Govt must learn from IDBI privatisation failure

“The more things change, the more they stay the same.” French writer Jean-Baptiste Alphonse Karr wrote this in 1849, highlighting the permanence of certain aspects of the world and human behaviour. That sense of continuity is evident in government thinking as well.

Statal and parastatal structures tend to perpetuate themselves. Ministers, bureaucrats and executives of public sector undertakings (PSUs) opposed privatisation at the turn of the 21st century when the Atal Bihari Vajpayee government pursued disinvestment—and they continue to do so.

Roadblocks were placed then; they persist even now. The decade-long IDBI Bank selloff process is testimony to the institutional hostility to privatisation.

One positive is that the Narendra Modi government has not abandoned the idea of selling IDBI Bank. Reports suggest it may restart the privatisation process. Earlier, financial bids were received, but these fell below the reserve price, leading to the exercise being called off.

This is not the first attempt. The Centre had earlier planned to exit IDBI Bank in 2016 under then finance minister Arun Jaitley, but the move was stalled by civil servants and bank executives, who cited concerns over real estate assets, including properties in South Mumbai and elsewhere.

Five years later, the government revived the plan—again without success. The second attempt appears to have faltered due to unrealistically high share valuations.

The government’s position on privatisation appears somewhat awkward. While the Prime Minister has often stated that “the business of government is not business,” the administration has struggled to deliver on this principle. Apart from Air India, few major PSU sales have been completed.

Increasingly, the focus has shifted to asset monetisation. Although Finance Minister Nirmala Sitharaman has clarified that asset monetisation is not a substitute for disinvestment, scepticism remains.

Asset monetisation may help address short-term fiscal pressures, but it does not fundamentally change the structure of state ownership in the economy.

It sidesteps the politically and administratively challenging task of transferring ownership and control to the private sector. In that sense, it represents a compromise—reflecting the same institutional caution that has long hindered privatisation.

What is needed is a stronger and more consistent push towards privatisation. Mere articulation of a pro-market stance is insufficient; it must be backed by concrete action, namely, the sale of PSUs. This gap between intent and execution lies at the core of India’s privatisation debate.

Going forward, a decisive push will require not just political will but also institutional reform. Disinvestment processes must be streamlined, valuations aligned with market realities, and accountability mechanisms strengthened to prevent delays.

Equally important is addressing the concerns of stakeholders, including PSU employees and management, who often perceive privatisation as a threat.

Ultimately, the success of privatisation in India will depend on the government’s ability to align its rhetoric with action.

Asset monetisation can play a supportive role, but it cannot replace the structural transformation that privatisation entails. If the state truly intends to redefine its economic role, it must move beyond half-measures.