With its disinvestment target set to be missed for the seventh year in a row, the government will likely revisit the strategic sale route for transfer of ownership and control in PSUs and unveil a clear-cut policy in this regard in the coming Budget, according to informed sources. The criteria for selection of PSUs for sale to private parties will be spelt out, these sources said, adding that PSUs that are not professionally run and have no hope of becoming profitable would doubtless figure in a list for privatisation being prepared.
“The department of disinvestment is working on the policy prescriptions and a mechanism to execute these strategic sales,” a source said. There is already understanding within the government as to which sectors the government should have a presence in with PSUs and where it should cease to exist with business entities. This would be explicitly stated in the proposed policy and perhaps even timelines could be drawn for a massive privatisation process. Also, cash-rich PSUs would be encouraged to pick up small stakes to be divested by the government in other PSUs, in what could enhance cross-holding among these firms and boost the government’s non-debt capital receipts.
A panel akin to the former Disinvestment Commission (1996-2004) could be set up.
Although an exhaustive list of the PSUs to be privatised is not immediately available, eight loss-making ITDC hotels — the ones in Bhubaneswar, Puri, Jaipur, Jammu, Guwahati, Ranchi, Puducherry and the Lalitha Mahal hotel in Mysuru — are sure candidates for privatisation. Other sick companies that could be sold off include Scooters India, Tyre Corporation of India, HMT Bearings, HMT and Richardson & Cruddas. The land holdings of these companies would be monetised too.
Even though a proposal to divest a majority stake in national carrier Air India is hanging fire for several years due to lack of political consensus, a group of secretaries told the Prime Minister in a recent presentation that the government should exit sectors such as airlines, hotels and travel agencies. Besides a network of hotels, ITDC also runs transport units, and nine duty-free shops at airports and seaports. The administrative ministries have already been asked to identify potential companies under them for possible sell-off.
The history of disinvestment in the country can be traced to the United Front government which set up the Disinvestment Commission in 1996. But it was the NDA government led by Atal Bihari Vajpayee which set the process in motion and managed to sell 18 ITDC hotels during 1999-2004, bringing down the number of state-run hotels from 34 to 16. The Vajpayee government also privatised more than a dozen PSUs to private companies, the most notable ones being IPCL, which was sold to Reliance Industries, and Bharat Aluminium Company and Hindustan Zinc, both of which went to Vedanta Resources.
In fact, the phrase “strategic sales” was there in the fine print of the FY16 Budget document and some Rs 28,500 crore was supposed to be raised through this route. But this was not part of the Budget speech, neither did policymakers announce a clear intent to carry out such stake sales. The process remained a non-starter.
The government’s ambitious plan to raise Rs 69,500 crore has yielded only Rs 13,344 crore so far in FY16, as it could not execute many minority stakes sales in PSUs due to market volatility and lack of appetite among investors. So, the Centre has asked about a dozen cash-rich PSUs such as Coal India, Nalco, NMDC, Power Finance Corporation and Rural Electrification Corporation to get their board approval to pick up government stakes in other PSUs to augment disinvestment revenue. Since this is a work in progress, sources said, the disinvestment revenue may be even lower than Rs 30,000 crore in FY16.