Given the shortfall in tax revenues, it’s a no brainer that New Delhi needs to pursue disinvestment in state-run companies aggressively to keep its fiscal deficit in check. But it’s also crucial that the programme sees stake sales that result in transfers of ownership to private entities, not to another state-run company. Going by the strategic disinvestment plans for five companies approved on Monday by a group of secretaries, though, it appears the government may again resort to financial jugglery. It may manage to raise the money it needs to meet its target, but fail to fulfill the broader objective of the exercise, which is to pare down its stake, both direct and indirect.

According to the plan, a sizeable stake in Bharat Petroleum Corp. would be put on the block. But it could yet end up in the hands of another government-run company, possibly Indian Oil Corp. (IOC). Through this sale alone, the government could raise about half its 1.05 trillion disinvestment revenue target for the year. Similarly, stakes in power companies THDC India and Neepco could be sold to state-run NTPC.

This may be an easy way for New Delhi to shore up its finances, but would end up eroding the credibility of its disinvestment programme. Given the general inefficiency of public sector management, a change from one arm to another does not serve the goal of turning Indian resource allocation more efficient. For this, India needs new owners to take charge and push these companies to get into better shape. Finding private buyers would not be difficult if what’s on offer is a functional company with no strings attached.