WHY GOVERNMENTS SHOULD ISSUE EQUITY SHARES

This is a suggestion for Central, State Governments & Local Government Bodies such as Municipalities to issue Share Capital and the shares to be traded on Stock Exchanges.

The purpose is to have an online, independent measure of performance of the Government bodies and thereby instil competition.

Following are the suggested steps -

a.       The bodies should issue share capital for which the Initial Public Offers (IPOs) should be linked to the size of the State/Municipality e.g., population, land mass, etc. Thus, the IPO size could be Rs 1 lac per capita

b.      The national accounting body, such as the Institute of Chartered Accountants of India in case of India, should frame accounting policies and standard reports that each class of Government body should publish. The frequency of these reports should not be more than 3 months. The suggested reports are Cash Flow, Profit & Loss account, Balance Sheet, etc.

c.       As profit is not the main objective of Government bodies, additional information should be incorporated such as life expectancy, per capita income, agricultural production, income distribution, index for green initiative, etc. Some suggestions are -

Sr no	Suggested Parameters	2015/16	2014/15	2013/14	± % 15/16 vs. 14/15
1	Per Capita
2	Life expectancy
3	Crime rate
4	Literacy rate
5	International Tourists
6	Indian Tourists
7	Unemployment %
8	Industrial production
9	Agricultural production
10	Service sector
11	Others as may be felt necessary

The above list is indicative. Experts should add/delete/modify the same

d.      As the primary purpose of the exercise is to independently measure the performance of the Bodies online, dividends should not be allowed to be declared. The returns to shareholders should come through Bonus, splitting of shares, trading in them, etc.

e.      There would be no Annual General Meetings, Extraordinary Meetings, Board Meetings, etc. which normal corporates have. The parameters as listed above, the regular conduct of the Assembly as broadcast on TV channels, the schemes and measures announced for the betterment of the State, etc.  would be reflected in the Share price of the State

f.        In the case of a State Government, the Chief Minister would be considered as the de facto CEO and his Ministers the Board of Directors

g.       The next Assembly or General elections would signify as the (Annual) General Meeting

h.      Measures need to be put in place so that the Share price cannot be rigged closer to election date. One of the measures could be freezing the price of the respective State’s share on the date on which elections are announced. In other words, buying and selling of shares can be conducted at the price prevailing on the date elections are announced and this price freeze to be released on the next day after polling is complete. To further limit rigging of share prices, average price over a period could be considered at the time of election

i.         Institutions controlled (even partly and remotely) by Governments should not be allowed to buy Government shares

The above is only suggestive and not comprehensive. Being a novel concept, if it is decided to be adopted, comprehensiveness would have to evolve as it gets implemented. Mock exercise of measures – reports and additional information – should be worked out with actual past data to enable refinement.