Mumbai: Politics in India is omnipresent but has acquired an unholy reputation. Old hat. But it has now added a new victim to its list - oil public sector units (PSUs). The reason? The postponement of disinvestment in two oil PSUs - HPCL and BPCL - for three months.

This postponement is the result of a continuous opposition and lobbying by Defence Minister George Fernandes, who is also the convenor of the National Democratic Alliance (the coalition of parties forming the government at the centre), and Petroleum Minister Ram Naik. Fernandes and Co were also able to garner tacit support from other members of the cabinet like Jaswant Singh, Pramod Mahajan and Uma Bharti.

Disinvestment Minister Arun Shourie, though he had the backing of Prime Minister A B Vajpayee, was left in the lurch due to the support the anti-disinvestment lobby had garnered. To make matters more complex, the political struggle seems to be multi-layered with involvement of figures from the business world as well.

The sudden opposition to disinvestments from within the government itself came as a surprise to everybody. These disinvestments had been planned around seven months back and there seemed to be a consensus on the same in the cabinet, the government and the NDA at that time.

It is a mystery as to what happened that brought about such a sudden change in policy. It was very well known to everybody now opposing the disinvestment of oil PSUs that disinvestment or privatisation will benefit private companies and they will, for that matter, bid for PSUs since they foresee a potential for reaping profits. Therefore, the sudden change in policy seems to do more with the political (read election) strategy rather than the talk of safeguarding the interests of the common man from monopolies.

One reason could be attributed to the fact that Fernandes has taken over as the president of the Samata Party, a constituent of the ruling coalition, some time back. He and his party faced a tough time after the Tehelka scandal broke out in March 2001. Fernandes's personal reputation and the reputation of his party had taken a big hit as a result.

This whole exercise is to assert the socialist credentials of the party and project it as a party that takes care of the common man's interests vis-à-vis large capitalists who want to build monopolies. This success in blocking disinvestment of oil PSUs, though temporarily, has given Fernandes the much-needed image he was looking for - that he enjoys considerable clout in the government.

This image will also act as a much-needed morale-booster to his Samata Party cadres, who were feeling that they had become second fiddles to the Bharatiya Janata Party (BJP). The support given by BJP members in the cabinet can also be attributed to the fact that they are acting keeping in mind the recent losses their party has to suffer in some state and local elections.

These electoral losses were the result of the alienation of the middle-class. Keeping an eye on future general elections, the BJP wants to portray the image of the saviours of the middle-class and win those votes back to their side.

All this petty politics is going to shatter the faith of foreign investors in the Indian stock markets. They had been bullish on the disinvestments theme for quite some time now. It brings forth the point that this is a government that backs out on what it plans earlier.

PSUs left on the disinvestment list in 2002-03:

Source: Ministry of Disinvestment

Disinvestment performance:

Note: # Up to August 2002
Source: Ministry of Disinvestment