Pardon us for borrowing the communications Minister Pramod Mahajan's phrase, but just who is making a "mockery of the disinvestment process", the Tatas or he himself? His rage over the recently divested VSNL's decision to invest Rs 1,200 crore of its reserves to buy 25 per cent in Tata Teleservices is based on an argument that is, at the least, specious. The Tata group, Mahajan's interpretation goes, will be paying Rs 2,590 crore to acquire 45 per cent of vsnl (Rs 1,439 crore for the government's 25 per cent stake and Rs 1,151 crore for the 20 per cent from the public), while it would be mopping up Rs 1,200 crore from the company's reserves. This, according to the enraged minister, slashes the cost of acquiring VSNL by 45 per cent. The arithmetic is correct but little else is.

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First, contrary to the minister's interpretation, the Tata Group isn't siphoning off funds from VSNL. Instead it is investing in another group company. The key words there are 'investing' and 'group'. Yes, group. The communications minister has to realise that with a 45 per cent stake in VSNL, the international long distance service provider can now be considered part of the Tata group. And that the Rs 1,200 crore that VSNL is paying for Tata Teleservices shares is an investment. Crossholdings through intra-group investments are a normal way of growing in the corporate sector.

Secondly, there is no doubt that as players in the telecom sector, VSNL and Tata Teleservices have obvious synergies and that it makes eminent sense to capitalise on those. In this case, VSNL, by taking a stake in a group company, is ensuring that it gets and benefits from customer access, something that by virtue of being just a long distance telephone operator it currently does not have. Thirdly, since April 2002, VSNL no longer is the prized monopoly that it was in international long distance telephony and, therefore, needs to expand its operations to cover other segments of the telecom industry. Hypothetically, if VSNL were to expand on its own into, say basic and cellular telephony, and restrict itself to just the four metro cities, it would need to invest a minimum of Rs 4,000-5,000 crore. Plus, unlike Tata Teleservices, it would have to start from scratch. Given the magnitude of capital expenditure in the business, does it not make sense for VSNL to make a strategic investment in a venture that is already off the ground? As for the losses incurred by Tata Teleservices, even a tyro is aware of how long it takes for TELCOs to begin making profits after they are started up.

That's not to say VSNL's investment can't be questioned? It can be, especially in the context of Tata Teleservices valuation, Rs 4,800 crore. Isn't that a bit steep for a company that has six basis services licences? Still, minister Mahajan's current state of pique and the threats that seem to be emanating from Sanchar Bhavan (prompted by competition, goes the buzz) may have a larger fallout on the disinvestment programme. True, the government continues to have a 26 per cent shareholding in vsnl and that, as per company law, allows it the power to veto resolutions but the same power could also be misused. Consider another recently divested public sector company-IPCL. Even before the Reliance group has completed the takeover, it has proposed a restructuring of IPCL's debt profile. Soon IPCL and Reliance may decide to restructure production capacities by rationalising some facilities that are duplicated by each other. Would the petrochemicals ministry then cry foul?

Minister Mahajan's reaction is symptomatic of the government's attitude towards public sector units-even the divested ones. Tomorrow, if Suzuki, which has recently taken control of Maruti Udyog, decides to stop producing the outdated and really quite obsolete Maruti 800, someone in the industries ministry may well create a stink, perhaps on the grounds that a cheap car like that should keep being churned out, never mind that it may be antiquated or even unsafe. The problem with the government and ministers like Mahajan is that they are so used to being in control that when it is time to let go, it hurts.