are legitimate instruments for the state to allocate and redirect resources,” it said.

Source: Economic Times January 31, 2017 20:02 UTC