oppn parties IRCTC: Important Lesson For The Government

News Snippets

  • Supreme Court approves two-child norm for government jobs in Rajasthan
  • DMK issues rocket ad with Chinese flag, PM Modi slams party
  • BJP alleges that Congress workers raised slogans like 'Pakistan jindabad' outside Karnataka assembly after the results for the RS polls were declared. CM Siddaramaiah promises stern action if claim found true
  • Calcutta HC says any agency can arrest absconding Sandeshkhali TMC strongman Sk Shahjahan
  • Himachal Pradesh Speaker suspends 15 BJP MLAs for unruly behaviour
  • Joint teams of Navy, NCB and Gujarat ATS seized a boat with 3200kgs of narcotics in high seas off Gujarat coast. Five crew members were also arrested
  • Centre tells Supreme Court that economic disaster will follow if states are allowed to tax mineral land
  • NCLT asks Byju's to keep rights issue funds in a different account
  • Sunil Bharti Mittal of Bharti Enterprises was conferred the honorary Knighthood by Britain's King Charles III for services rendered in furthering business relations between the UK & India
  • RIL to merge Viacom18 with Disney's Star in $8.5bn deal, Nita Ambani to lead the board of merged entity
  • Vodafone Idea shares fall nearly 15% over fears of huge fund raising
  • Stock markets crash on Wednesday: Sensex loses 790 points to 72304 and Nifty 247 points to 21951
  • BCCI gets tough, removes Shreyas Iyer and Ishan Kishan from central contracts for missing Ranji Trophy. In a first, it starts fast bowling contracts to reward emerging players like Akash Deep and four others
  • Tennis: Sumit Nagal loses in first round of Dubai Duty Free tournament
  • WPL: UP Warriorz beat Mumbai Indians by 7 wickets
Bengal police arrests TMC leader Sk Shahjahan, the prime accused in the Sandeshkhali disturbances
oppn parties
IRCTC: Important Lesson For The Government

By Sunil Garodia
First publised on 2021-10-30 04:03:39

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The IRCTC fiasco on Thursday-Friday should teach an important lesson to the central government - that once it decides to privatize PSUs and lets their share price (and hence valuation) be dictated by market mechanisms, it must take decisions regarding these entities with due care. The government decision to appropriate 50% of the convenience fee that the IRCTC charges its customers for online ticket booking (amounting to a piffling Rs 200cr annually), announced after market hours on Thursday, saw investors hammering the IRCTC share down by as much as 29% in opening trades, resulting in a value depreciation of Rs 18000cr for the government. Alarmed and worried by the development, the government had to backtrack and withdraw the order. The share price slowly inched back to recoup some losses but still closed 7.5% lower than Thursday.

There is no doubt that the government should actively look for additional income streams from the railways as given the investment in the utility and its reach, the returns are very low. But the reaction of investors and the resultant drop in valuation has to be studied before making such decisions in companies that have been privatized and whose shares trade in the markets. Shareholder response is a huge issue and any adverse reaction is not only likely to cause a drop in valuation of the company but also impact future divestment attempts on part of the government. Once the investing community realizes that despite privatization, the government treats these companies like extended government departments, the response to future sell-offs would be muted.

The IRCTC fiasco should prevent the government from doing anything that reduces the profit of the company while benefitting the government as it is no longer the sole shareholder. The Rs 200 crore annually that the government was trying to appropriate from the IRCTC belongs equally to all the shareholders. They were rightly peeved about the unilateral decision. The investors and the share markets have taught the government an important lesson which it would do well to remember forever in case of privatized PSUs.