oppn parties IRCTC: Important Lesson For The Government

News Snippets

  • SP drops two candidates owing allegiance to Azam Khan from Rampur and Moradabad
  • In Assam, a controversy erupted after a picture of UPPL leader Benjamin Basumatary, lying on a stack of Rs 500 notes circulated on social media. UPPL is an ally of the BJP
  • AAP's Jalandhar-West MP Sushil Kumar Rinku joins the BJP. He was the only AAP Lok Sabha MP
  • Supreme Court dismisses Centre's plea to review its 2023 verdict in the PMLA case
  • Close save for passengers as they remain unhurt after the wings of two planes graze at Kolkata airport. Pilots derostered and inquiry ordered by DGCA
  • Bengal BJP leader Dilip Ghosh gets notice from the EC as well as the BJP for making ugly remarks about Mamata Banerjee's parentage
  • Sadanand Vasanth Date, who faught terrorists in the 26/11 attack and was awarded the Preisent's Police medal, has been appointed the head of the NIA
  • Centre will borrow Rs 7.5L cr in the first six months of FY25, nearly 50% of the target for the full year
  • 25 stocks, including SBI, will see same day trade settlements from today in the world's fastest settlement mode in both BSE and NSE
  • Stocks recover smartly on Wednesday: Sensex rises 526 points to 72996 and Nifty 118 points to 22123
  • Tennis: Rohan Bopanna-Matthew Ebden reached the semifinals of the Miami Open
  • IPL: records tumble as SRH beat MI in a high-scoring match. SRH score 277/3 with 18 sixes and Mumbai score 246 with 20 sixes to fall short by 31 runs. Atotal of 38 sixes, highest in an IPL match were hit and both teams combined to score 523 runs, the highest aggregate in an IPL match
  • Amul will launch fresh milk in the US
  • IPL: RCB beat Punjab by 4 wickets as Kohli and Karthik shine with the bat
  • India strongly objected to German foreign office remarks over the arrest of delhi CM Arvind Kejriwal, called it "biased assumptions"
Delhi Lt Governor Vinai Kumar Saxena says government cannot be run from jail, hints at President's Rule in the capital ////// In a dangerous incident, the wings of two planes grazed while taxiing on the runway at Kolkata airport, all passengers were safe but DGCA ordered an inquiry and the pilots were derostered
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.