PSEs, State govts will not to be permitted to buyout other CPSEs

Shishir Sinha | | Updated on: Apr 21, 2022

| Photo Credit: AJIJCHAN

DIPAM prepares new guidelines for participation in strategic disinvestment

State government or public sector enterprises (PSEs) will not be allowed to buyout another PSU, said the Centre in its redefined guidelines . This means one may not see a repeat of deals such as ONGC-HPCL or Numaligarh Refinery-Oil India & Engineers India.

This reworking has been done keeping in mind the new PSE policy. However, relaxation can be given in the public interest, said an office memorandum (OM) issued by Department of Investment and Public Asset Management (DIPAM).

“It is decided that as a general policy, PSEs (Central/State/Joint)/State Government/Co-operative Societies controlled by the governments (where 51 per cent or more ownership is by the Central government or State governments or jointly owned by Centre and State) are not permitted to participate in the strategic disinvestment/privatisation of other PSUs as bidders unless, otherwise specifically approved by the Central government in public interest,” said the OM.

In September 2002, the Centre had decided that CPSEs and Central government-owned cooperative societies (where the government’s ownership is 51 per cent or more), should not be permitted to participate as bidders in the disinvestment of other CPSEs, unless specifically approved by the Core Group of Secretaries on Disinvestment (CGD). In December 2002, based on the proposal of the Department of Fertilizers, it was decided that Multi-State Cooperative Societies, under the Department of Fertilizers, may be allowed to participate in the disinvestment of fertilizer CPSEs, including NFL.

The latest OM says that to realise the mission of new and self-reliant India, the new policy intends to minimise the presence of the government in PSEs across the sectors, and to make available newer investment opportunities for the private sector, by allowing infusion of private capital, technology, innovation and best management practices. This is to ensure that post-privatisation, PSEs may generate higher economic activities, resulting in new job opportunities and growth of ancillary industries.

Therefore, “transfer of management control from the GoI to any other Government Organisation/State Government may continue the inherent inefficiencies of the PSEs, and this will defeat the very purpose of the New PSE Policy,” said the OM. The new PSE policy, which was announced in February 2021, lays down a broad roadmap for PSEs. Under this, public sector commercial enterprises have been classified as Strategic and Non-Strategic sectors. Four broad strategic sectors have been delineated, based on the criteria of national security, energy security, critical infrastructure, provision of financial services and availability of important minerals. These include (1) Atomic Energy, Space and Defence, (2) Transport and Telecommunication, (3) Power, Petroleum, Coal and other minerals, and (4) Banking, Insurance and Financial Services.

In strategic sectors, bare minimum presence of the existing public sector commercial enterprises at the holding company level will be retained under government control. The remaining enterprises in the strategic sector will be considered for privatisation or merger/subsidiarisation with another PSE or for closure. PSEs in non-strategic sectors shall be considered for privatisation where feasible, otherwise, such enterprises shall be considered for closure

The policy on strategic disinvestment/privatisation is based on the economic principle that the government should discontinue in sectors where competitive markets have come of age and economic potential of such entities may be better discovered in the hands of strategic investor due to various factors such as infusion of capital, technological up-gradation and efficient management practices.

Published on April 21, 2022
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