Govt plans to take up strategic sale of at least one PSU this fiscal

The government is preparing the ground for at least one strategic stake sale in a public sector unit this fiscal.

Taking NITI Aayog’s suggestions as a base, the Department of Investment and Public Asset Management (DIPAM) is finalising a model of strategic disinvestment.

DIPAM is working out procedures and timelines for strategic sale of government equity. “There has not been any strategic disinvestment in over a decade and all policies have to be laid down afresh. The NITI Aayog report will be used as a pointer to what can be done, but it will require more work,” said a senior official adding that government wants to take up at least one strategic sale so that intent is evident.

The NITI Aayog has recently submitted two separate – sick public sector undertakings and strategic disinvestment – reports to the Prime Minister’s Office. It is in the process of submitting its third report.

The NITI Aayog report, which has not been made public, has suggested various models of strategic sale. For PSUs where the government stake is about 60 per cent, it has recommended that it could trim it by at least 10 per cent to professionalise its working, but retain management of the company. The Aayog, according to sources, is of the belief that small doses of stake dilution don’t attract big investors.

For loss making PSUs such as BSNL, it has suggested the government could consider selling it off. But, it could face challenges, especially labour issues.

It has also identified nearly two dozen such firms where revival plans have failed. The Aayog has suggested first revival and then disinvestment of entities such as Chennai Petroleum, Madras Fertilisers, and Bharat Pumps & Compressors Ltd.

For strategic sale it has suggested Cement Corporation, Tyre Corporation of India Ltd, and Central Electronics Ltd.

The Aayog has also suggested that sick PSUs for their revival should not be encouraged to sell their capital assets such as land and units.

The Union Budget 2016-17 has earmarked ₹20,500 crore from strategic disinvestment and had announced a new system where in the NITI Aayog would identify the state run firms for the purpose.

Finance Minister Arun Jaitley had told BusinessLine that, “the government is entitled to decide on whether to own 80 per cent shares or 70 per cent shares in a PSU and in lieu of these 10 per cent shares...These are all government assets for public interest. The government is entitled to decide on its own assets.”

DIPAM is also now in the process of appointing an adviser to help on this as well as issues relating to valuation of PSUs, capital and financial restructuring.

The last strategic sale took place in Jessop and Co in 2003-04 where the government sold 72 per cent of its stake to Indo Wagon Engineering for ₹18.18 crore. The first strategic sale in a PSU was carried out in 1999-2000 when the government sold 74 per cent equity in Modern Food Industries to Hindustan Lever for ₹105 crore.

(inputs from Richa Mishra)

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