LONE RANGER: Shourie is isolated in the Cabinet	EVASIVE ACTION: Ministerial opposition stumped the PM
MIDDLE PATH: Advani favoured deferring sell-offs	JASWANT SINGH: The finance minister is concerned over the creation of private monopolies. But he has to contend with negative perceptions created about the Government's reforms agenda.

The tragedy about the events that culminated on September 7 is not that privatisation died a momentary death that day. The real misfortune was that the death was pronounced by the very same government that had given birth to privatisation and had painstakingly nurtured it to a level where the privatisation programme could be ranked as the most significant economic achievement of any government since 1991. Unlike the burst of economic reforms ushered in by the P.V. Narasimha Rao government in 1991, the A.B. Vajpayee Government's privatisation programme wasn't crisis driven. It had reasoning, a method and most importantly, a strong political commitment of the top echelon of the government. Suddenly post-September 7, all that is open to question and doubt. At least for the time being, the Government has boxed itself on the issue-it can neither own nor disown the privatisation programme.

A charitable view of the disinvestment deadlock is to call it a mid-course correction or a strategic pause to facilitate a measured reflection. But why a "mid-course" correction when barely 12 out of 240 public-sector companies have been privatised? Besides, privatisation isn't the only casualty. It has resulted in warring ministries, a deepening political divide, sagging market sentiments and a somewhat diminished writ of Prime Minister Vajpayee besides emboldening the Opposition. It would appear that privatisation's success became its worst enemy and its strongest crusader-Disinvestment Minister Arun Shourie-its biggest stumbling block.

Was The Battle Against Privatisation Really one Against Privatisation?

No, the sell-offs were just a red herring.

S.S. DHINDSA: The Akali politician is a new entrant to the disinvestment debate. The chemicals and fertiliser minister wants to protect his turf of which fertiliser firms are a crucial component.	UMA BHARATI: The coal and mines minister's opposition to Nalco sale is driven by populist concerns. She is also worried that the aluminium major's privatisation will deplete her portfolio.
ANANTH KUMAR: The urban development minister has rarely voiced his opinion on the sell-off policy. But he has been at odds with Arun Shourie and may be wanting to settle scores.	MURLI MANOHAR JOSHI: A swadeshi hawk, the HRD minister feels that his views on privatisation are gaining relevance. Also, he finds Shourie's style of functioning discomfiting.
GEORGE FERNANDES: The defence minister and NDA convener was key in scuttling the HPCL-BPCL sale. Questioned the route of privatisation and is worried about Reliance's growing clout in petro sector.	RAM NAIK: An unlikely victor, the petroleum minister is motivated by welfare politics and old-fashioned turf battles. Considers Shourie an upstart and was involved in a protracted personality clash.
MURASOLI MARAN: The articulate commerce minister strongly supports disinvestment. He felt that the Government's commitment to reforms would be dented if privatisation was abandoned.	YASHWANT SINHA: The external affairs minister stoutly backs privatisation through strategic sales. As finance minister, he had defended the strategic sale route in Parliament.
PRAMOD MAHAJAN: The IT minister instinctively supports privatisation. In the tussle over HPCL and BPCL, he felt that the public issue route would be more suitable for the sell-off of the oil companies.

Matters came to a head over the sale of two oil PSUs-HPCL and BPCL. In February this year, the Cabinet had taken an "in principle" decision to sell the two companies. Petroleum Minister Ram Naik, Shourie and the finance minister were to subsequently meet to discuss details. But Naik began raising one objection after another, initially arguing that petroleum was a strategic sector and then proposing a public sale of government equity in the two companies against Shourie's proposal of a strategic sale. Naik's tug-of-war with Shourie wasn't seen as uncommon. It could have been a replay of the Ministry of Heavy Industry's one-year-long foot-dragging on Maruti Udyog's sale to Suzuki. By August, Naik's supporters had swelled to include heavyweights like Defence Minister and NDA Convener George Fernandes and it Minister Pramod Mahajan. More critically, as the HPCL-BPCL controversy gathered momentum, Deputy Prime Minister L.K. Advani too felt that the sell-off decision should be deferred. Shourie began to run out of friends even though he had Vajpayee's backing. As the battle heated up, the corporate stakes in the issue became clear.

The arguments were placed before a specially convened meeting attended by senior BJP ministers and Fernandes at 11.30 a.m. on Saturday at the prime minister's residence. Proceedings began with Finance Minister Jaswant Singh outlining the issues and then suggesting that in view of the political controversy the sell-offs be put off. Fernandes, who on August 27 had written to Vajpayee asking for a mid-course correction in the method of privatisation by opting for public sale of government equity, pointed out that seven states would soon go to polls and that disinvestment was sending an anti-people signal. However, Advani did not agree that disinvestment was an election issue though he took note of the ministerial squabbling. "Hamare hi ministers virodh kar rahe hai (Our own ministers are opposing it)," he said. Shourie argued that ministers protected their empires by stalling sell-offs and that indecision would encourage them. Minister for Mines Uma Bharati's opposition to nalco's sale and Chemicals and Fertilisers Minister S.S. Dhindsa's posture on psu fertiliser firms are cases in point.

Sensing a deadlock, Vajpayee asked, "Is there a possibility of a middle path?" This led to a suggestion that the concern over creation of private monopolies could be addressed by allowing ONGC to bid for HPCL and BPCL as a junior partner of an Indian or foreign firm. Vajpayee's request to Naik to consider the proposal-"Aap kyun nahin mante"-did not move the minister. The meeting ended with a decision to defer equity sales in all oil companies (privatisation of HPCL-BPCL and minority sale in IOC and GAIL) by three months.

Was corporate rivalry at the heart of the battle?

Yes, everything else was coincidental.

Corporate rivalry turned out to be the biggest, but unstated, hurdle in privatisation. The simplest way to understand the extent of corporate rivalry is to know that if Reliance Industries Ltd (RIL) had not been a potential bidder for HPCL or BPCL, their privatisation would have proceeded smoothly. The opposition, if any, would have been an attempt at turf protection by the Petroleum Ministry. Those opposed to a potential takeover of one of the two oil companies by RIL had three arguments to make. The fear of RIL becoming a monopoly in the oil sector was one point. For instance, if RIL were to win the bid for one of the two oil companies, its share in the country's oil refining capacity would have equalled that of IOC. That combined with its up to 90 per cent market dominance in some petrochemical products would have raised its already large presence in the oil sector. According to the Disinvestment Ministry, the biggest insurance against a monopoly threat was the government decision not to allow any one company to buy both HPCL and BPCL. Besides, even after their privatisation, there would have been at least five big oil companies in India.

The other argument was against strategic sale as a route for privatisation as opposed to a public sale of government shares. This was best practised in Britain as a method of wealth creation for the common man. Though the argument wasn't debated at the meeting, it had been countered earlier by Shourie on the grounds that a strategic sale and a public issue are not mutually exclusive options. For each of the companies privatised so far, the Government has the right to sell its remaining 26 per cent stake through a public issue. That will be done in case of Maruti and would have been done with HPCL and BPCL as well. Besides, the Government plans to privatise NALCO through a public issue. Strategic sale as the preferred route for privatisation was enunciated by former finance minister Yashwant Sinha in his 2000 budget, a fact he reiterated at a meeting of the Cabinet Committee on Disinvestment (CCD) in the afternoon the same day.

BLOCKED: RIL's Mukesh Ambani (right) with Shourie. The size of Reliance fuelled the resistance to privatisation.

The final argument was against ril's alleged approach of managing the political environment to it advantage. Surely, none of these points against RIL were stated in as many words by anybody, but that they weighed in most minds present at the meeting is an open secret. Sensing this, the promoters of RIL-the Ambanis-had met Advani, Jaswant and Shourie in the past to ask if they should refrain from bidding for HPCL and BPCL. The ministers told the Ambanis that the government policy was not exclusive.

Has Vajpayee been weakened?

Ministerial spats give that impression.

The deliberations of September 7 confirm that Vajpayee was keen to break the deadlock and clear the privatisation of HPCL and BPCL. At the CCD meeting, he said, "Is gadi ko mat rokiye (Do not stop the privatisation wagon)." Vajpayee, who listens more than he talks at such meetings, interjected when Urban Development Minister Ananth Kumar said that there were "other" views on privatisation that must be heard. Kumar questioned the valuation of PSUs sold in the past, prompting Jaswant to say that the urban development minister was questioning collective cabinet decisions. When Naik was asked if he would play along, at least for a mid-way solution, he said that if Advani cleared the strategic sales option, he would agree too. At that point Advani closed the discussion by stating that given the sharp divisions within the Government on the issue, the privatisation of oil companies was best deferred.

In the past, Vajpayee has used his authority to clear privatisation deals. He did so in the case of IPCL where despite serious reservations of senior ministerial colleagues about a particular bidder, Vajpayee had used the prime ministerial prerogative. Similarly when the Balmer Lawrie sell-off was being discussed, Naik's suggestion that the firm be restructured prior to its sale was brushed aside by Vajpayee who simply said "Ho gaya (It is done)". But he did nothing of the sort on September 7. Apart from Shourie's isolation, the Prime Minister's central authority has been eroded and this has resulted in the Government speaking in divergent voices.

This unexpected jolt to disinvestment is also likely to bolster the spirits of Vajpayee baiters in the Sangh Parivar. Leaders of Sangh outfits such as the Bharatiya Mazdoor Sangh and Swadeshi Jagran Manch have been critical of the prime minister on policy issues and have sometimes displayed personal animus towards him.

Did Shourie's attitude hurt privatisation?

His critics in the Government think so.

Shourie has been charged with being obstinate, headstrong and a political greenhorn. A man who believes that the power of argument is greater than the power of alliances, which makes him unfit to be a minister. On the face of it these are classic allegations against any reformer. And Shourie isn't an average reformer. As disinvestment minister he can't afford to be. Unsettling interest groups in politics, bureaucracy, labour unions and the corporate world needs doggedness. To stick to the job needs perseverance. Add to that the pace with which he was pursuing privatisation-25 sell-off deals in 10 months-and it is no surprise that he is called what he is called. But even some of his friends believe that the "messiah versus mafia" attitude has rubbed people the wrong way.

Shourie's profile as a "clean reformer" also caused envy and anguish. Many well meaning critics find him intolerant of criticism, to the extent of muzzling any advice. Ministers and bureaucrats often complain that the Disinvestment Ministry claims a disproportionately large share of the credit for privatisation. Glowing media reports and Shourie's own signed articles against running of some PSUs only compounded the heartburn.

His relative isolation has led to speculation about Shourie's survival as disinvestment minister. Till now, he had enjoyed almost unstinted support of Advani, Vajpayee and Jaswant. That seems to be waning now. The absence of former law minister Arun Jaitley and former power minister Suresh Prabhu-both aggressively pro-privatisation-in the Cabinet will also hurt Shourie's cause. But quitting is not something he believes in. Though he has changed many jobs and professions, Shourie has never resigned, only been dismissed. Twice as the editor of The Indian Express-where he presided over the downfall of two governments.

Has privatization been killed?

A temporary halt is certain.

Other than HPCL and BPCL, big ticket privatisation for 2002-3 are NALCO, Engineers India Limited (EIL), Shipping Corporation of India (SCI), National Fertiliser Limited (NFL) and Balmer Lawrie. NALCO's sell-off is doomed for the time being. From within the NDA, Bharati and Orissa Chief Minister Naveen Patnaik have opposed it. The Congress has called for an Orissa bandh against nalco's privatisation. Given the divisions within, it seems unlikely that the Government will be able to display the resolve it did in supporting BALCO's sell-off. If prices of PSU shares keep falling the way they did for two days after September 7 that will delay public issue of NALCO and of the government's remaining stake in Maruti. Opposition to EIL's privatisation by its employees is getting shriller. Dhindsa has already expressed intentions to stall NFL's sale. An inter-ministerial meeting on Balmer Lawrie privatisation held on September 9 wasn't exactly pleasant. Naik has given hope to every minister who does not want the PSUs under his ministry to be sold. He has also helped make privatisation the Opposition's target.

As of now, nobody knows the fate of privatisation three months from now when the Government's self-imposed cooling period will end. State elections will be then nearer than they are today. A strong political intervention, at the level of the prime minister, seems unlikely. If everything fails there is always a perverse comfort. When it comes to reforms, governments in India follow the law of diminishing expectations-the longer they stay in power, the lesser their willingness to reform. Maybe for the Vajpayee Government, that moment has come.