In what came as music to the ears of markets and the foreign investor community, Finance Minister Nirmala Sitharaman gave a thumbs up to privatisation, reflecting the government’s commitment to go the whole hog to realise its disinvestment and privatisation target.

Adding to the resolve is the government’s decision to peg the 2021-22 disinvestment target receipts at a whopping ₹1.75 lakh-crore, substantially higher than the ₹32,000 crore pegged at the revised estimate stage for 2020-21. The government had for 2020-21 pegged the divestment target at ₹2.1 lakh-crore, which could not be realised due to Covid-19 lockdown.

Besides, reeling out the names of certain existing companies whose strategic divestment would be completed, Sitharaman in her Budget speech also said that NITI Aayog will be asked to work on the next list of Central Public Sector companies for strategic disinvestment.

‘Strategic disinvestment’

“In spite of Covid-19, we have kept working towards strategic disinvestment. A number of transactions, namely, BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited, among others, would be completed in 2021-22”, she said, adding that the government would bring the IPO of LIC for which the requisite amendments to the LIC Act will be brought in this Session itself.

“Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself,” she said.

In the Atmanirbhar package, Sitharaman had announced that government will come out with a policy of strategic disinvestment of public sector enterprises. “...The policy provides a clear roadmap for disinvestment in all non- strategic and strategic sectors. We have kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatised. In the remaining sectors all CPSEs will be privatised”, she said.

To incentivise States to take to disinvestment of their Public Sector Companies, government will work out an incentive package of Central Funds for States, she said.

The Minister said that idle assets will not contribute to Atmanirbhar Bharat. The non-core assets largely consist of surplus land with government Ministries/Departments and PSEs.

Monetising of land can either be by way of direct sale or concession or by similar means.

“This requires special abilities and for this purpose, I propose to use a Special Purpose Vehicle in the form of a company that would carry out this activity,” she said.

In order to ensure timely completion of closure of sick or loss making CPSEs, government will introduce a revised mechanism that will ensure timely closure of such units.

Monetisation goals

Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction, she said. A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched, she said, adding that an asset monetisation dashboard will also be created for tracking the progress and to provide visibility to investors.

In fact, last November, the Department of Investment and Public Asset Management had signed an agreement with World Bank. Under the agreement, World Bank is to provide advisory services to DIPAM for asset monetisation. DIPAM is mandated with facilitating monetisation of non-core assets of government CPSEs under strategic disinvestment or closure and enemy property of value of ₹100 crore and above. DIPAM has a framework for monetising non-core assets.

Some important measures in the direction of monetisation are: National Highways Authority of India and PGCIL each have sponsored one InvIT that will attract international and domestic institutional investors. Five operational roads with an estimated enterprise value of ₹5,000 crore are being transferred to the NHAI InvIT. Similarly, transmission assets of a value of ₹7,000 crore will be transferred to the PGCIL InvIT, she said. Also, Railways will monetise Dedicated Freight Corridor assets for operations and maintenance, after commissioning, she said. The next lot of Airports will be monetised for operations and management concession.

Other core infrastructure assets that will be rolled out under the Asset Monetisation Programme are: (i) NHAI Operational Toll Roads (ii) Transmission Assets of PGCIL (iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL (iv) AAI Airports in Tier II and III cities, (v) Other Railway Infrastructure Assets (vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED.

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