Seven months into the Modi regime, one area of reform in which little progress has been made is the public sector disinvestment programme. Having set an ambitious disinvestment target of ₹58,425 crore, the Centre has so far raised only a fraction of this sum, through SAIL’s offer for sale (₹1,715 crore). Despite bold talk of privatising loss-making PSUs and giving up control in non-strategic ones, the Centre’s timid approach to disinvestment so far has closely resembled that of the UPA government’s. Only listed PSUs have been lined up for minority stake sales. Even these have not been put through expeditiously to make the most of friendly market conditions. Now, with just three months left to the fiscal year-end, there’s a scramble to divest stakes in Coal India, ONGC and other firms, with talk of sweetening the offers with larger retail quotas and discounts.

But even such minority stake sales in PSUs (expected to raise ₹48,425 crore) now face a much rockier path than they would have earlier this year. Most of the firms lined up for disinvestment are in commodity-oriented businesses such as oil and gas, mining and metals. Global investors, concerned about falling commodity prices due to slowing growth in Europe and China, have been beating a hasty retreat from these sectors in recent times. Stocks of Indian commodity PSUs have lost 10-15 per cent in value, throwing a shadow of doubt over the success of the impending stake sales in these firms. The issue is further complicated by labour problems and regulatory uncertainties. Coal India’s labour unions, for instance, are firmly opposed to the move to restructure the behemoth, introduce automation and e-auction coal blocks to private miners. ONGC’s prospects are clouded by uncertainty relating to the subsidy-sharing formula. Valuation disputes and pending litigation pose significant hurdles to residual stake sales in Vedanta-owned Hindustan Zinc and Balco, which were expected to fetch ₹15,000 crore.

Given these circumstances, the one disinvestment move that should be immediately proceeded with is the sale of the Centre’s equity holdings in private sector blue-chips such as Larsen & Toubro, ITC and Axis Bank, acquired many years ago during the bailout of UTI. At current market prices, these holdings are valued at over ₹58,000 crore. The complicated plan to park these holdings along with PSU shares in an exchange traded fund should be abandoned; instead, the Centre must proceed directly to offload them in the secondary market. With foreign investors running out of headroom in most frontline stocks, these stocks may fetch valuations that the commodity PSUs are quite unlikely to. This will not really count as a reformist move. But it will buy time for the Centre to think through and articulate its long-term policies on natural resources, so that the public sector commodity giants can eventually be disinvested at the valuations that they deserve.