This year’s PSU stake sale programme seems to be getting perilously back-loaded. With the administrative ministries of two PSUs — Coal India and Indian Oil Corporation — expressing serious reservations, divestment in these companies is now likely only in January-March quarter as against the earlier plan of hitting the market in the current quarter.
These divestments are estimated to fetch close to R13,000 crore at current market prices.
The coal ministry and the CIL management have objected to bringing out the offer immediately due to subdued market conditions and labour protests. Things are similar at IOC as the original plan for a December offer has been thwarted by the absence of a green signal from the petroleum ministry.
Although the government kicked off its eight-day-long roadshows on Monday to woo foreign investors for the stake sale in CIL, sources said the presentations focussed on the financial strength of the company and were silent on when the offer will be made. The coal ministry had raised objections even in the cabinet note circulated among ministries to divest stake in the company.
Stuck due to opposition from labour unions, CIL’s stake sale had to be halved from 10% to 5% through the offer-for-sale route. The government is also looking at proceeds from a buyback of CIL shares, or a special dividend, to meet its non-tax revenue target. The government currently holds 90% stake in the company.
Threatening to disrupt operations, the CIL workers' union have decided to go on strike in December, making the company management and ministry jittery in going ahead with the stake sale. Sources say the government is also wary of considering a stake sale in November due to Chhattisgarh elections.
Halfway through the 2013-14 fiscal, the programme seems largely derailed due to a squabble among ministries. The government has so far raised only R1,325 crore while the total PSU stake sale target is R54,000 crore (including traditional stake sale of R40,000 crore) and residual stake sale in companies such as Hindustan Zinc and Balco.
This month, a global roadshow to drum up interest from investment bankers in the sale of 10% in IOC was cancelled at the last minute after the oil ministry backed out. Hoping to garner R4,000 crore through IOC, the oil ministry cited the refiner's weak share price and uncertainty over a new fuel-subsidy formula as the reasons for pulling out. Despite finance minister P Chidambaram’s intervention, the stake sale looks unlikely in December.
The government is also planning a buyback in NHPC and stake sale in Engineers India and Power Grid Corporation in the fourth quarter.