A massive mandate in the recently concluded Lok Sabha polls and the prospect of capturing majority in the Rajya Sabha next year have emboldened the Narendra Modi-led National Democratic Alliance (NDA) government to bite the bullet on lowering the government’s stake in state-run firms to below 51 per cent without ceding management control.

“Government has been following the policy of disinvestment in non-financial PSUs maintaining government stake not to go below 51 per cent. The Centre is considering, in case where the PSU is still to be retained under government control, to go below 51 per cent to an appropriate level on a case-to-case basis. The Union Government has also decided to modify the present policy of retaining 51 per cent government stake to retaining 51 per cent stake inclusive of the stake of Government-controlled institutions,” the Finance Minister Nirmala Sitharaman said in her Budget speech to Parliament on Friday.

BusinessLine first reported on this development on March 26.

The move comes even as the RSS-affiliated Bharatiya Mazdoor Sangh has opposed the government’s disinvestment plan.

Privatisation tag

Since the disinvestment programme was introduced by the Narasimha Rao government in 1991, successive governments have reiterated that the government holding in PSUs will be retained at 51 per cent to reflect the state’s control over the company. The threshold was drawn up to imply that any stake-sale that cuts the government holding in a PSU to below 51 per cent would lead to privatisation.

“Which private promoter holds 51 per cent in his company? With smaller stake, he has management control. So, why should a government company be different? We can also go below 51 per cent and still wield management control. In fact, in many of the PSUs, where we are 51 per cent owner, if you count the holding of state-controlled entities such as LIC, GIC, SBI, etc, together, it will go beyond 80 per cent.

“Effectively, the government holds more than 80 per cent in most of the PSUs. If all these put together can be permitted to go only up to 51 per cent, then we will get a lot of leg room to dilute government holding to below 51 per cent,” a government official explained.

‘All a mindset’

“Why do you need majority stake when you have management control? This is all a mindset. The government holding can go to as low as 25 or 26 per cent even while retaining management control,” he said.

This way of diluting government stake in PSUs is different from strategic disinvestment or privatisation of such firms, he added.

“Strategic disinvestment of select CPSEs would continue to remain a priority of this government. In view of the current macro-economic parameters, the government would not only reinitiate the process of strategic disinvestment of Air India, but would offer more CPSEs for strategic participation by the private sector,” Sitharaman said.

“Government is setting an enhanced target of ₹1.05-lakh crore of disinvestment receipts for the financial year 2019-20. The Centre will undertake strategic sale of PSUs. The government will also continue to do consolidation of PSUs in the non-financial space as well,” the Finance Minister added.